By Jonathan Curtis, Bank of America | You may be wondering: do I need to do my taxes this year? If you aren’t making that much money yet, you may not have to file. But—you might want to.
Because, when you file, you might find that you qualify for tax credits or deductions that could get you a refund. That’s money back in your pocket. In fact, the IRS says that typically, more than 65% of people who file a tax return receive a refund. So, let’s take a look at how to know if you need to file—and whether you might want to.
First Steps to Filing
There are a number of factors that determine whether or not you are required to file a federal income tax return.
These are typically related to your age and your filing status—which refers to IRS categories related to marital and family status, whether you’re claimed as a dependent and your income. These categories include:
- Filing status
- Single
- Head of Household
- Married filing jointly
- Married filing separately
- Qualifying surviving spouse
Depending on your filing status, if your “gross income” is below a certain threshold, you may not be required to file federal income taxes. Your “gross income” is all your income before deductions—that includes wages from an employer, but also money from freelance or side jobs like babysitting or dog walking—and income from investments or real estate, among other things.
Let’s say you’ve done your research and have figured out that you aren’t required to file your federal income taxes this year. Why bother, right? Well, you might benefit from filing. Let’s take a look at two of the most common reasons.
Reason #1: You might qualify for refundable tax credits.
If you had a very low gross income, if you were in school or taking classes, or if you have a child, you might qualify for what are called refundable tax credits. These are tax credits that can trigger a refund if they reduce what you owe the IRS to below zero. That means that the IRS would be sending you a refund check for all or a portion of that credit.
Reason #2: The federal income taxes withheld from your paycheck might be more than you actually owe.
If you have a job where your employer withheld federal income taxes from your paycheck for you but you didn’t meet the mandatory filing requirements, you might want to file anyway. You may be eligible for deductions and tax credits, which means you could get some of the money that was already paid toward federal income taxes back.
The IRS won’t typically track you down to give you any refund you’re due. In order to claim a refund, you have to file a tax return.
The specific factors that determine whether you need to file typically change a little bit each year.
You can find information on whether you need to file by visiting IRS.gov and filling out an interactive questionnaire.
Knowing if you need to file, and what to expect when you do, can help make the process that much easier.
Disclaimer
Jonathan Curtis is not a tax professional, and readers should consult a tax professional for questions about their personal situation.
For more info visit:
https://www.bankofamerica.com/
Be the first to comment