- Learn about refunds of withholding.
- Have you made other prepayments you forgot about?
- Learn about available tax credits for which you might qualify.
- Discover information about the earned income tax credit (EITC).
- Learn about changes to the child tax credit.
- Do you qualify for the American opportunity tax credit (AOTC)?
- Learn about the recovery rebate credit.
These days the government uses your tax return for more than just collecting taxes. It has also become a tool for the government to provide social benefits. Fiducial wants you to know the various reasons and resulting benefits available to you when you file. Even if you are not required to, you may be eligible for a refund of withholding or estimated payments, a refund as a result of a refundable tax credit, or even a stimulus payment that you didn’t previously receive. Below are some of the possibilities.
Refund of withholding
You may have worked or had other income that included income tax withholding, but the total of all your income was less than the requirement to file a return. You must file a 2021 return if your income is equal to or more than the amount shown in the following table based on the filing status you would use if you did file:
So, what happens if you do not have to file and decide not to bother? You would forfeit any income tax withholding on wages you earned.
Other tax return pre-payments
You may have made 2021 tax payments but have forgotten about them, such as estimated tax payments or a 2020 overpayment you applied to your 2021 return. Surely you don’t want to forfeit those amounts.
Tax returns can provide tax credits
Even though you may not be required to file a return and the withholding was negligible enough not to worry about it, you may be entitled to more than just a withholding refund. Normally tax credits can only be used to offset income tax. However, there are some credits that are refundable and may provide you with a significant refund. Here are the details of those credits:
- Earned Income Tax Credit (EITC) – The EITC provides a fully refundable credit for lower-income taxpayers who have earned income (income from working). The credit can be as much as $6,728 for 2021. The amount you receive depends on your income, filing status, and how many children you have. Even eligible individuals without children may qualify for the EITC.
- Child Tax Credit – For the 2021 tax year return only (unless Congress extends it), the tax credit is $3,000 per child under the age of 18 ($3,600 under the age of 6). The credit is reduced for upper-income taxpayers. The credit is fully refundable for those not required to file.
- American Opportunity Tax Credit – This is a credit to help pay for college costs. To qualify, the taxpayer, spouse, or dependent child must have been a student enrolled at least half time for one academic period during the year. The maximum credit is 100% of the first $2,000 of eligible expenses and 25% of the next $2,000 but only $1,000 is refundable.
- 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. Eligibility for the Recovery Rebate Credit is based on their 2021 tax year information.
Think twice before not filing a tax return
If you were considering skipping filing your 2021 return, maybe you should reconsider. You will need to file a 2021 tax return even if you don't usually file a tax return to benefit from any of these tax benefits.
If you are an existing client and have questions, please call your Fiducial representative. Have you been trying to do your own tax return? Would you like professional preparation? We are here to assist you. Call Fiducial at 1-866-FIDUCIAL or make an appointment at one of our office locations to discuss your situation.