Every year around tax time I usually hear someone say, “Do I have to file taxes this year?” Usually it’s the younger wage earners, or students who don’t make a lot of money to begin with. While the government does allow certain wage earners the option not to file, it may not be in your best interest. You may be eligible for certain tax credits, which could lead to a nice tax return. It’s definitely worth looking at the reasons why you should file, but first, let’s look to see who is exempt from filing taxes.
How to know if you need to file taxes this year.
The IRS requires you to file if your income is above a certain level, which can vary depending on your filing status, age and the type of income you earned that year.
Just for fun, I visited the IRS website and went through the ‘Do I Need To File a Tax Return’ calculator to see what it says for someone who meets this criteria: Single U.S. citizen, age 25 who received less than $9,000 in taxable income for the year. The calculator asked more questions, so the results may differ for other 25 year olds earning $9,000, but the calculator said that filing was not required. It did, however, suggest that it would be worth filing in order to receive a refund.
Why should you file a tax return if you’re not required to?
Our tax system gives filers the opportunity to claim credits and deductions, which means that you might get more of a refund than you expected. Here are a six reasons the IRS lists as to why you should file your taxes this year even if you don’t technically have to file.
1. Federal Income Tax Withheld If you had taxes withheld from your paychecks, you may be entitled to a refund. The only way you’ll get that money back is if you file your taxes.
The good news is that you can file for free with Turbo Tax in 2013.
2. Earned Income Tax Credit If you didn’t earn a lot of money last year, you might qualify for the EITC. This tax is refundable, meaning that you could still receive it even if it exceeds the amount of tax that you paid into the system – so you definitely want to file if you qualify for this.
3. Additional Child Tax Credit This credit is also refundable and may be available if you have at least one qualifying child and you didn’t get the full amount of the Child Tax Credit.
4. American Opportunity Credit If you are a student in college (first 4 years of post-secondary only), you may qualify for this credit. You may qualify for as much as $2,500 and 40% of the credit is refundable, which means that students who owe $0 in taxes can still get up to $1,000 with this this credit.
5. Adoption Credit This is a refundable tax credit that is made available to filers who have qualified expenses associated with adopting an eligible child.
6. Health Coverage Tax Credit According to the IRS, “Certain individuals who are receiving Trade Adjustment Assistance, Reemployment Trade Adjustment Assistance, Alternative Trade Adjustment Assistance or pension benefit payments from the Pension Benefit Guaranty Corporation, may be eligible for a 2011 Health Coverage Tax Credit.
So even if you don’t think you need to file (and you may be right) you’ll still want to file if you can take advantage of these tax credits. If you’re wanting even more details on filing your individual tax returns, you can download the IRS Publication 501 here.
Can you remember the last time you were exempt from filing taxes? Do you know if you qualify for any of these tax credits?