Most people file a tax return because they have to, but even if you don't, there are times when you should because you might be eligible for a tax refund and not know it. This year, there are a few new rules for taxpayers who must file. The six tax tips below should help you determine whether you're one of them.
1. General Filing Rules. Whether you need to file a tax return this year depends on a few factors. In most cases, the amount of your income, your filing status, and your age determine if you must file a tax return. For example, if you're single and 28 years old you must file if your income was at least $10,150. Other rules may apply if you're self-employed or if you're a dependent of another person. There are also other cases when you must file. If you have any questions, don't hesitate to call.
2. New for 2014: Premium Tax Credit. If you bought health insurance through the Health Insurance Marketplace in 2014, you might be eligible for the new Premium Tax Credit. You will need to file a return to claim the credit.
If you purchased coverage from the Marketplace in 2014 and chose to have advance payments of the premium tax credit sent directly to your insurer during the year, you must file a federal tax return. You should have received Form 1095-A, i>Health Insurance Marketplace Statement, in February. The new form has information that helps you file your tax return and reconcile any advance payments with the allowable Premium Tax Credit.
Note: Taxpayers who have a balance due on their 2014 income tax return as a result of reconciling of these payments please read, Penalty Relief: Overpayment of ACA Tax Credits, below.
3. Tax Withheld or Paid. Did your employer withhold federal income tax from your pay? Did you make estimated tax payments? Did you overpay last year and have it applied to this year's tax? If you answered "yes" to any of these questions, you could be due a refund. But you have to file a tax return to get it.
4. Earned Income Tax Credit. Did you work and earn less than $52,427 last year? You could receive EITC as a tax refund if you qualify with or without a qualifying child. You may be eligible for up to $6,143. If you qualify, file a tax return to claim it.
5. Additional Child Tax Credit. Do you have at least one child that qualifies for the Child Tax Credit? If you don't get the full credit amount, you may qualify for the Additional Child Tax Credit.
6. American Opportunity Credit. The AOTC (up to $2,500 per eligible student) is available for four years of post-secondary education. You or your dependent must have been a student enrolled at least half-time for at least one academic period. Even if you don't owe any taxes, you still may qualify; however, you must complete Form 8863, Education Credits, and file a return to claim the credit.
Which Tax Form is Right for You?
You can generally use the 1040EZ if:
- Your taxable income is below $100,000;
- Your filing status is single or married filing jointly;
- You don't claim dependents; and
- Your interest income is $1,500 or less.
Note: You can't use Form 1040EZ to claim the new Premium Tax Credit. You also can't use this form if you received advance payments of this credit in 2014.
The 1040A may be best for you if:
- Your taxable income is below $100,000;
- You have capital gain distributions;
- You claim certain tax credits; and
- You claim adjustments to income for IRA contributions and student loan interest.
You must use the 1040 if:
- Your taxable income is $100,000 or more;
- You claim itemized deductions;
- You report self-employment income; or
- You report income from sale of a property.
Choose the Right Filing Status
Wondering which filing status to use? Here's a list of the five filing status options:
1. Single. This status normally applies if you aren't married. It applies if you are divorced or legally separated under state law.
2. Married Filing Jointly. If you're married, you and your spouse can file a joint tax return together. If your spouse died in 2014, you often can file a joint return for that year.
Note: Keep in mind that your marital status on Dec. 31 is your status for the whole tax year.
3. Married Filing Separately. A married couple can choose to file two separate tax returns. This may benefit you if it results in less tax than if you file a joint tax return. It's a good idea for you to prepare your taxes both ways before you choose. You can also use it if you want to be responsible only for your own tax.
4. Head of Household. In most cases, this status applies if you are not married, but there are some special rules. You also must have paid more than half the cost of keeping up a home for yourself and a qualifying person. Don't choose this status by mistake. Be sure to check all the rules before you file.
5. Qualifying Widow(er) with Dependent Child. This status may apply to you if your spouse died during 2012 or 2013 and you have a dependent child. Certain other conditions also apply.
Note for same-sex married couples. In most cases, you and your spouse must use a married filing status on your federal tax return if you were legally married in a state or foreign country that recognizes same-sex marriage. That's true even if you now live in a state that doesn't recognize same-sex marriage.
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