A cartoon fairy god-person, holding a clipboard, hovers over a man holding a briefcase and says: “After Federal, State and Local taxes, you get one-third of a wish.” By definition, taxes are the money that the government takes from you—an very unpleasant thought. That’s why, according to a survey by TD Ameritrade (2018), the average American taxpayer preferred such delightful experiences as sitting in bumper-to-bumper traffic or having a dental procedure to completing their tax returns. Happily for them, certain people are exempt from filing taxes. Basically, if you are not claimed as a dependent by someone else and your income is less than the standard deduction for your filing status, you are not required to file because—one of the few times an IRS regulation makes sense immediately—your income minus the deduction = $0 or less. So, for example, a single person who is not a dependent and has no dependents and makes less than $12,000 does not need to file at all.
It’s a little more complicated if you are someone’s dependent. If someone else claims you, you must file a return if you have unearned income over $1,050 or earned income over $12,000 or a combination that was more than the larger of $1,050 or your earned income + $350. If you want to figure it out in more details, you can use this handy IRS online tool. There are also some situations in which a person must file even if s/he falls below the basic income threshold. Mostly this is true if you have earnings on which you have not paid Social Security and Medicare (FICA) taxes, such as cash tips or self-employment income. Or if you received some kind of credit like the Affordable Care Act advance premium credit or the first-time homebuyer credit, and you might need to pay some of the credit back.
But even if you don’t have to file taxes and even though some Americans consider cleaning up a teenager’s bedroom to be more fun than filing taxes, you might want to file. Sometimes, surprisingly, filing taxes can benefit you more than the government. This is true if:
You want to claim back what you already paid. This seems obvious, but it is often overlooked by low-wage earners, including youth with disabilities. If you worked in a job that paid W-2 earnings, your employer withheld income tax from your paycheck and sent them on to the IRS. It is entirely possible that the employer, not knowing your whole economic picture, sent more to the IRS than the Service was going to require. The extra is your money and you should get it back.
You may qualify for the Earned Income Credit. The EIC is a refundable credit. Let’s say you worked at a W-2 job and your employer withheld income tax, which turns out to be more than the IRS needed from you. You have a refund coming in this case, but it is not large and you are still waffling about whether to file. You might qualify for the EIC, which can make your refund larger (or even give you a refund when you would not otherwise have one). The EIC, a credit for low-income workers, is most beneficial to filers with children, and is only available to filers over the age of 25 and under the age of 65.
You may qualify for the Child Tax Credit or the Additional Child Tax Credit. Again, let’s suppose that you fall under the filing threshold and you figure your refund will be small. If you have children, you probably want to file because although the Child Tax Credit can only reduce your tax liability to $0, the Additional Child Tax credit, which is refundable, can give you money back.
You may qualify for the American Opportunity Tax Credit. If you are not a dependent, and you have not completed four years of undergraduate education, and you are more than a half-time student; then you may be able to claim the American Opportunity Tax Credit for education expenses that you pay out of pocket. This is a partially refundable credit, meaning, again that you can use it even if you owe no taxes and would not otherwise file.
You want to accumulate Social Security Credits and you are self-employed. I mentioned above that, actually, you are required to file a tax return if you have income on which FICA taxes have not been paid even if that income is below the threshold for your filing status. If you are a person with a disability, who has self-employment (including 1099 income from contract work) or tip income, you definitely want to file your taxes so that you can make sure to pay your self-employment tax and get your Social Security credits.
If you have only W-2 income, it is very simple to file your own tax returns. The IRS website has another interactive tool to help you find sites, where you can file your Federal taxes for free. The lookup system also provides options to file many state income tax returns for free. In addition, many states have free file options directly on their Department of Revenue (or equivalent) website, such as the listing for my home state of Illinois. If your situation is more complicated—for instance if you want to determine whether you qualify for a credit—you may want to work with a qualified tax preparer. You do have to pay, but most will tell you the charge up front and the charge may have coupons. The Volunteer Income Tax Assistance (VITA) and Tax Counseling for the Elderly (TCE) programs also offer free tax-preparation help. You can find out more about these programs here:.
Tax filing can be stressful, especially this year when so many changes are going into effect. It might be tempting to skip the process if you think you can. But you work hard for your money, and filing might land you with more than just one-third of a wish. Filing your taxes just might give you the unexpected refund that makes the whole thing bearable.