 Internal Revenue Service IRS tax news. People without a filing requirement may miss out on a refund if they don't file a 2021 tax return. In other words, the IRS is like, file your dang tax return, even if you don't have to. Because we want to know who you worked for, even if it was nobody, where you live, who your dependents are, and all other vital personal information. You know, the same kind of stuff you'd be asked about by your typical identity thief. And we'll pay you for it. It's like, hey, wait a second, this looks familiar. Did the IRS steal this business model from Facebook? But first, an attempt at a joke. The administration grudgingly admits that the economy, it's not as solid as it could be. Solid as a rock. But don't worry, that crap will hold together. Don't worry. However, the market disagrees, saying that crap's not holding together. In fact, it's diarrhea. COVID tax tip 2022-111, July 21st, 2022. Some people may choose not to file a tax return because they didn't earn enough money to be required to file, but may miss getting a refund if they don't file. I'm not a fan of the structure of that first sentence here, but what do I know? I'm going to count. And this is tax news. What do you want? Brilliant prose from the tax news. In any case, if you break this down, you can basically ask two questions which are not the same question. One, am I required to file a tax return? Two, would it be beneficial to file a tax return? These are two distinct questions that we could ask. If we ask the question, am I required to file a tax return? If your income is below a certain threshold, you would think that would basically be kind of like the standard deduction that everyone gets, that you wouldn't be required to file because that would bring your taxable income to basically zero. You wouldn't owe any tax at that point in time. And therefore, you would think the IRS would not be coming after you if you didn't file a tax return when you don't owe any taxes, although you can't imagine a world in which they would come after you if they wanted more than taxes, such as your personal identifiable information. Obviously, in theory at least these days, that's not what they're trying to do. They're not trying to track every step. They're trying to actually get tax revenue in theory and therefore you would think they wouldn't come after you if you didn't owe any taxes because your income is below a certain threshold. On the other hand, if you ask the question, would it be beneficial to file the tax return? It still may be quite beneficial these days because for multiple reasons. One, you might have worked somewhere and you might have some withholdings that they took for federal income taxes. And if you file the tax return, you might get that in the form of a refund. That would be a general classical kind of refund. But also, possibly bigger financially, you might say, well, they only withheld like 20 bucks. It's not really worth me filing possibly or something like that, even though you might be able to do it for free, filing for free these days. But the other thing that could happen is they've increased a lot of the refundable credits. So like the child tax credit, the earned income tax credit, and then you have these other things like the stimulus payments that could, if you haven't gotten those have an impact as well. So those can be quite significant. And basically they're working at this point in time to have at least a component of them not to be a refund, which you would think just by the definition or the term would be a refund, meaning you overpaid your taxes in withholding and they're giving it back to you. These are more like benefit program types of things because your income goes below zero and you still get money from the government. So it's not really a refund, even though it would kind of categorized in the refund category. So therefore you probably want to I would check it out. If you haven't filed or you're not required to file, you might as well check it out because they've also got the free file software that you can get access to up until the point of the extension point. And so you so you can you can test it out for free. So I would think that almost everyone these days should probably if they're just looking at it from it would it be beneficial for me to file and not whether or not you want to give the IRS your information and that kind of stuff. Then you should file a tax return and check it out because you might be subject to some of these benefits. Okay. So while filing deadline is October 17, 2022 to file 2021 tax returns. The IRS strongly encourages individuals to consider filing electronically sooner. So the IRS would benefit by that as well. It's probably a good idea not to procrastinate and so on and get it done. But you can think about it from the IRS standpoint. They would like people to file sooner and not have everybody file on October 17 because then you know, they want to get stuff done before the filing season at the end of the year. So you from their standpoint, you could see that they would want the tax returns done sooner. You would think so sooner rather than later, especially if they're due a refund. So in most cases and notice how they kind of frame it here as if they're concerned with your refund. Right. They want you to file sooner. So, you know, it's I get that. But I'm you know, from my skeptical perception, I would think that they want you to file it sooner because this is their downtime and they'd like to process as many tax returns at this point in time as they can. And they're probably more concerned about the people that owe money because if they owe money, then the IRS basically wants to get paid. But in any case, in most cases, income filing status and age determined if a taxpayer must file a tax return. Other rules may apply if the taxpayer is self-employed or can be claimed as a dependent of someone else. The interactive tax assistance. There's a link to that here can help people determine if they need to file a tax return. Look at tax withheld or paid. Exes tax withholding are only returned to the form of a refund when someone files a tax return. So if your income is below a certain threshold, it's likely that your employer still had to withhold money based on the W-4 and you're not going to get that money back if you didn't owe it without filing a tax return in the form of a refund. So this can affect students and part-time workers where the tax withheld from their wages is at a rate that is too high. Seniors and retirees who make estimated tax payments or have money withheld from their retirement fund and social security disbursements may also be eligible for a refund. Individuals who answer yes to any of these questions may be due a refund and must file a tax return to get their money. Did the taxpayers' employer withhold federal income tax from their pay? Did the taxpayer make estimated tax payments