Save The Right Paperwork All Year Long
Stay on top of tax-related paperwork throughout the year it will make your life easier during tax season. You might want to keep receipts for things like charitable donations, work-related expenses and medical bills, or other items from step 4. You may also want to keep statements from student loans or investments and any grants or fellowships. Having these handy and organized can help you determine whether to itemize and make the process easier. You should keep your paperwork after you file, too. The IRS recommends keeping records for at least three years.
No Exemption For Age Or Occupation
Whether youre 9 or 90, age has no effect on your requirement to file a tax return. If you meet one of the above requirements, the CRA expects to receive an income tax return from you.
Students are not exempt from filing either. If your 20-year-old child is an entrepreneur who made over $3,500 running a small business last summer, they must file an income tax return even if theyre still in school. All working children should file a tax return as soon as they start earning income.
Why Its Important To File Taxes With No Income
Suppose you made less than $12,400 in 2020, which is the standard deduction. In that case, you could technically skip filing your taxes but doing so might affect whether you will receive the economic impact payments approved as relief from the COVID-19 pandemic.
The U.S. government used data from tax refunds issued by the IRS to distribute the three stimulus payments that have been sent out since last year. The total of the three payments amounted to $1,800. It’s likely that non-filers didnt receive any payments.
In October 2020, the IRS put out a step-by-step guide on how non-filers could get the economic impact payments through its Enter Payment Info Here Tool. Since then, the tool has closed.
Instead, the IRS encourages taxpayers eligible to receive the payments to file a 1040 or 1040-SR to claim the Recovery Rebate Credit.
Filing a tax return might also make it easier to receive tax credits for your dependent children. Under Bidens $1.9 trillion American Rescue Plan Act, parents will receive child tax credits of $3,000 per child age 617 or $3,600 for children under six.
Filing a tax return will also make it easier for you to receive any future stimulus payments that might be issued this year.
Remember: the Recovery Rebate Credit is reduced by any Economic Impact Payments you already received. Watch an #IRS video to learn more: #COVIDreliefIRS
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Better To File Now Even If You Cant Pay
Some people avoid filing taxes because they cant afford to pay the tax bill. However, you should always file on time, even if you cant pay all of the taxes due. If you wait, youll be faced with a late filing penalty which is just one more thing youll have to pay. The failure-to-file penalty is 5 percent per month based on the amount of tax you owe.
If you are unable to pay your tax bill quickly, the IRS has payment installment plans. Approval of an installment plan is automatic if you owe $25,000 or less, can prove you cannot pay the total amount you owe at the time its due, and are able to pay off the tax in three years or less. In addition, you or your spouse cant have had an installment agreement with the IRS in the past five years.
Should You File A Tax Return If You Are Not Required To File
Just because you dont meet the gross income requirements to file does not mean you should not file. You may be eligible to receive a refund or cash back tax credits. For instance, low-income families may qualify for the Earned Income Tax Credit federally, and the California EITC on their state tax return. This can pay anywhere from $243 to $6,728.
Additionally, the Golden State Stimulus can only be claimed by filing your 2020 tax return. If you earned less than $30,000 and qualify for the CalEITC, you can get a $600 payment from the Golden State Stimulus along with any other cash from tax credits you are eligible to claim.
It is a good idea to talk with a tax professional to determine your filing status and whether you are required to file or could benefit from doing so anyway. Orange County United Ways OC Free Tax Prep helps qualifying households in Orange County file taxes for free and maximize their returns. Tax volunteers help educate families on available tax credits and refunds they may be eligible for and assist with accurately preparing and filing tax documents. The tax refunds received help residents save for the future, pay down debt, and afford basic necessities. Learn more by visiting ocfreetaxprep.com.
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Does Your Teenager Need To File An Income Tax Return
Luckily, most teenagers dont earn enough income to be required to file a tax return. Generally, any Canadian who earns less than the basic personal credit doesnt have to file a return. Some exceptions do apply of course. Check out the full details on the Canada Revenue Agencys Do you have to file a return? webpage.
Should your teenager file an income tax return? Definitely!
- They could get a tax refund. If your teen has deductions for income tax, EI, or CPP and didnt make a lot of money, they may be entitled to a refund.
