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Have you ever wondered if it was actually necessary to file a tax return? Perhaps your income is relatively low, and so you wonder if it’s really required of you to file a return.
Often it’s not entirely a case of a return being required, but rather it might be in your best interest to file a return in order to receive certain credits against your income. Recently the IRS issued their TAX TIP 2012-02 which goes over some of the things you need to be aware of when considering if it’s necessary or in your best interest to file a return. Portions of this TIP are listed below, with additional information added.
Do I Need to File a Tax Return This Year?
You are required to file a federal income tax return if your income is above a certain level, which varies depending on your filing status, age and the type of income you receive. However, the Internal Revenue Service reminds taxpayers that some people should file even if they aren’t required to because they may get a refund if they had taxes withheld or they may qualify for refundable credits.
The amount of income that a couple filing jointly (filing status Married Filing Jointly) with only the Standard Deduction and only the two exemptions (no child exemptions) without needing to file is $19,000 for 2011. For single folks (filing status Single) using the Standard Deduction and one exemption, the amount of income is $9,500 for 2011. These are only general rules of thumb, if you’re near that level of income you’ll want to spend some more time on it to be sure.
To find out if you need to file, check the Individuals section of the IRS website at www.irs.gov or consult the instructions for Form 1040, 1040A or 1040EZ for specific details that may help you determine if you need to file a tax return with the IRS this year. You can also use the Interactive Tax Assistant available on the IRS website. The ITA tool is a tax law resource that takes you through a series of questions and provides you with responses to tax law questions.
Even if you don’t have to file for 2011, here are six reasons why you may want to:
1. Federal Income Tax Withheld You should file to get money back if your employer withheld federal income tax from your pay, you made estimated tax payments, or had a prior year overpayment applied to this year’s tax.
2. Earned Income Tax Credit You may qualify for EITC if you worked, but did not earn a lot of money. EITC is a refundable tax credit; which means you could qualify for a tax refund. To get the credit you must file a return and claim it.
3. Additional Child Tax Credit This refundable credit may be available if you have at least one qualifying child and you did not get the full amount of the Child Tax Credit.
4. American Opportunity Credit Students in their first four years of postsecondary education may qualify for as much as $2,500 through this credit. Forty percent of the credit is refundable so even those who owe no tax can get up to $1,000 of the credit as cash back for each eligible student.
5. Adoption Credit You may be able to claim a refundable tax credit for qualified expenses you paid to adopt an eligible child.
6. Health Coverage Tax Credit 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.
Eligible individuals can claim a significant portion of their payments made for qualified health insurance premiums.
For more information about filing requirements and your eligibility to receive tax credits, visit www.irs.gov.An IRA Owner's Manual or if you'd prefer the Kindle version (and let's face it, ALL the cool kids do!), you can find that at this Kindle version link.