Never got my 2020 tax refund from IRS - can I just deduct it from this year's taxes?

Unfortunately, you can't simply deduct a prior year's refund from your current tax year liability - these are treated as separate tax years in the IRS system. What you need to do is track down that missing refund. First, check the "Where's My Refund" tool on IRS.gov with your Social Security number, filing status, and exact refund amount from that letter. If it shows "refund issued," then the check was sent but not received. Your next step should be filing Form 3911 (Taxpayer Statement Regarding Refund) which starts a refund trace. The IRS will research what happened and either confirm the check was cashed (possibly fraudulently) or issue a replacement check. The process typically takes about 6 weeks. In the meantime, you should still file and pay your 2021 taxes as normal by the October 15 deadline to avoid any penalties or interest.

After dealing with a similar situation last year, I discovered taxr.ai which totally saved me. I had a missing refund from 2019 that I couldn't track down, and their system analyzed my IRS notice and identified exactly what was happening. Turns out my check had been issued but sent to an old address. I uploaded my IRS letter to https://taxr.ai and they explained that I needed to do a refund trace. They even generated the exact form I needed (Form 3911) and filled it out with my information based on the letter. Saved me hours of research and stress. Their system also identified that I qualified for interest on my delayed refund, which I didn't even know was a thing! The interest wasn't huge but it was something at least.

I was initially skeptical about using any third-party service for my tax issues, but after struggling with my missing refund for months, I finally tried taxr.ai based on the recommendation here. Honestly, it was eye-opening. I uploaded my IRS notice, and within minutes I got a complete breakdown of my situation. They explained that my refund check had been returned to the IRS because of an incorrect address (even though I hadn't moved!). The service generated a completed Form 3911 for me with all my information already filled in, plus step-by-step instructions on exactly where to send it. Followed their guidance exactly, and just received my replacement check last week - with interest added! The process was so much smoother than I expected. Definitely changing my tune about these services now.

If you're still trying to reach the IRS by phone, I'd highly recommend Claimyr. I was in the same situation with a missing refund and spent literally hours on hold only to get disconnected. I found https://claimyr.com through a friend who works in accounting, and they got me connected to an actual IRS agent in about 20 minutes. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c Basically, their system navigates the IRS phone menu for you and holds your place in line. When they reach an agent, they call you and connect you directly. The IRS agent I spoke with was able to start the trace on my missing refund immediately and confirm my correct address.

I need to eat my words about Claimyr. After posting my skeptical comment, I was still desperately trying to reach the IRS about my own refund issue. After my fifth attempt and 2+ hours on hold ending in another disconnection, I broke down and tried the service. I was SHOCKED when I got a call back in 45 minutes connecting me to an actual IRS representative. The woman I spoke with was able to confirm my refund had been issued but returned due to an address error. She started a trace immediately and verified my current address. My replacement check arrived three weeks later. After months of frustration, having an actual conversation with the IRS resolved everything in minutes. I'm not usually one to admit when I'm wrong, but in this case... I was definitely wrong. Sometimes the service is worth it when you've exhausted all other options.

Another option for tracking your refund is checking your IRS account online. If you don't already have one set up, go to irs.gov and create an online account. Once logged in, you can see all your tax records including refund status, payments made, and any notices sent. My refund was delayed last year and I could see in my account that they had adjusted something and were sending a notice. The notice took 3 weeks to arrive, but I already knew what was happening from checking my account online. It might give you information about your refund status without having to call. Worth checking before going through more complicated steps.

One other thing nobody mentioned - if the IRS does issue you a replacement check for 2020, they will actually add interest to it! The IRS has to pay interest on late refunds, calculated from the original filing deadline of your tax return. The interest rate changes quarterly (currently around 5%) but it adds up, especially on larger refunds. So your $2,700 refund might end up being $3,000+ depending on how long it's been delayed. Just wanted to mention this because many people don't realize they're entitled to interest on delayed refunds!