2 reasons to file taxes even if you don’t have to
Even though not all Americans need to file tax returns, sometimes it’s actually beneficial to do so. See if you have to file and what you need to know before you get started.
2 reasons to file your taxes even if you don’t have to
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 70% of people who file a tax return receive a refund.
[Visual of a pie chart highlighting 70% and the statement: Typically more than 70% of people who file a tax return receive a refund according to the IRS. Source: irs.gov.]
So let’s take a look at how to know if you need to file—and whether you might want to.
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,
[Visual of a list of categories including “Single,” “Head of Household,” “Married filing jointly,” “Married filing separately,” and “Qualifying widow(er) with dependent child”]
whether you’re claimed as a dependent and your income.
How it works: 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 taxable 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.
So 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:
[Caption: Reason 1: Refundable tax credits.]
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.
[Visual of a chart titled “Tax bill,” showing the amount owed being less than $0.]
[Caption: Reason 2: Too much withheld.]
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.
[Visual of an internet search for “Do I need to file a tax return?” and a mouse click revealing a representation of the IRS interactive questionnaire.]
Knowing if you need to file, and what to expect when you do, can help make the process that much easier.
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Neither Bank of America Corporation nor any of its affiliates provide legal, tax or accounting advice. You should consult your legal and/or tax advisors before making any financial decisions. The material provided on this video is for informational use only and is not intended for financial or investment advice. Bank of America and/or its affiliates assume no liability for any loss or damages resulting from one’s reliance on the material provided. Please also note that such material is not updated regularly and that some of the information may not therefore be current. Consult with your own financial professional when making decisions regarding your financial or investment management. © 2018 Bank of America Corporation.
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