Key Takeaways
- It's perfectly legal to file a tax return even if your income falls below the IRS minimum requirement to file.
- If you qualify for certain tax credits but owe no tax, you might be able to claim the excess tax credit as a refund when you file your return.
- Filing a tax return typically starts the clock running for the amount of time the IRS can audit your return for a given year. If you don't file, the IRS can come back and perform an audit for that year.
Any year you have minimal or no income, you may be able to skip filing your tax return and the related paperwork. However, it's perfectly legal to file a tax return showing zero income, and this might be a good idea for a number of reasons.
Income requirements
Even if you earned income last year, if it falls below the IRS minimum you don't have to file a tax return. The minimum varies according to your age and filing status—whether you are:
- Single
- Head of Household
- Married Filing Jointly with your spouse
- can be claimed as a dependent on someone else's taxes
The IRS also adjusts the minimum amount of earned income from year to year for inflation. Individuals who fall below the minimum may still have to file a tax return under certain circumstances; for instance, if you had $400 in self-employment earnings, you'll have to file and pay self-employment tax.
If you have no income, however, you aren't obligated to file.
Credits may earn you a tax refund
The IRS offers a number of tax credits that you can take directly off your taxes rather than your income like a deduction. If the credit is more than you owe in taxes, in some cases, you can claim the excess credit as a refund.
If you qualify for tax credits, such as the Earned Income Tax Credit or Additional Child Tax Credit, you can receive a refund even if your tax is $0. To claim the credits, you have to file your 1040 and other tax forms.
For your 2021 tax return only, the Child Tax Credit is expanded by the American Rescue Plan raising the per-child credit to $3,600 or $3,000 depending on the age of your child. The credit is also fully refundable for 2021. To get money into the hands of families faster, the IRS will be sending out advance payments of the 2021 Child Tax Credit beginning in July of 2021. For updates and more information, please visit our 2021 Child Tax Credit blog post.
TurboTax Tip:
If you qualify for tax credits, such as the Earned Income Tax Credit or the Child Tax Credit, you can receive a refund even if your tax is $0. To claim the credits, you have to file your 1040 and other tax forms.
File now, deduct later
The IRS limits how much you can claim with various deductions and credits. For example, you can't claim a home office deduction so large that it would put your business into the red. Instead, you claim zero business income for the year, and carry any leftover deduction into the next year.
If you have deductions or credits carrying over, you can't claim them if you have no income, but you need to file your taxes to claim them in a future year when you do have income.
Protect yourself from future audits
The IRS operates under a statute of limitations when it comes to auditing old tax returns.
If you've reported your information accurately, in most cases they can only go back three years. However, the clock only starts for a given year when you actually file your tax return.
- If you don't file, the IRS can always come back and perform an audit.
- For this reason, the IRS recommends that even if you don't file, you still keep any relevant financial records indefinitely.
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