TLDR:
Some people may choose not to file a tax return because they didn't earn enough money to be required to file, but they may miss getting a refund if they don’t file.
While the filing deadline is October 17, 2022 to file 2021 tax returns, the IRS strongly encourages individuals to consider filing as soon as possible, especially if they’re due a refund.
In most cases, income, filing status and age determine 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. If you are unsure about your filing status, the tax specialist team at RP Financial Services can help you out!
If you received a W2 for 2021, look at tax withheld or paid. Excess tax withholdings are only returned in the form of a refund when someone files a tax return. 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 taxpayer's employer withhold federal income tax from their pay?
Did the taxpayer make estimated tax payments during the tax year?
Did they overpay last year on their taxes and have it applied to their 2021 tax?
Here are some valuable credits taxpayers may be able to claim. While most tax credits can be used to reduce the tax owed, there are credits that allow individuals to receive money beyond what they owe, or a "refundable tax credits"
Recovery rebate credit. Individuals who didn't qualify for a third Economic Impact Payment or got less than the full amount, may be eligible to claim the 2021 Recovery Rebate Credit and will need to file a 2021 tax return even if they don't usually file a tax return. The credit will reduce any tax owed for 2021 or be included in the tax refund.
Earned income tax credit. A working taxpayer who earned $57,414 or less last year could receive the EITC as a tax refund. For the 2021 tax year, the tax return taxpayers file in 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 if they are otherwise eligible to do so.
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.
Child tax credit or credit for other dependents. Taxpayers can claim the child tax credit if they have a qualifying child under the age of 18 and meet other qualifications. Other taxpayers may be eligible for the credit for other dependents. This includes people who have:
Dependents who are age 17 or older.
Dependents who have individual taxpayer identification numbers.
Dependent parents or other qualifying relatives supported by the taxpayer.
Dependents living with the taxpayer who aren't related to the taxpayer.
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 tax credit and the other is the lifetime learning credit. The taxpayer, their spouse or their dependent must have been a student enrolled 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.
If you have additional questions regarding your taxes, we can help you here at RP Financial Services. Contact us at (720) 712-7724 or book a FREE consultation using the link: https://calendly.com/rpfs/consult-with-ea
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