You may be tempted to skip filing an income tax return if your income is below the minimum required for filing one or if you will not receive a refund. However, if you do, you could miss out on some tax credits. You could even pay no income tax and still receive a check from the IRS.
Based on your age, filing status, and other factors (such as whether you earned $400 from self-employment), a required return depends on your age. Single filers under 65 years of age can earn up to $10,275 for the 2022 tax year; “qualifying widow(ers)” are 65 years or older and can earn up to $20,550 ($11,000 to $22,000 for 2023).
You may still want to file a return even if you don’t owe taxes on your earned income. In the first place, you could receive a refund if you filed a tax return. Even if you don’t qualify for a refund, you should still file to avoid a penalty for not filing or filing late.
What You Should Know
- You may benefit from filing a return even if you do not owe taxes.
- Tax years 2022 and 2023 have minimum earnings ranges of $10,275 to $20,550, but you may still be eligible for tax credits that will result in a refund even if your earnings fall below that.
- Earned Income Tax Credit payments may be due to you.
- Tax credits in 2022 range from $560 to $6,935 ($600 to $7,430 in 2023).
- Parents can also receive tax credits for health insurance costs.
- Even if you do not have an employment income, if you make money through other means, you may need to file taxes.
You owe a refund because tax was withheld
In 2022, married couples with household incomes below $20,550 ($22,000 for 2023) don’t have to file a tax return. However, doing so doesn’t mean that your employer withheld taxes.
It’s just a matter of completing an IRS Form 1040, which can usually be completed online by companies like TurboTax or H&R Block. Filing a tax return will get you a refund of those withholdings. If you have other taxes due, you’ll receive a refund of those withholdings.
You should file your federal income taxes if you’re eligible for one of these five tax credits.
An EITC is a tax credit for earned income
As a means of allowing lower-wage earners to keep more of their paychecks, Congress created the Earned Income Tax Credit (EITC).
If your tax obligation is less than the amount of the credit, you may be eligible for a cash refund of the remaining credit. If your tax liability is greater than the amount of the credit, you will not owe any income taxes.
The maximum credit that can be claimed for a single or married taxpayer during the 2022 and 2023 tax years is as follows: 65 percent for single taxpayers and 70 percent for married taxpayers.
Tax credit for children
You may be eligible for a refund if you have fewer taxes than the maximum credit for each dependent child.
In 2022 and 2023, the amount of the Child Tax Credit is capped at $2,000 per minor dependent. The credit is phasing out for higher-income families, since it was designed to benefit low- and middle-income workers, subject to maximum income requirements.
American Opportunity Tax Credit (AOTC)
Qualified education expenses can be reimbursed up to $2,500 per year by the American Opportunity Tax Credit (AOTC).
Recent legislation expanded this credit to allow those who do not owe any taxes to still qualify. This generous tax credit could provide you with a nice refund check if you paid college tuition or other qualified education expenses, but it is only valid for four years per student.
Premium tax credit for health insurance marketplaces
In accordance with the Affordable Care Act (ACA), low- to moderate-income individuals and families are eligible to receive this tax credit.
There are other requirements that must be met to qualify for the premium tax credit, so click here to find out whether you qualify.
A credit for savers
A 401(k) or Individual Retirement Account (IRA) may allow you to claim an additional tax credit on some of your contributions.
The credit has income limitations. Married couples filing jointly will be entitled to a credit of $68,000, while individuals filing independently will be entitled to a credit of $34,000 for the 2022 tax year ($73,000 for 2023 and $36,500 for 2024).
A nonrefundable tax credit, the saver’s credit allows you to deduct the lesser of $1,000 ($2,000 if you file jointly) or the amount of taxes you would have had to pay if the credit had not been available.
Don’t get penalized for not filing
For example, if you were self-employed and earned a little more than $400 during the year, you still have a good reason to file your federal taxes, even if you did not make enough money to meet the IRS minimums. It is also possible for you to withdraw money from your retirement account and sell your home for a profit.
The alternative minimum tax (AMT), which requires a return, could be due if Social Security or Medicare taxes were not withheld.
Avoid filing a return if you can. In the event you have to file later, you may have to pay IRS penalties and back taxes.
What is the difference between a tax credit and a refund?
It is not a refund; it is a reduction of your taxable income. However, a credit can result in a refund if you have paid more than you owe after applying the credit.
Tax Credit: What Is It?
The IRS uses tax credits to reduce taxpayers’ taxable income. A tax credit usually reduces their tax bill for the year.
Can I get a refund for the Child Tax Credit?
Child Tax Credits generally reduce your overall taxable income by $2,000 for each child. However, you may receive up to $1,500 back for tax year 2022 ($1,600 for 2023).
Even if your tax bill will be essentially zero, you may still owe substantial tax credits even if you did not make enough money to file a tax return. You could receive a large check from the IRS by reading about the credits available.