Tax season can be a stressful time, but it’s also an opportunity to get money back from the government. While some people are aware they need to file a tax return, others might not realize that filing can be beneficial even if their income falls below the standard deduction.
Here’s why filing a tax return, even if not mandatory, could put thousands of dollars back in your pocket.
Understanding the Standard Deduction
The standard deduction is a set dollar amount that taxpayers can subtract from their taxable income, effectively reducing their tax burden. This amount is adjusted for inflation each year. For instance, the standard deduction for single filers in 2023 was $12,950.
If your total income for the year is less than the standard deduction for your filing status, you generally aren’t required to file a tax return. However, there are exceptions, such as being self-employed with a net income of $400 or more, or married filing separately with a gross income of at least $5.
Benefits Beyond Required Filing
Even if you’re not obligated to file, here are some compelling reasons why you should consider doing so:
- Refunds on Withheld Taxes: Throughout the year, employers withhold federal income tax from your paychecks. If your income falls below the filing threshold, you’ve essentially overpaid the government. Filing a tax return allows you to claim a refund for this withheld amount.
- Unlocking Refundable Tax Credits: Tax credits further reduce your tax liability. Unlike deductions that lower your taxable income, credits directly reduce the amount of tax you owe. Some credits, like the Earned Income Tax Credit (EITC), are refundable. This means you can receive a check from the IRS even if you don’t owe any taxes.
- The Earned Income Tax Credit (EITC): This valuable credit is available to low- and moderate-income workers. The EITC amount can be significant, reaching up to $6,935 in 2022 (based on filing status and number of qualifying children). Don’t miss out on this potential boost to your income!
- Child Tax Credit (CTC): This credit provides a per-child benefit that phases out for higher earners. Even if you don’t owe taxes, you can still claim the refundable portion of the CTC, which can be up to $1,500 per child for 2022 and $1,600 for 2023.
- American Opportunity Tax Credit (AOTC): This credit offers tax relief for qualified education expenses. A portion of the AOTC is refundable, meaning you can get a check from the IRS even if you don’t owe any taxes. This credit can be worth up to $1,000 per eligible student.
Taking Action: Don’t Miss Out on Your Refund
The IRS estimates that roughly 25% of eligible taxpayers miss out on claiming the EITC. Don’t let this be you! By filing a tax return, you could be entitled to thousands of dollars in refunds and valuable tax credits.
Need Help? We’re Here for You!
If you’re unsure about filing requirements or claiming tax credits, consider consulting a tax professional. They can help you determine if filing is beneficial and guide you through the process. Additionally, you may be eligible for past-year tax refunds if you haven’t filed in previous years.
Remember, filing a tax return can be an advantage, not a burden. Don’t leave potential money on the table!
