Figuring out taxes each year can be a real struggle and extremely frustrating, especially when you're unsure about the requirements based on your income level.
Do you have to still file a federal tax return if low income status?
This guide is tailored to help you understand income requirements, whether you need to file a tax return if low income, and what options are available to you.
Understanding Your Tax Filing Obligations
Dealing with taxes can often feel overwhelming, particularly when your income is low and every dollar counts. You might be asking yourself, "Do I owe taxes and really need to file a tax return?" Understanding your tax filing obligations is crucial, not only to comply with the law but also to potentially benefit from various tax credits and refunds that can put money back in your pocket.
What Determines the Need to File a Tax Return?
Several factors determine whether you need to file a tax return, including your gross income, filing status, age, and specific tax situations. For example, in 2023, if you're under 65, single, and earned less than $13,850 (the standard deduction for a single taxpayer), you typically wouldn't need to file a return.
However, other factors such as self-employment income, owing special taxes, or receiving advance payments of the premium tax credit can necessitate filing regardless of your gross income.
If you have bunch of side hustles you'll need to make sure to include this income in your tax report.
How Does Income Level Affect Tax Filing Requirements?
Your income level is one of the primary factors affecting your tax filing requirements. If your income is less than your standard deduction, you generally don't need to file a return. The standard deduction amount varies based on age, filing status, and whether you're blind.
For instance, a married couple both over 65 would have a higher standard deduction than a younger couple, potentially exempting them from filing if their income is below this higher threshold.
What If You Only Have Social Security Benefits?
If your only source of income is Social Security benefits, in most cases, you won't need to file a tax return. However, if you have other forms of income, such as tax-exempt interest, part of your Social Security benefits may become taxable, pushing you over the standard deduction limit and requiring you to file a return.
Are There Exceptions That Require You to File Regardless of Income?
Yes, there are exceptions. You're required to file a tax return if you have self-employment income over $400, owe special taxes, or received advance payments of the premium tax credit (discounted ACA health insurance plans). Being aware of these exceptions helps avoid potential penalties and ensures you're compliant with tax laws.
What Are the Benefits of Filing a Tax Return Even With Low Income?
Filing a tax return can be highly beneficial, even for those with low income. One of the key advantages to file a federal tax because of filing is the ability to claim various tax credits, some of which are refundable, meaning they can reduce your tax bill and potentially lead to a refund.
Earned Income Tax Credit (EITC)
The Earned Income Tax Credit (EITC) is designed for low- to moderate-income working individuals and families. The amount of EITC you can receive depends on your income, filing status, and the number of qualifying children.
For the 2023 tax year, the credit ranges from $560 to $6,935. The EITC is a refundable credit, which means if the credit exceeds the amount of taxes you owe, it results in a tax refund. For example, if you're eligible for a $2,000 EITC and owe $1,500 in taxes, you'll get a $500 refundable tax credit.
Child Tax Credit (CTC)
The Child Tax Credit (CTC) is another significant credit for families with children. For 2023, the CTC can be up to $2,000 per qualifying child under the age of 17. The credit includes a refundable portion, known as the Additional Child Tax Credit (ACTC), which can be up to $1,500 per child. This means if the credit is more than the taxes you owe, you may receive the excess amount as a refundable tax credits.
American Opportunity Tax Credit (AOTC)
The American Opportunity Tax Credit (AOTC) is aimed at helping with college expenses for the first four years of higher education. The AOTC can be up to $2,500 per eligible student, with 40% of it being refundable (up to $1,000). This credit can be claimed for expenses like tuition, course materials, and any required fees.
Other credits include the Lifetime Learning Credit for post-secondary education expenses, which is non-refundable but can reduce your tax liability by up to $2,000. There’s also the Credit for Other Dependents, offering up to $500 for dependents who don’t qualify for the CT
Can Dependents with Low Income Be Required to File?
Dependents with low income might still be required to file a tax return, depending on their earned and unearned income thresholds. In 2023, a dependent's filing requirements depend on whether their unearned income is over $1,250 or earned income is more than $12,950.
How Can You Determine If You Need to File a Tax Return?
To determine if you need to file a tax return, you can use the IRS’ interactive tool or consult with a tax professional. These resources can provide personalized guidance based on your specific circumstances.
What Are the Risks of Not Filing When Required?
Not filing a tax return when required can lead to penalties, interest on owed taxes, or missing out on refundable credits. It's important to file a return if you meet the criteria to avoid these risks and remain compliant with tax laws.
How to Get Your Taxes Filed: Common Methods and Services
Filing your taxes doesn't have to be a hassle. There are several convenient methods and services available.
You can file taxes online using platforms like
which offer user-friendly interfaces and guidance throughout the process.
File In Person
For personalized assistance, tax preparation services
Want Even More Money Back? How About a Cell Phone Service "Tax Refund"?
For low to middle-income individuals, the Federal Government's Lifeline and Affordable Connectivity Program (ACP) through EASY Wireless offers a vital opportunity to eliminate your monthly cell phone and data bill.
Over 40% of U.S. households qualify for one or both of these programs.
Participating in these programs with EASY Wireless can lead to significant savings. Eligible customers can enjoy free or discounted wireless services, including UNLIMITED Talk, Text, and Data. This assistance is crucial for those managing tight budgets, helping to ease the financial strain of a monthly cell phone bill.
With average phone bills ranging between $50 to $100 a month, enrolling in Lifeline and ACP through EASY Wireless is like receiving a monthly "tax refund."
Interested in Saving Money Today?
Click here to check your eligibility for Lifeline and ACP with EASY Wireless.
Get the Benefits of Filling a Federal Income Tax Return
Understanding your tax filing requirements is essential, especially when you have a low income. By assessing your situation and utilizing available resources and services, you can navigate tax filing with confidence.
Remember, even if you're not obligated to file, doing so can often be beneficial, potentially resulting in tax refunds and credits. Stay informed, explore your options, and take charge of your tax obligations to ensure you're making the most of your financial situation.