If you haven’t made any income or very minimal income amounts within the year, you might not have to file any of the related tax forms and paperwork.
Now before you jump for joy at evading one of the most confusing and stressful parts of the year, it’s important to keep in mind that just because you might not have to doesn’t mean you shouldn’t.
There can be a lot of benefits from still completing all the forms which we will go over throughout this article. Filing a tax return with zero income is completely legal and many people do still file regardless of their minimal income.
So, let’s talk a little more about the income requirements. If you fall below what the IRS deems the minimum income requirement for tax then you won’t legally need to file a tax return.
What is the minimum?
Well, that depends on several different factors. These include whether or not you are single, the head of a household, filing jointly with a spouse, or you are claimed as a dependent on another person’s tax form.
The amount of minimum income also changes slightly from year to year due to inflation. It’s also important to note that sometimes you can fall below the minimum income amount and still need to file a tax refund in certain circumstances.
For example, if you had around $400 in self-employment earnings you’d still need to file and pay self-employment tax.
Benefits Of Still Filing Your Tax Returns
So what exactly are the benefits of you still filing your tax returns even if you’ve had no income?
Below are a few of the most compelling arguments for still sitting down and taking the time to fill out all those relevant forms:
You May Get A Tax Refund From Earned Credits
If you claim any of the tax credits that the IRS offers, you can use these credits directly on your tax as opposed to your income.
Sometimes the credits you have can surpass the tax that you owe. In this case, there is potential for you to claim the surplus credit as a refund.
This is why it can be worth still filing these forms because you can reap benefits from them. Even if your tax is $0, and you receive Additional Child Tax Credit or Earned Income Tax Credit you can be eligible for a refund.
And we all know how welcome those tax refunds can be. But you won’t get this refund unless you’ve filed your tax forms including your 1040.
Recently the Child Tax Credit has been expanded by the American Rescue Plan. This means that per child the credit has now been raised to between $3000-$3600 dependant on the age of your child.
It’s also important to keep in mind that you usually need to get your refunds sooner rather than later.
Skipping out on filing in your forms means you might miss out on the refunds that you’re entitled to. If you realise a year or two down the line it will be too late to claim the money back.
File Now, Deduct Later
One thing to consider is that the IRS does have a limit on how much you are able to claim with various credits and deductions.
So as an example, you won’t be able to claim a home office deduction that would be so big that it’ll put your business in the red.
What you’d do instead is claim zero business income for the financial year, and then carry your surplus deduction into the following year.
While you won’t be able to claim any of the deductions while you have no income, but if you still file them you will be able to claim them back at a later date when you do have a growing income.
Protection Against Audits
As you’re probably already aware, the IRS works under a statute of limitations concerning auditing your old tax returns.
As long as you’ve been reporting your information correctly, in most instances they’ll only go back as far as three years.
Keep in mind though that this only applies if you’ve actually filed your tax return. If you don’t file your tax return then the IRS always have the option to come back and perform an audit.
Because of this it is really imperative that you always keep all your relevant financial records so that the information is there and available if it becomes needed.
If you haven’t earned any income, it can be really tempting to just ignore all the forms. After all they are long, confusing, time-consuming and you can just avoid all of that by not filing. It isn;t a legal requirement, after all.
However, this isn’t really the best mindset to have because there are quite a few advantages to still filing your tax returns.
If nothing else it keeps you in the habit, forgetting to file your tax return when you are required to do it can have serious consequences so it’s not a bad habit to keep.
Not only this, but if you receive a high amount of credit throughout the year it may even be possible that you’ll actually get a tax refund. Surely filling out the form is worth it if you’ll get some cash in return!
It also means that you can file yout taxes now to ensure that you can claim deductions in the coming year. Be kind to your future self and do the work now so that you can reap the rewards later.
And then finally continuing to file can protect you from audits, so a tiny bit of stress now can prevent quite a lot more stress later on.
So don’t put it off. Sit down, get it done, and future you can thank you later!