MEDIA ALERT – Now, there are more reasons to file a tax return even if you don’t have to

Why: Taxpayers who fall into low-income tax brackets should never just assume that there is no need to file a tax return.

Metadata
Provider: 
Business Wire, Inc.Business Wire, Inc.
Retrieved on: 
Thursday, February 17, 2022
Information
Tags: 
Accounting, Professional Services, Finance, JD, Child and Dependent Care Credit, Income, Income tax, Internal Revenue Service, Government, Child tax credit, Congress, American Opportunity Tax Credit, IRS, United States Congress, Accounting, CPA, Tax, Earned income tax credit, European Parliament Liaison Office with the US Congress, Revenue stream, Life insurance, Online shopping, Tax advisor, Child
Geotags: 
UNITED STATES, NORTH AMERICA, ILLINOIS, NEW YORK
⚠generated by AI ↴
Stock Symbol: 
AEX:WKL
Summary
Key Points: 
  • Why: Taxpayers who fall into low-income tax brackets should never just assume that there is no need to file a tax return.
  • If a taxpayer ends up with greater tax withholding and estimated tax payments than the amount owed in income tax, the only way to recover those funds is to file a tax return.
  • Many taxpayers receive a refund every year from the Internal Revenue Service (IRS) to recover withholding taxes paid during the year
    Earned Income Tax Credit.
  • In 2021, the Earned Income Tax Credit was significantly expanded, especially for taxpayers who do not have children
    Child Tax Credit.


Wolters Kluwer Tax & Accounting:

What: Taxpayers are generally only required to file a tax return if their adjusted gross income exceeds the standard deduction for which they qualify. Starting in 2018, the standard deduction increased significantly; however, the personal exemptions for the taxpayer and dependents were also eliminated. Since that time, the US Congress has continued to add to the list of refundable tax credits - those that taxpayers are entitled to claim even if they do not owe any taxes. Refundable tax credits, therefore, have the potential to result in a net payment to the taxpayer.

Why: Taxpayers who fall into low-income tax brackets should never just assume that there is no need to file a tax return. Even if not required, many of those taxpayers could end up being entitled to a refund from the government beyond any taxes paid into the system. Some of the potential sources for a tax refund include:

  • Recovery of excess withholding. If a taxpayer ends up with greater tax withholding and estimated tax payments than the amount owed in income tax, the only way to recover those funds is to file a tax return. Many taxpayers receive a refund every year from the Internal Revenue Service (IRS) to recover withholding taxes paid during the year
  • Earned Income Tax Credit. The Earned Income Tax Credit has been a refundable credit for many years. It is designed to reward taxpayers for working, with the amount of the credit going up as income goes up and then ultimately phasing out as income gets even higher. In 2021, the Earned Income Tax Credit was significantly expanded, especially for taxpayers who do not have children
  • Child Tax Credit. The Child Tax Credit has been partially refundable for a number of years. For 2021, it is significantly increased in amount and became fully refundable. Take care with this one, however – if the taxpayer received more advance payments of the Child Tax Credit than they end up being entitled to on their 2021 tax return, they may have to repay to the government all or part of the excess
  • American Opportunity Tax Credit. The American Opportunity Tax Credit has been partially refundable for many years, and it remains partially refundable for 2021 tax returns
  • Child and Dependent Care Credit. The Child and Dependent Care Credit has traditionally been a nonrefundable credit. However, it became a fully refundable credit for 2021 tax returns. It is also increased in terms of the percentage of expenses that qualify for the credit and the amount of expenses that qualify. In addition, the income phase-out range has significantly increased for 2021 tax returns
  • Premium Tax Credit. The Premium Tax Credit continues to be a refundable credit and was enhanced for 2021 tax returns in terms of a higher range of incomes being eligible for the credit and an increase in the credit amount
  • Health Coverage Tax Credit. The refundable Health Coverage Tax Credit remains available for 2021 tax returns
  • Recovery Rebate Credit. The Recovery Rebate Credit, which was introduced on 2020 tax returns, is also available in its third installment on 2021 tax returns. Many taxpayers may have already received the credit to which they are entitled in the form of Economic Impact Payments paid during 2021. The Recovery Rebate Credit is fully refundable, and, if taxpayers received more payments than they are entitled to when calculating the Recovery Rebate Credit on their 2021 tax return, those sums do not need to be repaid
  • A number of these enhancements to tax credits, including refundable features, have expired at the end of 2021 and may not be available to taxpayers in the future

Who: Tax expert Mark Luscombe, JD, LL.M, CPA, Principal Federal Tax Analyst at Wolters Kluwer Tax & Accounting, is available to discuss the potential advantages of filing a tax return even if not required to do so.

PLEASE NOTE: These materials are designed to provide accurate and authoritative information in regard to the subject matter covered. The information is provided with the understanding that Wolters Kluwer Tax & Accounting is not engaged in rendering tax advice or accounting, legal, tax or other professional service.

Contact: To arrange interviews with Mark Luscombe or other state or federal tax experts from Wolters Kluwer Tax & Accounting on this or any other tax-related topics, please contact Bart Lipinski.

Copyright: 
Copyright Business Wire 2022