You must file a tax return if your income is above a certain level. The amount varies depending on filing status, age and the type of income you receive. But, even if you don't have to file, it may be well worth your time to do so.
"It is essential to file a tax return to receive any kind of credit for which you qualify," said Clay Sanford, an IRS spokesman in Dallas. "Unfortunately, there are credits available that a lot of folks may overlook."
Tax credits, unlike deductions, are subtracted directly from your tax and reduce your tax, dollar for dollar. Many tax credits are refundable, which means they are treated as payments. These credits are added to the federal income tax withheld and any estimated tax payments you made. If this total is more than your total tax, the excess will be refunded to you.
Sanford also stressed e-filing your tax return to ensure you maximize tax deductions, claim deserved credits, and take advantage of tax benefits.
Here are eight reasons why you may want to file:
Federal Income Tax Withheld: If you are not required to file, you should file to get money back if Federal Income Tax was withheld from your pay, you made estimated tax payments, or had a prior year overpayment applied to this year's tax.
Making Work Pay Credit: You may be able to take this credit if you have earned income from work. The maximum credit for a married couple filing a joint return is $800 and $400 for other taxpayers.
Government Retiree Credit: You may be eligible for this credit if you received a government pension or annuity payment in 2009. However, the amount of this credit reduces any making work pay credit you receive.
Earned Income Tax Credit: You may qualify for EITC if you worked, but did not earn a lot of money. EITC is a refundable tax credit; which means you could qualify for a tax refund. The IRS estimates one of four eligible taxpayers fails to claim EITC. The average family received an extra $2,000 tax refund because of EITC in 2009 – a lot of money in these difficult financial times. Last year, more than 2.2 million taxpayers claimed the EITC in Texas, amounting to $5.3 billion.
Additional Child Tax Credit: This credit may be available to you if you have at least one qualifying child and you did not get the full amount of the Child Tax Credit.
Refundable American Opportunity Credit: This education tax credit is available for 2009 and 2010. The maximum credit per student is $2,500 and the first four years of postsecondary education qualify.
First-Time Homebuyer Credit: The credit is a maximum of $8,000 or $4,000 if your filing status is married filing separately. The credit applies to homes bought anytime in 2009 and on or before April 30, 2010. However, you have until on or before June 30, 2010, if you entered into a written binding contract before May 1, 2010. If you bought a home after November 6, 2009, you may be able to qualify and claim the credit even if you already owned a home. In this case, the maximum credit for long-time residents is $6,500, or $3,250 if your filing status is married filing separately.
Health Coverage Tax Credit: Certain individuals, who are receiving Trade Adjustment Assistance, Reemployment Trade Adjustment Assistance, or pension benefit payments from the Pension Benefit Guaranty Corporation, may be eligible for a Health Coverage Tax Credit worth 80 percent of monthly health insurance premiums when you file your 2009 tax return.
For more information about filing requirements and your eligibility to receive tax credits, visit IRS.gov.