Wednesday, January 27, 2010

Do I have to file a Tax Return?

"Do I have to file a Tax Return?" I am approached with this question on a frequent basis, whether the question is about a child that started working or for a new business venture that has just started. The answer is almost always the same - "It depends". There are many factors that can effect whether you should file a return or not. A few of the factors for this year include the below items to consider:

- Federal Income Tax Withheld - even if you are below the income requirements to file, you should file to get a refund of Federal and possibly state tax withholding. If you don't file, you can't get a refund and there is a limitation on the time period you can claim a refund. Don't miss that opportunity.

- Making Work Pay Credit - new for 2009 is a credit for earned income which could be as much as $800 for married couple filing a joint return and $400 for other taxpayers (single, head of household, married filing separately).

- Earned Income Tax Credit - If you worked and did not earn a lot of money, you may be eligible for this refundable credit. You need to file to be able to claim this.

- Additional Child Tax Credit - this is a refundable tax credit that may be available to you if you have at least one qualifying child (child under age 17 at the end of 2009) 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 & 2010. This credit is available for the first 4 years of postsecondary education and provides a maximum credit of $2,500 per student.

- First-Time Homebuyer Credit - Just because you bought a home and qualify for the credit is not enough to receive the possible $8,000 tax credit. You must file a tax return to claim the credit and receive your refund. There are certain requirements to qualify for this credit that will be addressed in another posting.

I generally recommend that you consult with a professional to determine your filing requirements if you are uncertain. You may also check out the IRS website and look for the Free File link.

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