Friday, February 11, 2011

Do You Have to File a Tax Return?

Not all individuals are required to file tax returns. If your income is less than the sum of your standard deduction and personal exemptions, you are generally not required to file a tax return. There are, however, circumstances where you may have to file anyway based on certain types of income or special circumstances.

Even if you are not required to file, it may be in your best interest to do so. The following are some of the instances in which you may want to file a tax return even though you are not required to do so.

  • Federal or State Income Tax Withheld – You should file to get money back if federal or state income tax was withheld from your pay, if you made estimated tax payments, or if a prior year overpayment was applied to this year’s tax return.
  • Making Work Pay Credit – You may qualify for the making work pay credit if you had earned income from work. The maximum credit for a married couple filing a joint return is $800; it is $400 for other taxpayers.
  • Earned Income Tax Credit (EITC) – You may qualify for EITC if you worked but did not earn a lot of money. EITC is a refundable tax credit, which means you could qualify for a tax refund even if you had no withholding.
  • Additional Child Tax Credit - This refundable credit may be available to you if you have at least one qualifying child and the credit exceeded your tax liability for the year.
  • American Opportunity Credit – Up to 40% of this credit, which applies to the first four years of post-secondary education, is refundable, and the maximum credit per student is $2,500.
  • First-Time Homebuyer Credit – The credit is a maximum of $8,000, or $4,000 if your filing status is married filing separately. To qualify for the credit, taxpayers must have bought – or entered into a binding contract to buy – a principal residence located in the United States on or before April 30, 2010. If you entered into a binding contract by April 30, 2010, you must have closed on the home on or before September 30, 2010. If you bought a home as your principal residence in 2010, you may be able to qualify, and claim the credit even if you already owned a home. In this case, the maximum credit for long-time residents is $6,500, or $3,250 if your filing status is married filing separately.
  • Health Coverage Tax Credit – Certain individuals, who are receiving Trade Adjustment Assistance, Reemployment Trade Adjustment Assistance, or pension benefit payments from the Pension Benefit Guaranty Corporation, may be eligible for a Health Coverage Tax Credit worth 80 percent of monthly health insurance premiums when they file their 2010 tax returns.

If you have questions related to whether you must file or whether you should file, please give this office a call.

 

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