5 Reasons to File a Tax Return Even if You Don’t Owe Taxes

Consider it or not, many individuals don’t have sufficient revenue after tax deductions to owe federal revenue taxes.

The Tax Cuts and Job Act of 2017 roughly doubled the standard deduction quantities, to not point out that these quantities improve usually to account for inflation, and taxpayers who make lower than their customary deduction sometimes don’t owe taxes.

In response to recent analysis by the Tax Coverage Heart, 40% of households are anticipated to owe no taxes for the 2022 tax 12 months — the one for which returns are due this spring.

Nevertheless, simply since you don’t owe taxes doesn’t essentially imply you shouldn’t file a tax return. There are a number of conditions by which it actually pays to file a return anyway.

Learn on for a take a look at among the commonest the reason why somebody who owes no taxes may benefit from submitting a federal revenue tax return.

How you can inform in case you are required to file

Now that you recognize many households don’t owe federal revenue taxes, you may be questioning learn how to inform for those who do.

Whether or not the IRS requires you to file a return depends upon a number of elements, together with your revenue, tax-filing standing and eligibility for sure tax breaks. Take a look at the IRS’ 2022 Filing Requirements Chart for Most Taxpayers to get a tough concept, or use the company’s free Interactive Tax Assistant software for a extra particular reply primarily based on the specifics of your scenario.

However once more, even in case you are required to file a return, you continue to ought to achieve this if a scenario like one of many following applies to you.

1. Your employer withheld revenue taxes

Even for those who didn’t make sufficient cash to owe taxes, your employer might have withheld revenue taxes out of your paycheck. Take a look at field 2 in your Form W-2 for any federal revenue tax withheld. If you don’t owe taxes however there’s a greenback quantity in that field, submitting a tax return will internet you a refund of that quantity.

In different phrases, if it seems you didn’t earn sufficient revenue to owe taxes, Uncle Sam owes you your federal withholding again. However you will need to file a return to get it again.

This case is quite common with youngsters and younger adults who work part-time however are nonetheless be claimed as dependents by their dad or mum or guardian.

2. You qualify for the earned revenue credit score

The earned income tax credit is at the moment for employees who’re ages 25 by way of 64 and have low or reasonable revenue. It’s particularly helpful for taxpayers with dependent youngsters — as much as $6,935 for the 2022 tax 12 months, relying on what number of qualifying dependents they’ve and the way a lot revenue they earned in 2022.

The earned revenue credit score can be refundable, that means that it couldn’t simply decrease your tax invoice but additionally internet you a tax refund — even for those who don’t owe taxes. So for those who qualify for this credit score, you’ll most likely need to file a return, even for those who aren’t required to take action.

3. You qualify for the kid tax credit score

The child tax credit is one other refundable credit score. So it could cut back your tax legal responsibility to zero and, if any credit score stays after lowering your legal responsibility, it may be refunded to you.

For the 2022 tax 12 months, this credit score is value as much as $2,000.

4. You qualify for the American alternative tax credit score

Throughout their first 4 years of faculty, college students may be eligible for this partially refundable tax credit score. It’s value as much as $2,500 in complete, with as much as $1,000 of that being refundable. So even for those who don’t have a tax legal responsibility, you could possibly get a tax refund of as much as $1,000 for those who’re eligible for the American alternative tax credit score.

5. Revenue verification functions

Many federal, state and different authorities help packages require a tax return for revenue verification. For instance, some seniors could obtain a property tax deduction or discount in householders’ affiliation charges if they’re able to present proof of revenue under a specific amount.

A tax return filed for informational functions solely is commonly referred to as a “zero-dollar return.”