Can you file taxes if you have 0 income?
Any year you have minimal or no income, you may be able to skip filing your tax return and the related paperwork.
Being allowed to skip filing your tax return and the related paperwork sounds like a good deal. Any year you have minimal or no income, you may be able to do just that.
income tax return with no income
However, it’s perfectly legal to file a tax return showing zero income, and this might be a good idea for a number of reasons. Before you decide to skip your return this year, consider whether it might be worthwhile to file.
Even if you earned income last year, if it falls below the IRS minimum you don’t have to file a tax return. The minimum varies according to your age and filing status—whether you are single, head of household, filing jointly with your spouse or you can be claimed as a dependent on someone else’s taxes.
The IRS also adjusts the minimum amount of earned income from year to year for inflation. Individuals who fall below the minimum may still have to file a tax return under certain circumstances; for instance, if you had $400 in self-employment earnings, you’ll have to file and pay self-employment tax.
If you have no income, however, you aren’t obligated to file.
Credits may earn you a tax refund
The IRS offers a number of tax credits that you can take directly off your taxes rather than your income. If the credit is more than you owe in taxes, in some cases, you can claim the excess credit as a refund.
The IRS lists the “additional child tax credit” and the “earned income tax credit” as examples; if you qualify for these credits, you can receive a refund even if you paid no taxes. To claim the credits, you have to file your 1040 and other tax forms.
File now, deduct later
The IRS limits how much you can claim with various deductions and credits. For example, you can’t claim a home office deduction so large that it would put your business into the red; instead, you claim zero business income for the year, and carry any leftover deduction into the next year.
Smart Money writer Bill Bischoff advises that if you have deductions or credits carrying over, you can’t claim them if you have no income, but you need to file your taxes to claim them in a future year when you do have income
Protect yourself from future audits
The IRS operates under a statute of limitations when it comes to auditing old tax returns.
If you’ve reported your information accurately, in most cases they can only go back three years. However, the clock only starts for a given year when you actually file your tax return.
If you don’t file, the IRS can always come back and audit you. For this reason, the IRS recommends that even if you don’t file, you still keep any relevant financial records indefinitely.
Do I Have to File a Tax Return if I Don’t Owe Tax?
The IRS has restrictive guidelines for determining who needs to file, which means even if you don’t owe, you may still have to submit a tax return.
african american woman working on her laptop
It’s very common to feel like you shouldn’t need to file a return if you don’t owe any tax. However, owing tax and having a filing requirement are two separate situations in the IRS’ eyes. The IRS has restrictive guidelines for determining who needs to file, which means even if you don’t owe, you may still have to submit a return. These restrictions are based on the amount and type of income you receive and whether automatic deductions will reduce your income below taxable levels.
General filing requirement
The IRS has general filing requirements for most taxpayers. Even if no tax is owed, most people file a return if their gross income is more than the automatic deductions for the year. The primary automatic deduction is the the standard deduction. Its amount will depend on your filing status and age. Standard deduction amounts change each year, however, a single filer’s standard deduction is always less than the amount a head of household filer can take.
Children and dependents
Children and other dependents may be required to file their own tax returns despite being claimed on someone else’s tax return. However, a different set of rules govern when these individuals need to file since they are subject to reduced deduction amounts.
Moreover, there is a distinction between a dependent’s earned and unearned income insofar as larger amounts of unearned income can be received without having to file. Examples of unearned income includes interest, dividends, taxable Social Security benefits and unemployment compensation. Earned income, however, typically includes earnings from employment and self-employment.
Self-employed business owners
You’re self-employed if you earn money by providing services to individuals or entities, other than an employer, or operate a trade or business as a sole proprietorship or as a partnership, for example. You must file a return if your net earnings from self-employment is $400 or more. This generally requires you to file a Schedule C (or C-EZ) with your 1040 to calculate and report net profit, and a Schedule SE to cover the self-employment taxes you’ll also owe.
Filing for refunds
Even if you aren’t required to file a return, you still may want to. If you don’t owe tax at the end of the year, but had taxes withheld from paychecks or other payments—filing a return may allow you to obtain a tax refund. You may also be eligible for certain refundable tax credits, like the Earned Income Tax Credit (EITC), which could generate a refund for you. The only way to get your tax refund is to file a tax return.
What if I don’t have any taxable income?
If you do not have any form of taxable income on your tax return, the IRS E-file system will reject the submission because it will read it as an empty tax return. Some people are not required to file returns when this occurs, yet choose to so that they have a filed tax return on record for personal and/or legal reasons.
For more information or to determine if you are required to file a return, please reference the IRS Form 1040 Instructions. If you still want/need to file a federal tax return you should go into the Income section of the program and make a $1 entry for Interest Income.
- Interest and Dividend Income
- Interest or Dividend Income
- Interest Income Form 1099-INT > enter your name in the Payer’s Name box and enter $1 in the Interest Income box 1 entry space.
This will have no bearing on the return however it will allow the IRS computer to read an entry on one of the required lines and therefore be able to process the return for you.
If the only income that you had was from Social Security benefits, most likely these benefits are not considered taxable income.