Most people file a tax return because they have to, but even if you don’t, there are times when you should – because you might be eligible for a tax refund and not know it. The tax tips below should help you determine whether you’re one of them.
General Filing Rules
Whether you need to file a tax return this year depends on several factors. In most cases, the amount of your income, your filing status, and your age determine whether you must file a tax return. For example, if you’re single and 24 years old, you must file if your income was at least $12,400. If you are age 65 or older, income thresholds are higher ($14,050 in 2020 for single filers). If you’re self-employed (see below) or a dependent of another person, other tax rules may apply.
Tax Withheld or Paid
Did your employer withhold federal income tax from your pay? Did you make estimated tax payments? Did you overpay last year, and have it applied to this year’s tax? If you answered “yes” to any of these questions, you could be due a refund, but you have to file a tax return to receive the refund.
Eligibility for Certain Tax Credits
1. Premium Tax Credit. If you, your spouse, or a dependent was enrolled in healthcare coverage purchased from the Marketplace in 2020, you might be eligible for the Premium Tax Credit – but only if you chose to have advance payments of the premium tax credit sent directly to your insurer during the year. However, you must file a federal tax return and reconcile any advance payments with the allowable premium tax credit.
2. Earned Income Tax Credit. Did you work and earn less than $56,844 last year? You could receive EITC as a tax refund if you qualify with or without a qualifying child. You may be eligible for up to $6,660. If you qualify, file a tax return to claim it.
You may elect to use your 2019 earned income to figure your EITC if your 2019 earned income is more than your 2020 earned income.
3. Additional Child Tax Credit. Do you have at least one child that qualifies for the Child Tax Credit? If you don’t get the full credit amount, you may qualify for the Additional Child Tax Credit and receive a refund even if you do not owe any tax.
4. American Opportunity Tax Credit. The AOTC (up to $2,500 per eligible student) is available for four years of post-secondary education. You or your dependent must have been a student enrolled at least half-time for at least one academic period. Even if you don’t owe any taxes, you still may qualify; however, you must complete Form 8863, Education Credits, and file a return to claim the credit.
5. Health Coverage Tax Credit. If you, your spouse, or a dependent received advance payments of the health coverage tax credit, you will need to file a 2020 tax return. Form 1099-H, Health Coverage Tax Credit (HCTC) Advance Payments, shows the amount of the advance payments.
Other Situations
You must file a return in other situations as well, including, but not limited to the following situations:
- You owe special taxes such as the alternative minimum tax (AMT), additional tax on qualified plans such as an individual retirement arrangement (IRA), or another tax-favored account, or household employment taxes. However, if you are filing a return only because you owe these taxes, you can file Schedule H, Household Employment Taxes, by itself.
- You (or your spouse, if filing jointly) received Archer MSA, Medicare Advantage MSA, or health savings account distributions.
- You had net earnings from self-employment of at least $400.
- You had wages of $108.28 or more from a church or qualified church-controlled organization that is exempt from employer social security and Medicare taxes.
If you have any questions about whether you should file a return or if you need assistance with preparing and filing your taxes, contact us today so our Enrolled Agent can help you!
