Do You Have to File Taxes If You Didn’t Earn Any Income?

If you are not making much money, you might be able to avoid filing a tax return.

The Internal Revenue Service doesn’t require you to file a federal income tax return if you didn’t earn any money during the previous year. Additionally, not everyone needs to file taxes even if they did earn some money for the tax year because their earnings were below that year’s standard deduction amount.

Even if you don’t have any income after subtracting the deductions, there are a few reasons why filing your taxes can still be worthwhile. Read on to see what those reasons are.

Income Thresholds for Federal Taxes

Your ability to deduct the standard deduction depends on your filing status, and it’s adjusted each year to account for inflation.

The IRS offers standard deductions for each tax filing status. In order to be exempt from taxation, you must file your taxes if your annual income is forecasted to exceed the amount of those deductions.

Filing StatusTax Year 2020Tax Year 2021
Single$12,400$12,550
Married filing jointly$24,800$25,100
Married filing separately $12,400$12,550
Head of household$18,650$18,800
Qualifying widow(er)$24,800$25,100

There are additional factors that may determine whether or not you need to file taxes, even if the IRS states that married couples filing separately have a standard deduction equivalent to those who are single. Married couples who are under 65 years old will have to file a return if they earn even just $5.

Those ages 65 or older are given more leeway when it comes to taxes because of their higher standard deductions. The standard deduction for tax years of 2020 and 2021 if you are 65 or older is as follows:

Filing StatusTax Year 2020Tax Year 2021
Single$14,050$14,250
Married filing separately$14,050$14,250
Married filing jointly if one spouse is age 65 or older$26,100$26,450
Married filing jointly if both spouses are age 65 or older$27,400$27,800
Head of household$20,300$20,500
Qualifying widow(er)$26,100$27,800

Note: A taxpayer may be able to file as a qualifying widow(er) for two years after the death of their spouse if they have a dependent child. This status has the same threshold as those who are married filing jointly, and some other rules may apply.

Why You Might Want to File Tax Even If You Didn’t Have Taxable Income?

If you didn’t have any taxable income during the previous year, you might not think it is worth it to file taxes. Yet, there are three reasons why you might still wish to do so:

Tax penalties

If you don’t file your taxes for a given tax year, even if you earned no money that year or had less than the standard deduction amount, you may be subject to an automatic penalty on top of interest and other fees. The IRS calls this “failure-to-file” penalty—it’s 5% of the balance due in most cases. This rate may increase depending on such factors as how late your return is filed or whether a proper extension was requested from the government agency where you filed for an extension. If the IRS deems that you are not attempting to file your tax return in good faith, this penalty can be up to 25% of the balance due on your taxes.

Taxes withheld or collected by an employer at a higher rate than normal

You may have had some money withheld from your paycheck (or paid out of pocket) during the previous year, and you will need to file a return so that this extra amount is refunded to you. For example, if your income was too high such that no tax was taken out but you earn less now, there is still a possibility that enough has been collected in case you accidentally owe taxes. This could happen if you received bonus compensation during the previous year—you might get a letter from the IRS with details on what needs to be done.

Tax credits and other benefits

You may have earned some money but you qualify for tax benefits such as child tax credits or earned income tax credits. If your credits are greater than your taxes owed, then you should file a return so that the extra amount can be refunded to you. Your eligibility for these types of credits may also require you to file an annual return even if you didn’t earn any money during the year. In other words, it is in your best interest (and this is why most people want to do so) to ensure that your records match up with what the IRS thinks about your income status before missing out on any potential benefit from those programs.

Tax laws have been in place for almost a century, and it can be confusing to understand what your responsibilities are when it comes to filing. If you would like more information on how to file taxes with no income or whether or not you should file them at all, contact an experienced tax practitioner such as one from XOA TAX. The CPAs at our firm will work closely with you on what is required of you under the law so that the process goes smoothly and you don’t miss out on any opportunity.

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