Article Highlights:
- Withholding
- Other Prepayments
- Tax Credits
- Earned Income Tax Credit
- Child Tax Credit
- American Opportunity Tax Credit
- Recovery Rebate Credit
These days the tax return is used for more than just collecting taxes. It has also become a tool for the government to provide social benefits. This article discusses the various reasons and resulting benefits available to you when you file, even if you are not required to, as you may be eligible for a refund of withholding or estimated payments or a refund as a result of a refundable tax credit or even a stimulus payment that you didn’t previously receive. Here are some of the possibilities.
Refund of Withholding – You may have worked or had other income that included income tax withholding, but the total of all your income was less than the requirement to file a return. You are required to file a 2021 return if your income is equal to or more than the amount shown in the following table based on the filing status you would use if you did file:
2021 GENERAL TAXPAYER FILING REQUIREMENTS
| Taxpayer Filing Status | Gross Income |
|---|---|
| Single | $12,550 |
| Head of Household | $18,800 |
| Surviving Spouse | $25,100 |
| Married Filing Separate | $5 |
| Married Filing Jointly | 25,100 |
Add to the Above Amounts for Taxpayers Aged 65 and Older or Meet the Blind Qualifications
| Married Filing Joint or Surviving Spouse | $1,350 |
|---|---|
| All Others | $1,70 |
Caution: Self-employed taxpayers generally must file in all circumstances
So, if you are not required to file and decide not to bother, you would be forfeiting any income tax withholding on wages you earned.
Other Pre-payments – You may have made 2021 tax payments but have forgotten about them, such as estimated tax payments or a 2020 overpayment you applied to your 2021 return. Surely you don’t want to forfeit those amounts.
Tax Credits – Even though you may not be required to file a return and the withholding was negligible enough not to worry about it, you may be entitled to more than just a withholding refund. Normally tax credits can only be used to offset income tax. However, there are some credits that are refundable and may provide you with a significant refund. Here are the details of those credits:
- Earned Income Tax Credit (EITC) – The EITC provides a fully refundable credit for lower income taxpayers who have earned income (income from working) and can range from $519 to $6,728 for 2021. The amount you receive depends on your income, filing status, and how many children you have. Even eligible individuals without children may qualify for the EITC.
- Child Tax Credit – For the 2021 tax year return only (unless Congress extends it) the tax credit is $3,000 per child under the age of 18 ($3,600 under the age of 6). (The credit is reduced for upper-income taxpayers.) The credit is fully refundable for those who are not required to file.
- American Opportunity Tax Credit – This is a credit to help pay for college costs. To qualify, the taxpayer, spouse or dependent child must have been a student enrolled at least half time for one academic period during the year to qualify. The maximum credit is 100% of the first $2,000 of eligible expenses and 25% of the next $2,000 but only $1,000 is refundable.
- Recovery Rebate Credit - Individuals who didn't qualify for a third Economic Impact Payment or got less than the full amount, may be eligible to claim the 2021 recovery rebate credit based on their 2021 tax year information. If they're eligible.
If you were considering skipping filing your 2021 return, maybe you should reconsider. You will need to file a 2021 tax return even if you don't usually file a tax return to benefit from any of these tax benefits.
If you are an existing client and have questions, please give this office a call. If you have been trying to do your own tax return and would like professional preparation, we are here to assist you.
