Can You Get the Child Tax Credit if You Have No Income?
Millions of Americans don’t care when the tax season begins or ends because they don’t have to file taxes. If you are someone who has little to no income, you’re under no obligation to file a Federal tax return.
On the other hand, you can still file your taxes if you want to. There’s nothing illegal about filing a Federal tax return displaying zero income. In some cases, this is a smart idea.
So, if you are an American who isn’t legally obligated to file a Federal tax return this year, you may want to see if filing can get you the child tax credit even with no income.
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What are the Income Requirements to File a Tax Return?
If you have earned income, but it falls below the IRS minimum, you won’t have to go through the hassle of filing a Federal tax return.
This minimum limit changes every year. It also depends on how old you are and what your filing status is. There are different limits for taxpayers who are single, married filing jointly, and head of household.
It’s also possible to be claimed as a dependent as part of someone else’s tax return.
Inflation is another major factor in the IRS’s decision on what the minimum limit should be.
Keep in mind that even if you are below the minimum IRS limit, there are some circumstances that may require you to file a Federal tax return regardless. For example, if you have any earned income from self-employment, you will need to fill out a tax return in order to pay self-employment taxes.
But if you don’t have any earned income, there is no reason for you to file, in most cases.
Are You Entitled to a Tax Refund?
Did you know that there are thousands of Americans across the nation that don’t have any income yet receive a big fat tax refund from the IRS every year?
The IRS has a range of tax credits that reduce the amount you have to pay in taxes, as opposed to reducing your taxable income. In some cases, if you don’t owe anything in taxes, the child tax credit can lead to a refund.
There are a few different examples of refundable tax credits. The most common refundable tax credit claimed every year is the Earned Income Tax Credit.
The problem is if you want to claim a refundable tax credit, you will need to fill out a Form 1040, as well as certain other tax forms. If you don’t, you won’t be able to get a tax refund this year.
If you are in this situation, it’s worth filing taxes as the refund will result in thousands of dollars for just a few hours of work.
Why You Should File Even if You Can’t Deduct
The IRS places limits on the amount of child tax credit you can claim.
This stops people from playing the system. A prominent example of this is the home office deduction. In the past, many taxpayers were tempted to claim enormous deductions on their home offices. Obviously, the IRS declared it absurd that you would claim a home office deduction so large that it would cause your business to lose money.
What’s interesting, though, is even if you earned nothing during the last tax year, it’s worth filing taxes still because then you can claim the leftover deduction in future tax years.
This means that even if you are not eligible to claim a credit or a deduction now, you can still claim it in future years when you do have income. You need to start filing taxes now, though, rather than waiting until you are legally obligated to file a return.
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Frank Ellis is a Traverse City Tax Preparation Planner and published author. He has written tax and finance related articles for twelve years and has published over 1000 articles on leading financial websites.