- They can build some RRSP room. RRSP contribution room starts building as soon as income is reported, regardless of age.
- They can register for benefits. Filing a tax return registers your teen in CRAs system. Once they turn 19, theyll be automatically considered for the GST/HST credit if theyve filed a return the previous year.
Make it a teachable moment. Involve your teen in the process of filing their return.
If your teen is a university student, be sure to prepare their return before yours if you plan to transfer tuition credits. Youll need to enter certain numbers from their return into your return to complete the process. If they plan on carrying forward those tuition credits to a future year when they need to use them, theyll need to file a return and report the amounts from their T2202 or official tax receipts.
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What Income Is Low Enough To Not File Taxes
If you dont have any previous income, you will have to pay a minimum income amount. As of 2021, single filers with low incomes age 65 and under will only be able to file for a filing status with a minimum fee of $12,550. The federal tax return for income that falls below this threshold does not usually need to be filed.
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Filing Electronically And Choosing Direct Deposit Is The Fastest Way To Get Your Refund And Stimulus Payments
If I could give you one important piece of advice for filing your taxes, it would be to file electronically and choose direct deposit for your refund. The best way to file a complete and accurate return is to file electronically. The tax software asks questions about your income, credits and deductions and will help figure your Recovery Rebate Credit. If you want your refund as soon as possible, filing electronically and having your refund sent via direct deposit is the fastest and safest way to receive your money.
If you dont have a bank account, visit the FDIC website or the National Credit Union Association using their for information on where to find a bank or credit union that can open an account online and how to choose the right account for you. If you are a veteran, see the Veterans Benefits Banking Program for access to financial services at participating banks.
So, if you havent filed taxes recently because you thought you didnt have to, I hope Ive given you a closer look into why it might be a great idea to file in 2020. Its something that can be done electronically using a smartphone. Plus, with our helpful online resources and free filing assistance for certain taxpayers, its easier than ever to file electronically and see if youre due a refund. If youve already filed, thank you. Tell your friends and family so they dont lose the money theyre entitled to visit the filing information section of IRS.gov today!
When It Pays To File
For those few who dont legally have to file, it pays sometimes to send in a return anyway.
This is the case for individuals who dont earn much but might be eligible for the earned income tax credit. This benefit is available to qualified individuals even if they owe no tax, meaning they would get money back from the federal government. Many people think the credit is available only to parents while that is not true, the credit amount is greater for eligible low-wage taxpayers with children.
The IRS also says that most individual taxpayers are due a tax refund. But those taxpayers must send in a Form 1040, Form 1040A or Form 1040EZ to get that cash.
You can check out the filing requirements section of IRS Publication 17 for more details.
Once youve determined that you need to file taxes, your next question is likely to be when do I have to file taxes? This year, the deadline for filing your 2021 tax return is Friday, April 15, 2022. If youre still not sure whether you must file a tax return, ask a tax professional, call the IRS at 829-1040 or make an appointment at your nearest IRS Taxpayer Assistance Center.
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Why You Should Consider Filing A Tax Return Even If Youre Not Required To File
Filing a tax return is probably not something most people enjoy doing. So why would anyone want to file a tax return if they don’t have to? Well, actually, there are some important reasons you might get a tax refund and you may be eligible for an additional stimulus payment. If youre eligible for future payments or credits, it helps if IRS has your 2020 tax return and direct deposit information on file.
While people with income under a certain amount aren’t required to file a tax return because they won’t owe any tax, if you qualify for certain tax credits or already paid some federal income tax, the IRS might owe you a refund that you can only get by filing a return. Some tax credits are “refundable” meaning that even if you dont owe income tax, the IRS will issue you a refund if youre eligible. Many people miss out on a tax refund simply because they dont file an IRS tax return.
There is usually no penalty for failure to file if you are due a refund, but why miss out on money thats rightfully yours? If, however, you wait too long to file your return and claim a refund, you risk losing it altogether. Thats because an original return claiming a refund must generally be filed within three years of its due date. If you havent filed a tax return for tax year 2017 and had any money withheld from your paychecks or are eligible for tax credits, you need to file by May 17, 2021. If you dont, the money is forfeited, by law, and becomes property of the U.S. Treasury.
