7 Reasons to File a Tax Return Even If You Don't Have To (Hint: They're Due July 15!)
Although you might not be required to file a tax return, it might be wise to file one anyway. Here's a few reasons why.
Filling out tax forms is a pain in the you-know-what. So why on earth would anyone file a tax return if they don't have to? Well, actually, there's one very important reason why – you might get a big, fat check from the government.
People with income under a certain amount (see table below) aren't required to file a tax return because they won't owe any tax. But if you qualify for certain tax credits or already paid some federal income tax, Uncle Sam might owe you a refund that you can only get by filing a return. Think about that for a minute!
If you want to know more, here are 7 reasons why you might want to file a tax return this year even if you don't have to. Also remember that this year's tax deadline was extended from April 15 to July 15, 2020 – so there's still time to claim any money the government owes you. Plus, as an added bonus, the IRS will pay interest on tax refunds reflected on returns filed by July 15 (the interest will generally be paid from April 15, 2020, until the date of the refund).
Federal Tax Return Filing Requirements (2019 Tax Year):
Filing Status and Age at End of 2019
Income Required to File 2019 Return
Single; Under 65
Single; 65 or Older
Married Filing Jointly; Both Spouses Under 65
Married Filing Jointly; One Spouse 65 or Older
Married Filing Jointly; Both Spouses 65 or Older
Married Filing Separately; Any Age
Head of Household; Under 65
Head of Household; 65 or Older
Qualifying Widow(er); Under 65
Qualifying Widow(er); 65 or Older
If an employer withheld federal income taxes from your paycheck last year, or taxes were withheld from other sources of income in 2019, you might be entitled to a refund if you file a tax return before the July 15 deadline.
If you don't owe any tax – and, therefore, aren't required to file a return – then it only makes sense that any taxes you already paid should be refunded to you. But you won't get that money back if you don't file a 1040 form.
Withholding isn't the only way you could have already paid taxes for 2019 to Uncle Sam. For example, if you received income as an independent contractor or were otherwise self-employed, you may have made estimated tax payments last year. If you filed a 2018 tax return, you may have applied your refund from that return to your 2019 taxes (it's optional).
If you paid 2019 taxes in advance in one of these two ways, make sure you file a tax return even if your overall income is below the applicable filing threshold amount. That will allow you to get that money back. But don't dawdle…you only have until July 15 to get your 1040 form to the IRS.
Earned Income Tax Credit
The Earned Income Tax Credit (EITC) is for lower income working people. If you qualify for the credit, then you definitely want to file a tax return. The credit is "refundable," meaning that if it's worth more than the income tax you owe, the IRS will issue you a refund check for the difference. (With a "nonrefundable" credit, you don't get a refund because the tax you owe isn't reduced below zero.) The EITC is the first of several refundable credits that we'll discuss.
For 2019 tax returns, the maximum EITC ranges from $529 to $6,557 depending on your income and how many children you have. (For your 2020 return, the range will be $538 to $6,660.) So, it's well worth the time it takes to complete a tax form if you qualify for the credit.
The income limits to qualify for the EITC are fairly low. For example, if you don't have kids, you can qualify if your 2019 earned income and adjusted gross income (AGI) are each less than $15,570 for singles and $21,370 for joint filers. (For 2020, those income limits rise to $15,820 and $21,710, respectively.) If you have three or more children and are married, though, your 2019 earned income and AGI can be as high as $55,952 ($56,844 in 2020). There are many exceptions and other rules, but the IRS has a handy online tool to help you figure out if you're eligible for the credit.
Child Tax Credit
Parents with children age 16 or younger may qualify for the child tax credit. The maximum credit amount is $2,000 per child, but up to $1,400 of the credit can be refundable. And that's per child! So, like the EITC, you could end up with a nice refund check by filing a return just to claim the this credit.
Not sure if you qualify for the credit? The IRS has an online tool to help with that.
Also note that, if you don't qualify for the child tax credit, you might be able to claim a different tax credit for your dependents. There's something called the "credit for other dependents," and it's worth up to $500 for each qualifying dependent. It's a nonrefundable credit, though. So, it won't trigger a refund if you otherwise don't owe any tax.
American Opportunity Tax Credit
The American Opportunity credit covers expenses for students who are in their first four years of college. The credit is worth up to $2,500, and it can be claimed by a parent, spouse or student who is not claimed as a dependent who for tuition, fees, or textbooks.
The credit is partially refundable. So, if the credit is worth more than your tax liability for the year, you'll get a refund check for 40% of the remaining amount – up $1,000 for each qualifying student. That should be enough to get you to complete a tax return if you don't otherwise have to file one.
As with the EITC and child tax credit, the IRS has an online tool to help you figure out if you're eligible for the American Opportunity credit. It will also help you determine if you can claim the Lifetime Learning credit or the tuition and fees deduction.
Premium Tax Credit
The premium tax credit helps people pay for insurance they buy through the health insurance marketplace (i.e., Obamacare). The credit is available for people with household incomes ranging from 100% to 400% of the federal poverty level. The amount of the premium tax credit is based on a sliding scale, so that people with a lower income get a larger credit.
An estimated credit is calculated when you go on a marketplace website such as healthcare.gov to buy insurance. At that point, you can choose to have the credit paid in advance directly to the insurance company to lower your monthly payments, or you can choose to get all of the benefit of the credit when you file your tax return for the year. If you elect to have advance payments made to the insurer, you will have to reconcile the amount paid in advance with the actual credit you compute when you file your tax return. Either way, you will need to complete Form 8962 and attach it to your tax return.
The premium tax credit is another refundable credit. So, if the amount of the credit is more than the amount of the tax you owe, you'll receive the difference as a refund if you file a tax return. If you owe no tax, you can get the full amount of the credit as a refund. However, if advance credit payments were made to your insurance company and your actual allowable credit is less than your advance credit payments, the difference is generally subtracted from your refund or added to the tax you owe.
Be warned, though, that the IRS is looking for people who receive advance credits and either don't file returns or file returns incorrectly reporting the credit. So, monkeying around with the premium tax credit is a good way to get your return audited.
Health Coverage Tax Credit
The health coverage tax credit helps certain displaced workers and pre-retirees pay for health insurance. Specifically, it is available to (1) people eligible for Trade Adjustment Assistance allowances because of a qualifying job loss, and (2) people between 55 and 64 years old whose pension plans were taken over by the Pension Benefit Guaranty Corporation. The credit is worth up to 72.5% of payments for qualified health insurance coverage.
As with the other credits we've mentioned, the health coverage credit is refundable. So, if you can claim the credit, you'll want to file a tax return just to claim the credit, even if you're not required to file a return. By doing so, you can get a federal income tax refund check sent to you.
As with the premiums tax credit, the health coverage credit can be paid in advance. That also means that your refund will be smaller (or eliminated) if the advance credit payments are greater than your actual allowable credit.