Do You Have to File Taxes If You Have No Income?

Federal law does not require you to file an income tax return if you did not earn money in the previous tax year. This can be the case even if you earn some money, but your earnings are less than the standard deduction amount for that tax year.

Why bother filing a tax return if you have no income left after subtracting the deduction? There are a few reasons why you might want to do this, it is not technically necessary. Here's what to consider before deciding not to file an income tax

Income limits for federal taxes

The amount of the standard deduction varies by deposit status and is generally adjusted each year to keep pace with inflation. Each taxpayer has the right to subtract the standard deduction from their income, so they only pay taxes on what is left.

Below are the standard deductions for each claim status for tax years 2020 and 2021. Generally, you must file a tax return if your income was more than the deduction for your claim status, unless you have more age 65 or other rules apply (more on this below).

Filing StatusTax Year 2020Tax Year 2021
Single$12,400$12,550
Married filing jointly$24,800$25,100
Married filing separately$12,400$12,550
Head of household$18,650$18,800
Qualifying widow(er)$24,800$25,100

Although the IRS states that the standard deduction for married individuals filing separately is the same for single individuals, this does not necessarily determine whether or not you need to file. This is because the IRS states that married people filing separately must file a tax return if they earn only $ 5.3. This income limit applies to couples of all ages.

Taxpayers age 65 and older may have a little more freedom because they are entitled to an additional standard deduction. Below are the standard deductions for tax years 2020 and 2021 for people 65 and older.

What if someone else can claim you as a dependent?

Different income limits apply if someone else can claim you as a dependent. Your total income may be less than the standard deduction for your filing status. However, you will need to file a tax return if you are single or head of household, and one of the following applies:

$ 1,100 in unearned income, under 65 and not blind
$ 2,750 in unearned income, over 65 or blind
$ 4,400 in unearned income, over 65s and blind
$ 12,400 in earned earnings, under 65s and not blind
$ 14,050 in earned income, 65+ or blind
$ 15,700 in earned income, over 65s and blind

You must also file an income tax return if your combined, unearned income exceeds any of the amounts applicable to your circumstances. For example, you would have to file a tax return if you had $ 1,101 of unearned income even though you only had $ 10,000 of income, were single, and were under 65 last year. (See “What is Taxable Income?” Below for more information on what qualifies as earned and not earned income.)

The numbers change a bit and more rules apply if you are married or a qualified widow:

$ 1,100 in unearned income, under 65 and not blind
$ 2,400 in unearned income, over 65 or blind
$ 3,700 in unearned income, over 65s and blind
$ 12,400 in earned earnings, under 65s and not blind
$ 13,700 in earned income, 65+ or blind
$ 15,000 in earned income, over 65s and blind

Again, you must file an income tax return if your accumulated unearned and earned income exceeds any of the applicable amounts. For example, you would have to file a tax return if your gross income was more than $ 1,100 or more than $ 12,400 if you were unmarried and under 65. The $ 5 rule also applies for married taxpayers filing separate tax returns.

The IRS provides an interactive tool on its website that can help you determine if you need to file a tax return. It is only intended for taxpayers who have lived in the US for the entire tax year. Your spouse must also have lived in the US if you file a joint return.

Other submission requirements

Some people must file the lawsuit regardless of whether their earnings exceed the amount of the standard deduction to which they are entitled. Undocumented immigrants, or "nonresident aliens," as the IRS states on its website, generally must register if they engage in any trade or business in the US during the tax year.

You must also register if you owe any additional taxes such as:

The alternative minimum tax

The "babysitting tax" for domestic workers

Tax on tips you did not report to your employer

Additional tax on any qualified retirement plan or health savings plan you have contributed to

You must also file a tax return if you have self-employment income of a certain amount and wages paid by a qualified church or church controlled organization that does not have to contribute Social Security or Medicare taxes on your behalf. For fiscal year 2020, these amounts are $ 400 and $ 108.28, respectively.

You must record whether you have received distributions from certain medical savings accounts or medical savings accounts. You should also record whether you claimed the premium tax credit on a prior year's income tax return and the money was issued in advance to your insurer.

Why You May Want To File Even If You Have No Taxable Income

All of these rules apply when you must file a tax return, but there are some good reasons you might want to do so, even if it is not technically necessary.

You may be eligible to claim the Recovery Reduction Tax Credit if you or one of your dependents was entitled to a stimulus check but never received it. In fact, you are allowing the IRS to keep this money unless you file a return claiming it as a tax credit.

The same applies to any other refundable tax credit you may claim. You will not receive this money unless you file an income tax return to claim it.

State income tax

The rules described above apply to federal taxes. Most states also impose income taxes, and the rules about who must file can be significantly different. Check with your state's Tax Department for the rules that apply in the state where you live or work.

However, you won't have to worry about this if you live or work in Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington State, or Wyoming.

These states do not have income taxes in 2021. Tennessee used to tax unearned income, but that tax is no longer valid after 2021. And if you live or work in New Hampshire, you will only pay taxes on dividends and income. for interests.

We hope you enjoy watching this video about Taxes

Source: The College Investor

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