Filing To Open An Individual Retirement Account
It might seem a little premature for your child to consider opening an individual retirement account the IRS calls it an individual retirement arrangementbut it is perfectly legal if they have earned income. By the way, earned income can come from a job as an employee or through self-employment.
If you can afford to, consider matching your child’s contributions to that IRA. The total contribution must be no more than the child’s total earnings for the year. That lets your child start saving for retirement but keep more of their own earnings. It also teaches them about the idea of matching funds, which they may encounter later if they have a 401 at work.
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How Can I Reduce My Taxable Income
One way to reduce taxable income is by topping up your retirement savings with traditional IRAs and 401s, up to the maximum allowable contribution.
Contributions to Health Savings Accounts and Flexible Spending Accounts are another way to shrink your taxable income.
You could potentially earn thousands of dollars before paying taxes. However, even when your income falls below the cut-off level and you do not have to pay taxes, you need to file to taxes to get a refund check.
Minimum Gross Income Thresholds For Taxes
The IRS defines “gross income” as anything you receive in the form of payment that’s not tax-exempt. Gross income can include money, services, property, or goods. The thresholds cited here apply to income earned in 2020, which you must report when you file your 2020 tax return in 2021.
In a practical sense, the limits are equal to the years standard deduction, because you can deduct this amount from your gross income and only pay income tax on the difference. You would owe no tax and would not be required to file a return if youre single and earned $12,400 in 2020, because the $12,400 deduction would reduce your taxable income to $0. But you would have to file a tax return if you earned $12,401, because youd have to pay income tax on that additional dollar of income unless you had applicable tax credits you could use.
As of the 2020 tax year, these figures are:
|Single under age 65|
|Qualifying widow age 65 or older||$26,100|
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Questions And Answers About Filing Your Taxes
This web page will be updated periodically to incorporate changes that may affect you during tax-filing season.
The Canada Revenue Agency understands that COVID-19 has affected you, your family and your taxes. We remain committed to providing you with various measures of support and, as the crisis continues to evolve, we remain committed in helping you during these hard times.
Why You Might Want To File Even If You Didnt Have Taxable Income
All these rules apply when you are required to file a tax return, but there are a few good reasons why you might want to file even if you technically dont have to.
You may be eligible to claim the Recovery Rebate Tax Credit if you or one of your dependents were entitled to a stimulus check but never received it. Youre effectively letting the IRS keep that money unless you file a return to claim this as a tax credit.
The same applies to any other refundable tax credit you might be qualified to claim. You wont get that money unless you file a tax return to claim it. For example, if you did not receive advance monthly payments of the child tax credit, you may qualify for a lump-sum payment when you claim the child tax credit on your 2021 tax return when you file in 2022, even if you don’t normally file a tax return.
And if you had earned income that was less than the standard deduction and paid taxes through your paychecks, you may want to file to get some of that money back.
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All You Need To Know Is Yourself
Answer simple questions about your life and TurboTax Free Edition will take care of the rest.
- Earned Income Tax Credit
- Child tax credits
- Student Loan Interest deduction
Do I Need To File A Tax Return If My Only Income Is Social Security
Submitted by anonymous.
Thats a great question, as many Americans only source of income is Social Security. Social Security income is taxed for federal and state income tax purposes. If your earned income exceeds IRS 2019 filing guidelines, you are required to file a tax return with the IRS and in most states.
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When A Dependent May Need To File A Tax Return
Taxpayers who are claimed as a dependent on someone’s tax return are subject to different IRS filing requirements, regardless of whether they are children or adults. A tax return is necessary when their earned income is more than their standard deduction.
The standard deduction for single dependents who are under age 65 and not blind is the greater of:
- $1,100 in 2021
- Or the sum of $350 + the person’s earned income, up to the standard deduction for an unclaimed single taxpayer which is $12,550 in 2021.
A dependent’s income can be “unearned” when it comes from sources such as dividends and interest. When a dependent’s unearned income is greater than $1,100 in 2021, the dependent must file a tax return.