COVID Tax Tip 2020-77, June 30, 2020
While many people are required to file a tax return, it’s a good idea for everyone to determine if they should file. Some people with low income are not required to file but will need to do so to get a tax refund.
The Interactive Tax Assistant – Do I Need to File a Tax Return? – will help determine if an individual is required to file a federal tax return or should file to receive a refund.
Here are seven things to consider when determining whether to file a 2019 tax return, including possibly being eligible for an Economic Impact Payment.
Tax withheld or paid – Did the taxpayer’s employer withhold federal income tax from their pay in 2019? Did the taxpayer make estimated tax payments? Did they get a refund last year, and have it applied to 2019 tax? If a taxpayer answers yes to any of these questions, they may be owed a refund. To receive the refund, they must file a 2019 tax return.
Earned income tax credit – This is a tax credit for low- to moderate-income wage earners. It is a refundable tax credit, and the amount depends on the taxpayer’s income and number of children. The credit doesn’t just reduce the amount of tax owed but could also result in a refund. However, once again, to claim the EITC, a taxpayer must file a return. Taxpayers can use the EITC Assistantto determine if they qualify for this credit.
Child tax credit – Taxpayers can claim this credit if they have a qualifying child under the age of 17 and meet other qualifications. The maximum amount per qualifying child is $2,000. Up to $1,400 of that amount can be refundable for each qualifying child. So, like the EITC, the Child Tax Credit can give a taxpayer a refund even if they owe no tax.
The IRS Interactive Tax Assistant – Is My Child a Qualifying Child for the Child Tax Credit? – helps taxpayers determine if a child is a qualifying child.
Taxpayers with dependents who don’t qualify for the child tax credit may be able to claim the credit for other dependents. The maximum credit amount is $500 for each dependent who meets certain conditions. Find out more by reading Publication 972, Child Tax Credit and Credit for Other Dependents.
American opportunity or lifetime earning credits – Two credits can help taxpayers paying higher education costs for themselves, a spouse or dependent. Even if the taxpayer doesn’t owe any taxes, they may still qualify. They can complete Form 8863, Education Credits (American Opportunity and Lifetime Learning Credits) and file it with the tax return. The Interactive Tax Assistant – Am I Eligible to Claim an Education Credit? – can help taxpayers figure out if are eligible for an education credit.
If taxpayers do not qualify for the either of these credits may benefit from the Tuition and Fees Deduction. For details about this deduction, see Publication 970, Tax Benefits for Education.
Economic Impact Payment – Individuals who aren’t required to file a tax return may still be eligible for an Economic Impact Payment of $1,200 or $2,400 if they filed married filing jointly. People who meet the EIP eligibility requirements, have a filing requirement or can claim a refund should file a 2019 tax return. If they have not filed a 2019 and 2018 tax return, the IRS will use their information from the 2019 tax return to calculate their Economic Impact Payment. Those who don’t have to file should use the Non-Filers: Enter Payment Info Here tool by October 15 to provide simple information so to get their payment.
The tax filing deadline has been postponed to Wednesday, July 15, 2020. The IRS is processing tax returns, issuing refunds and accepting payments. Taxpayers who mailed a tax return will experience a longer wait. There is no need to mail a second tax return or call the IRS.