during the year? Did they overpay last year on their taxes and have it applied to their 2021 tax return? So these are all the things that apply to the classical refund, meaning you overpaid your taxes possibly and therefore you would get a refund when filing the tax return as you realize that you didn't owe as much taxes. That's one thing. But again, you've got these other credits and stuff that could be beneficial and possibly be worth even more in a lot of cases than that stuff. So here are some of valuable credits taxpayers may be able to claim. While most tax credits can be used to reduce tax owed, there are credits that allow individuals to receive money beyond what they owe, meaning it's no longer a refund at that point. These are benefit programs past that point in time. So we've got the recovery rebate credit. Individuals who didn't qualify for the third economic impact payment or got less than the full amount may be eligible to claim the 2021 recovery rebate credit. There's a link to that here and we'll need to file the 2021 tax return even if they don't usually file a tax return. The credit will reduce any tax owed by for 2021 or be included in the tax refund. We got the earned income tax credit. A working taxpayer who earned $57,414 or less last year could receive the earned income tax credit. Now, it's more complex than that because the earned income tax credit is one of the most complex credits there are to kind of understand. It's got a dependent component or qualifying child component to it up to three qualifying children. And it's got an income component that actually the credit goes up as your income goes up, caps off and then goes back down. But that slope of capping off and going back down will differ based on how many children you have. But in any case, it could be a significant amount and it's refundable or large. You know, there's a huge refundable component to it. So again, you might want to file just to check check it out for 2021 tax year. The tax return taxpayers file a 2022 the earned income credit ranges from $1,502 to $6,728. Depending on their filing status and how many children they claim on their tax return. Taxpayers 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. So it gets even more complex these days with the credit because again, that credit already complicated because there's this earned income component. It's tied to the children. I'm not really against the credit. I like the concept of the credit by the way because it actually is trying to incentivize work as opposed to disincentivizing work with most benefit programs do. Meaning if you start earning income, you lose the benefits and you might lose more benefits than the income you earn, which seems counterproductive to me. So I like the idea of it, but it gets all complicated. And now they're going back. You could use 2019 because they're trying to say, well, people might not have been able to find work in 2020 or 2021. So maybe we can use the 2019 in an attempt to get people more benefit. So you could do that as well. So the software helps a lot with these confusing components and oftentimes it's free up until October. If you look at the free file stuff on the IRS website. So in any case, taxpayers can also use their 2019 earned income to figure their 2021 earned income credit. If their 2019 earned income is more than their 2021 earned income. So you might say, well, why would why in the world if my 2019 earned income is more than 2021? Would it be better for me to use 2019 income? Because income is bad for taxes, isn't it? But with the earned income tax credit, your credit actually goes up as your income goes up up to a certain threshold. And so it could be good for that purpose. And then you might be able to use the income in 2019 for that particular for that particular component to figure that out. And then your normal income for 2020 like to do the rest of the tax return. So it makes perfect sense. Everything makes sense. So they can check eligibility by using the EITC assistant. There's a link to that here on irs.gov, which is available in eight different languages. So child tax credit or credit for other dependents. Taxpayers can claim the child tax credit. This is the other big one. Those, those valuable little kitties. That's horrible. Okay, anyways, there's a big credit for the children. Taxpayers can claim the child tax credit if they have a qualifying child under the age of 18 and meet other qualifications. So other taxpayers may be eligible for the credit for other dependents. These include people who have dependents who are age 17 or older dependents who have individual taxpayers identification numbers, dependent parents or other qualifying relatives supported by the taxpayer dependents living with the taxpayers who aren't related to the taxpayers. So if you have a dependent, typically you're going to first say, Hey, can I get a qualification for the qualifying child because that's going to be worth a whole lot more. And if not, and there's still a dependent, maybe you can get the other dependent credit, which is worth far less. But still those dependents are worth something. Those eating all my food, whatnot. At least I get, I should get something here. Anyways, this interactive tax assistant tool, there's a link to that here on irs.gov can help people determine if they qualify for these two credits. And then we've got the 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 credit. And the other is the lifetime learning credit. You usually kind of think of these together as the education credits typically going for the one that you get a bigger benefit from. And if you don't qualify for that because it's got more restrictive rules, you try to get the other one, which you could still get some benefit from. It's kind of like the dependent thing where you try to get the child tax credit, but if you can't, then you get the other default dependent credit. At least. So the taxpayer, their spouse or their dependent must have been a student enrolled in at least half time for one academic period to qualify. The taxpayer may qualify for one of these credits, even if they don't owe any taxes. Form 8863 Education Credits. There's a link to that here is used to claim the credit when filing the tax return. So note again, these credits get complicated and they've been changing from year to year. So you probably want to use software to kind of figure this out or get a, you know, help with, you know, a tax professional or something. But I think they still have the free file software on irs.gov up until October. So you want to, if you're going to use that, which I would certainly do if, if rather than do it by hand at least, then, then you want to check that out before October. Because I don't think you can get access to it after that point. And I think you can before that point. There's links to all that stuff here. There'll be a link to this in the description.