Not Sure About Filing a Federal Income Tax Return? Here's Why You Should
If your gross income is over $12,400, you must file a federal income tax return. If you earn less than $12,400, you may want to consider filing a federal income tax return so that you don’t miss out on a refund or certain tax credits.
You will want to follow a federal income tax return if:
Your employer withheld federal income tax from your pay.
You made estimated tax payments.
You overpaid your taxes in 2019 and want to have your refund applied to your 2020 taxes.
You paid higher education expenses. Certain higher education expenses will qualify a taxpayer for an Education Credit.
You are eligible for an Economic Impact Payment but you didn’t receive it or you didn’t receive the full amount. In order to claim the Recovery Rebate Credit, you must file a tax return.
You lost your job in 2020 or you earned less in 2020 than in 2019. You can use your 2019 income to figure out your Earned Income Tax Credit (EITC) and the Additional Child Tax Credit (ACTC.)
You have been or think you have been a victim of identity theft. The IRS will know what your true income was for the year and it prevents a thief from filing a fake return using your name and social security number.
If the above list was not reason enough, following are five more benefits for filing a federal income tax return:
1. Carry Forward Losses – If a tax return is filed on time and results in a loss, the loss can be carried forward to offset income in subsequent years.
2. Avoid Penalties – If you are required to file an income tax return and don’t or are late, you are charged with a penalty and the penalties will continue to increase.
3. Easy Loan Approval – Banks can ask for copies of tax returns, thereby making it easier to get a loan for a car or vehicle.
4. Proof of Address and Income
5. Simplified Visa Processing
Here are three suggestions for how to file your tax return to avoid delays:
1. File electronically.
2. Choose direct deposit.
3. Use IRS Free File for free tax preparation, electronic filing, and direct deposit of refunds.
Remember to file your taxes or file an extension on time! Even if you can’t afford to pay the taxes you owe, the fees for filing late are much greater than the fees for not paying your taxes on time!
If you still aren’t sure if you have to file a federal income tax return or if you should file in order to receive a refund, you may want to use the Interactive Tax Assistant. This tool will give you a recommendation based on the information that you provide.
2020 was a challenging year that resulted in taxes that are even more complicated. I am happy to meet with you to discuss your individual tax situation, and make sure that you are receiving all of the tax credits that you may be eligible to receive.