Believe it or not, many people don’t have enough after-tax income to pay federal income taxes.
The Tax Cuts and Jobs Act of 2017 nearly doubled the standard deduction. Needless to say, these amounts increase periodically to account for inflation, and taxpayers who fall below the standard deduction generally do not owe any tax.
according to Recent analysis According to the Center for Tax Policy, 40% of households are expected to pay no tax in the 2022 tax year.
However, just because you don’t pay taxes doesn’t mean you don’t have to file a final tax return. Either way, there are some situations where filing a return will literally cost you money.
Let’s take a look at some of the most common reasons why people who owe no tax can benefit from filing a federal income tax return.
How to tell if a submission is required
Now that you’ve learned that many households don’t owe federal income tax, you may be wondering how you can tell if you’re paying federal income tax.
Whether the IRS requires you to file a return depends on several factors, including your income, tax return status, and eligibility for certain tax exemptions.Check out the IRS 2022 Filing Requirements Chart for Most Taxpayers Get a rough idea or use agency free interactive tax assistant It’s a tool for getting more specific answers based on the details of your situation.
Again, even if you are required to file a return, you must file a return if any of the following apply:
1. Employer withheld income tax
Even if you didn’t make enough money to pay taxes, your employer could have withheld income tax from your paycheck.check your box 2 Form W-2 For federal income tax withheld. If he doesn’t pay taxes and he has $1 in that box, that amount will be deducted when he files his tax return.
In other words, Uncle Sam owes you federal tax withholding if it turns out that you didn’t earn enough to pay your taxes. , must file a tax return.
This situation is very common among teenagers and young adults who work part-time but are claimed as dependents by their parents or guardians.
2. Eligible for earned income deduction
of earned income tax credit It currently targets low- and medium-income workers between the ages of 25 and 64. It is especially valuable for taxpayers with dependent children. Up to $6,935 for the 2022 tax year, depending on the number of eligible dependents and her 2022 earnings.
The earned income deduction is also refundable. This means that not only can you lower your tax bill, but you can also get a tax refund even if you weren’t obligated to pay it. So if you qualify for this credit, you’ll probably want to file a return, even if you don’t have to.
3. Eligible for Child Tax Credit
The child tax credit is another refundable credit. So you can zero out your tax liability, and if you have credit left after reducing your debt, you can get a refund.
For the 2022 tax year, this credit is worth up to $2,000.
4. Eligible for the U.S. Opportunity Tax Credit
During the first four years of college, students may qualify for: This partial refund Tax deduction. It’s worth up to $2,500 in total, of which up to $1,000 will be refunded. So, even if you don’t have tax liability, you can still get a tax refund of up to $1,000 if you qualify for the American Opportunity Tax Credit.
5. Income confirmation purpose
Many federal, state, and other government assistance programs require tax returns to verify your income. For example, some seniors may be eligible for property tax credits or reduced Homeowners Association fees if they can prove they earn less than a certain amount.
Tax returns that are filed for informational purposes only are often known as “zero dollar returns.”