Some people may not be aware of this but in some cases filing a federal tax return is not necessary. Many factors way in on this but it has to do with more than just how much income you have taken in over the year in addition to your filing status, age, and the type of income you made. In some cases even if you are not required to file it is advised that you still do because there may be a refund waiting for you. I’m sure we can all use the extra cash. You may even qualify for refundable credits. On the IRS website, you can find many tools to help you figure out whether filing a tax return is necessary. If you use the Interactive Tax Assistant on the IRS website you will be answering a series of questions to help determine if filing is applicable to you.
As mentioned before, even if you don’t have to file you may want to file for six major reasons: Federal income tax withheld, Earned Income Tax Credit (EITC), Child Tax Credit, American Opportunity Credit, Adoption Credit, and Health Coverage Tax Credit. For the case of Federal Income Tax Withheld, it is advisable to file in order to retrieve any taxes that may have been held by your employer if you were making estimated tax payments or overpayment from the prior year’s tax return.
If you qualify for EITC you will receive a refundable tax credit. To receive a refund you must file your tax return. The same theory applies to the Additional Child Tax Credit except you must have at least one qualifying child.
Students that are in their first four years of postsecondary education can qualify for a credit of up to $2500.00 of which 40% is refundable. This means that even if you don’t owe any taxes you will receive $1000.00 cash back for all eligible students. If you have adopted a child then you may also receive a refundable tax credit to cover any expenses you paid to adopt a qualified child.
Lastly, eligible taxpayers may also receive a refund on payments made to health insurance premiums.
The average American family is facing a nearly $3700.00 increase in their tax bill next year. Not to mention that the stock market has had one of the worst weeks of the year due to a drop of more than 2%. These tax increases and the spending cuts that will take effect in the year 2013 will be about $600 billion per year, with tax increases being the majority. What this means is that even if these tax increases are temporary it is likely that every American will be paying into it. To make matters worse there are about nine different tax increases due to take effect in 2013. Some of which include increased rates on capital earnings and other investment income, estate tax thresholds due to lower and top earners are to face a new tax to help finance the Obama healthcare reforms.
