You should file a tax return even if you have little or no income – Forbes Advisor
Editorial Note: We earn a commission on partner links on Forbes Advisor. Commissions do not affect the opinions or ratings of our editors.
Even if you are not required to file a tax return this year, it may be a good idea to file one because you may be eligible for a refund.
Generally, you are not required to file a return if your income is below a certain threshold, as you will not owe any tax.
But “you should file anyway because you may be eligible for a refund due to refundable tax credits,” said Susan Allen, senior director of tax practice and ethics for the American Institute of Certified Public. Accountants (CPA), Allen said. “If you refuse to deposit, you risk missing out on the money you are entitled to.”
Featured Partner Offers
Federal Filing Fees
An EY tax specialist will file for you
Get a quick, free, no-obligation quote
Who is generally not required to file a tax return?
Whether or not you are required to file a tax return depends on your filing status, your gross income, your age, and the age of your spouse. Gross income includes your salary, retirement income, dividends, interest and other sources of income.
If your gross income is below the thresholds below for 2021, you are not required to file a tax return.
Read more: Tax Season 2022: who has to file a tax return?
3 Reasons People Who Usually Don’t File Should File a 2021 Tax Return
Even if you are not required to file a tax return, there are many reasons why you should still file your 2021 tax return.
For starters, if you have taxes withheld from your paycheck or paid estimated taxes, you can file a claim for a refund. Plus, if you qualify for certain refundable tax credits, you could be entitled to thousands of dollars, even if you had little or no income.
A refundable tax credit can trigger a tax refund, even if you don’t owe any tax. For example, suppose you owe $500 in taxes and qualify for a refundable tax credit of $2,000, you will receive a refund of $1,500.
Here are three refundable tax credits you can use to put money in your pocket even if you don’t have to file a return.
Additional child tax credit payments
For 2021, some families eligible for the Child Tax Credit have elected to receive the credit upfront in the form of advance monthly Child Tax Credit payments. Payments were sent by direct deposit or paper check.
However, since the payments were only up to 50% of the total value of the child tax credit, some families may be eligible to claim the rest of the credit on their tax return.
If you received advanced monthly Child Tax Credit payments in 2021, you will need to compare the total payments you received to the amount you are entitled to claim. You can determine the amount received by viewing letter 6419 or by logging into your IRS.gov online account.
You will need to enter the amounts on Schedule 8812 (Form 1040). If you are unfamiliar with completing this form, use the 2021 instructions for Schedule 8812 or file it using an online tax software provider.
For 2021, you can claim up to the full value of the credit, which is fully refundable up to $3,600 for children under age 6 ($3,000 for children ages 6-17). If you received less than you are entitled to, you can claim the additional amount on your tax return.
If you did not receive any advance payments or if you withdrew but qualify for the 2021 child tax credit, if you qualify even if you are not required to file a return.
Earned Income Tax Credit (EITC)
Whether you worked part-time or on the side, you can get a refund by claiming the Earned Income Tax Credit (EITC). Unlike the Child Tax Credit or the Recapture Rebate Tax Credit, you must have earned income to claim the credit, but it can be as little as $1. You can get EITC credit even if you earn as little as $1.
If you were a single parent with two children in 2021 and earned $5,000, you would qualify for a $2,010 credit.
For 2021, the maximum EITC is $6,728 if you have children (up to $1,502 without children). Some examples of earned income include your salary, tips, and self-employment earnings. Any amount received from Social Security, investment income, alimony, child support, and other sources does not qualify.
Additionally, you must meet the following rules to be eligible for the EITC:
The IRS has a handy online tool to help you determine if you qualify for the credit.
Salvage rebate tax credit
One tax credit you may be entitled to even if you had no income or deduction is the clawback tax credit.
Allen says you may be eligible for the clawback rebate tax credit if you haven’t received the full amount of the third economic impact payment in 2021.
“You have to file a return to claim the credit, even if you don’t usually file a tax return. Your 2021 recovery refund credit will reduce any tax you owe for 2021 or be included in your tax refund,” Allen says.
For example, let’s say you made too much money in 2019 and 2020, so you didn’t qualify for the third stimulus when the payments were sent by the IRS. However, you lost your job in 2021. In this case, you can now benefit from the stimulus rebate tax credit.
To claim the credit, you must complete the Salvage Refund Tax Credit Worksheet and submit it with your 2021 tax return. If you are using tax software, it should walk you through the process. along the process.
Before completing the worksheet, you need to know the amount of third stimulus payments received for you, your spouse, and your dependents. You can obtain this amount by viewing your 6475 letter sent to you by the IRS or by logging into your IRS.gov online account.
If you qualify, you can claim up to the full amount of the third stimulus payment, which was $1,400 per person. You can claim a tax credit for yourself, your spouse and eligible dependents.
What you need to file your tax return for free
If you earn less than $73,000, you can file your taxes for free using the IRS Free File tax program. Before filing your return, you will need to make sure you have your tax documents, such as the following:
Read more: Tax preparation checklist: everything you need to know to file your tax returns
Also, you may want to keep an eye out for some letters from the IRS, such as your 6419 and 6475 letters. But double-check the amounts listed in your letters. The IRS said some letters may contain inaccurate information and urged taxpayers to verify the amount online.