Even if You’re Not Required to File a Tax Return, You May Be Missing Out if You Don’t.
Article Highlights:
Tax Filing Thresholds
Withholding
2021 Recovery Rebate Credit
Earned Income Tax Credit (EITC)
Child Tax Credit or Credit for Other Dependents
Education Credits
Some people may choose not to file a tax return because they didn't earn enough money to be required to file, but these folks may miss out getting a refund if they don’t file. Although there are some exceptions, generally individuals are not required to file a tax return if their income for the year is below the filing threshold for their filing status as shown in the following table.
2021 TAX FILING THRESHOLDS FOR MOST INDIVIDUALS | ||
|---|---|---|
Filing Status | Age at the end of 2021 | Gross Income Filing Threshold |
Single | Under 65 | $12,550 |
65 or older | $14,250 | |
Head of Household | Under 65 | $18,800 |
65 or older | $20,500 | |
Married Filing Jointly | Under 65 (both spouses) | 25,100 |
65 or older (one spouse) | $26,450 | |
65 or older (both spouses) | $27,800 | |
Married Filing Separate | Any Age | $5 |
Qualifying Widow(er) | Under 65 | $25,100 |
65 or older | $26,450 | |
Many social benefits provided by the government for lower income individuals are distributed through the tax return, often in the form of a tax credit, and a return must be filed to claim those benefits, many of which can be substantial. Some of these credits are partially or fully refundable even if an individual has no tax liability. So, even though you might not be required to file a return you may be missing out on a tax refund if you don’t file one. Here are some examples:
Withholding – If you are not required to file a tax return but had income taxes withheld from your W-2 wages, Social Security benefits, retirement income, or investment income, or you made estimated tax payments, you are entitled to have that withholding or estimate payments refunded. However, you must file a tax return to recover the withholding or tax payments.
2021 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 . However, a 2021 return will need to be filed, even if not otherwise required to file a tax return. The credit will reduce any tax owed for 2021 or be included in the tax refund.
Earned Income Tax Credit (EITC) - A working individual who earned $57,414 or less in 2021 can receive the EITC as a tax refund. For 2021 the amount of the earned income credit ranges from $1,502 to $6,728 depending on your filing status and how many, if any, children you claim on your tax return. Those who did not file a return for tax year 2020 or 2021 or who did not claim the earned income tax credit on their 2020 or 2021 return because they had no earned income in those years may file an original or amended return to claim the credit using their 2019 earned income if they are otherwise eligible to do so.
Child Tax Credit Or Credit For Other Dependents – individuals can claim the child tax credit for 2021 if they have a qualifying child under the age of 18 and meet other qualifications. Other taxpayers may be eligible for the credit for other dependents. This includes people who have:
Dependents who are age 18 or older.
Dependents who have individual taxpayer identification numbers instead of a Social Security number.
Dependent parents or other qualifying relatives whom the taxpayer supports.
Dependents living with the taxpayer who aren't related to the taxpayer.
Education Credits – There are two higher education credits that can reduce the amount of tax someone owes on their tax return. One is the American opportunity tax credit and the other is the lifetime learning credit. The taxpayer, their spouse or their dependent must have been a student enrolled at least half time for one academic period and have paid college or university education expenses to qualify. The taxpayer may qualify for one of these credits even if they don't owe any taxes.
If you are not required to file, and didn’t, you can contact this office to determine if any benefit can be gained by filing a 2021 tax return. Even if you are required to file and didn’t, this office can help you meet your filing requirements and take advantage of the many benefits available.
Want tax & accounting tips and insights?
Sign up for our newsletter.
“Bernard and his team at BR tax group are top notch. This is my first year using them after switching from a different local CPA and I didn't realize how much tax info I've been missing. His communication is great. The additional information he provides to maximize tax savings is something I didn't get from my previous CPA. Thanks Bernard”
Frequently Asked Questions
-
You can prepare your taxes yourself, especially if your business is simple.
But once you have contractors, employees, business loans, equipment purchases, mileage, mixed expenses, or growing revenue, things get more complex. At that point, tax preparation becomes a way to make sure your business is reported correctly, your deductions are handled properly, and your records can support what you file.
-
Send anything that shows what your business earned, spent, bought, paid, borrowed, or changed during the year.
That usually means your income records, bank statements, credit card statements, payroll reports, contractor payments, loan documents, mileage records, and prior-year tax return. Also tell me about anything unusual, such as buying a vehicle, hiring someone, opening a new location, or taking out a business loan.
-
Messy books can slow things down. If expenses are in the wrong categories, transactions are missing, or personal and business spending are mixed together, your tax return may not show the right profit. We may need to clean things up before filing, so your return is accurate and easier to support.
-
Possibly, if it was truly for your business and you have proof.
Still, it is much better to avoid this when you can. A separate business bank account and business credit card make everything cleaner. They save time, reduce confusion, and make your records much easier to defend if anyone ever asks questions.
-
Most small business owners can deduct ordinary business expenses like software, advertising, supplies, insurance, rent, payroll, contractor payments, professional fees, travel, and some vehicle costs.
The question I usually ask is simple. Was this expense clearly for the business? If yes, we can look at how it should be handled. Personal expenses should stay personal.
Our Offices
Georgetown
Austin - Arboretum
Austin Downtown
Let's Get Started
Our services are designed specifically for business start-ups, entrepreneurs and small businesses of all sizes. Let’s start the conversation.
Site managed by http://www.webstrategyboost.com/