Not everyone files a tax return, nor they are required to do so. Filing a tax return, however, has its perks, even if you are not required to based on your income. Filing a return may qualify you to receive certain credits such as additional child tax credit, first-time homebuyer credit, and other benefits, which you will otherwise miss out on. Through this brief post, we’ll look at five reasons you should file your tax return.
1. Tax Paid or Withheld
There are various situations when you should file a tax return and claim a refund. Firstly, you paid an estimated tax during the last year. Secondly, if your employer withheld federal income tax from your salary though you weren’t required to pay any amount or pay less. Additionally, if you overpaid your taxes the last year, you can and should file a tax return.
2. Premium Tax Credit
People who enrolled in a health insurance policy through the Health Insurance Marketplace can get a refund on the part of their premiums by filing a tax return. Alternately, if you wish to use this refund as advance premium payments by sending them directly to your insurer, you will first need to file federal tax return.
3. Additional Child Tax Credit
As mentioned above, filing a tax return can not only get refunded the extra taxes you paid in the last year, but it can also provide other credits. Additional Child Tax Credit is one of them. Under this scenario, if your credit exceeds the total taxes you owe, you can claim for a refund for the additional credit by filing a tax return. However, at least, one of your children must qualify for the Child Tax Credit.
4. General IRS Requirements
Whether or not you need to file a tax return usually depends on three factors: 1) your age, 2) amount of income, and 3) filing status. If, for instance, you earn a minimum of $10,300 and are under age 65, you must file a tax return. Self-employed people with earnings of $400 or more must file a tax return. There are, however, other factors too, for both employed and self-employed individuals.
5. Earned Income Tax Credit
The Earned Income Tax Credit or EITC is a refundable credit for working people with low to moderate income. It can help reduce the amount of taxes you owe as well as get you a refund if your EIC or Earned Income Tax is greater than your taxes. The qualifying criteria for adults usually depend on their income, but it is different for married, widowed, and single people. If you are filing jointly with your spouse and children, for example, your income must be below $20,330 in case you have none qualifying children, and below $44,651 if you have one qualifying child.
If you are a widow and the head of your household, your income must be below $14, 820 with no qualifying children, and below $39,131 for one qualifying child. To check whether or not you qualify for the EITC, you can use the EITC Assistant.
Note: People with filing status ‘married filing separate’ do not qualify for the EITC.
The Bottom Line
Most people think that they must file a tax return if they have taxable income. Income, however, is not the only criteria that require you to file a tax return. There are various other situations when you have to file a tax return, even if your income falls below the minimum threshold set by the IRS. In fact, filing a tax return, in certain cases, can get you a significant tax refund and other benefits, which you may fail to get otherwise.
Additionally, filing Federal tax returns is mandatory under 26 U.S.C. § 6011. Talking to a professional tax attorney can help you learn whether you must file a tax return as well as how to file taxes. In addition, an attorney can also make you understand about other tax benefits you qualify for, explain complicated IRS tax issues, and negotiate with the Internal Revenue System to solve any problems you may have with them.