Tax Dilemma: What to Know About Filing a Return with Zero Reported Income

For most US citizens and permanent residents working in the United States, filing a tax return is a standard requirement. 

The IRS or state tax collection agencies process these returns to ensure accurate tax payments. 

Generally speaking, you have to file if your net income from self-employment (including side jobs and independent labor) exceeds the filing threshold and surpasses $400. There are strong reasons to think about filing, even if not everyone may be required to. 

The determination of whether you are required to file a tax return is impacted by your filing status, encompassing factors such as your marital status and your position within the household.

Even if your income falls below the IRS minimum, filing a tax return can prove beneficial, potentially resulting in a refund and averting complications tied to age, filing status, and income.

Despite having minimal or no income, it is legal to file a tax return indicating zero income. The IRS adjusts the minimum earned income annually for inflation. 

Tax Credit Criteria and Filing Requirements

 

Some individuals below the minimum may still need to file under specific circumstances, such as having $400 in self-employment earnings, which triggers the requirement to file and pay self-employment tax.

Furthermore, meeting the criteria for specific tax credits may require the submission of a tax return, even in cases where there is no tax liability.

Claiming excess tax credits as a refund when filing your return is possible in such cases. The IRS provides various tax credits that can directly offset taxes, allowing for potential refunds if the credit surpasses the owed tax amount. Even if you’re unsure about your filing obligations, it’s advisable to file a tax return. 

Filing initiates the statute of limitations for IRS audits, setting a timeframe during which the IRS can review your return for a given year. Choosing not to file could leave the door open for the IRS to conduct an audit at a later date.

In conclusion, beyond the mandatory requirements, filing a tax return can lead to financial benefits, safeguard against potential complications, and adhere to statutory timelines governing IRS audits. It is a prudent financial practice that individuals should consider, especially given the potential advantages and legal obligations associated with tax filing.