Filing a Tax Return to Claim a Refundable Tax Credit

Even if you don't owe any taxes, you may want to file a tax return to get a tax credit refund from the IRS.

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If you received no income for the tax year, you don't have to file a tax return. Even if you did receive income, you may still not have to file for that year. It all depends on the amount of your income, your filing status, your age, and the type of income you received. The IRS has an Interactive Tax Assistant on its website you can use to determine if you need to file a return. The instructions for Forms 1040, 1040A, and 1040-EZ also list filing requirements.

However, you may want to file a return, even though it's not required. Here are two reasons why.

You Are Owed a Tax Refund

You may be owed a refund by the IRS if:

  • you worked last year and your employer withheld federal income tax from your pay
  • you made estimated tax payments to the IRS, or
  • you had a prior year overpayment applied to this year’s tax.

You must file a return to claim any excess tax you paid during the year.

You Qualify for a Refundable Tax Credit

There are several types of tax credits designed to help low-income people that are refundable--that is, you are entitled to be paid the amount of the credit even though you don't owe any income tax to the IRS. In effect, the IRS is giving you money for being you. You must file a tax return to claim any of these tax credits. Millions of low-income people who qualify for refundable credits don't get them because they don't file a return. These refundable credits include:

Premium assistance tax credit. If you obtained health insurance coverage through an Obamacare health insurance exchange (either the federal exchange at healthcare.gov or one of the state exchanges), and your family income was less than four times the federal poverty level, you qualified for a tax credit to help pay for your coverage. If you’re like most people, this credit was paid directly to your health insurer by the federal government during the year. You qualify for this credit even if you owe no taxes. However, even if you owe no taxes, you must file a tax return with appropriate documentation (IRS Form 1095-A, Health Insurance Marketplace Statement) to avoid having to repay this credit. For more information, see the IRS webpage Affordable Care Act Tax Provisions for Individuals and Families.

Earned Income Tax Credit. If you worked but earned less than a threshold amount last year, you may qualify for Earned Income Tax Credit ("EITC"). The maximum you can earn and the amount of the credit depends on your family size. Families with three or more children can obtain a credit over $6,000. Use the IRS's EITC Assistant to find out if you qualify.

Additional Child Tax Credit. If you have dependent children under age 17 you likely qualify for a child tax credit of $1,000 per child. However, this credit is not refundable--that is, you may take it only up to the amount of your tax liability for the year. If you unable to claim all or part of the child tax credit because of this limitation, you may be able to obtain the additional child tax credit instead. This credit is refundable—it’s paid whether or not you owe income tax for the year—and can equal up to 15% of your earned income over $3,000. Example: A family of five (husband, wife and three dependent children) qualifies for a $3,000 child tax credit but can’t collect it because it has only $20,000 in earned income for the year and owes no income tax; it qualifies for a $2,550 additional child tax credit (15% x $17,000 = $2,550). You must file and use Schedule 8812, Child Tax Credit, to claim the credit.

American Opportunity Credit. If you or someone you support is a student who is attending the first years of college or other post-secondary education at least half-time, you might be eligible for the American Opportunity Credit of up to $2,500. Forty percent (40%) of this credit, up to $1,000, is refundable. You must file Form 8863,Education Credits, and submit it with your tax return to claim the credit. The IRS has an online education credit questionnaire you can complete to see if you qualify for this tax credit.

Health Coverage Tax Credit. If you’re receiving Trade Adjustment Assistance, Reemployment Trade Adjustment Assistance, Alternative Trade Adjustment Assistance, or pension benefit payments from the Pension Benefit Guaranty Corporation, you may be eligible for a Health Coverage Tax Credit. Spouses and dependents may also be eligible. If you’re eligible, you can receive a 72.5% tax credit on payments you made for qualified health insurance premiums. File Form 8885, Health Coverage Tax Credit with your income tax return and elect HCTC when you file.

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