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How to File a Tax Return With No Income

How to File a Tax Return With No Income

Unfortunately, paying taxes is a responsibility that simply can’t be circumvented. In fact, virtually everyone who believes that they are smarter than the IRS eventually gets caught.

This is true even for those who manage to underreport or otherwise misrepresent their tax obligations for a period of years. Interestingly, it’s possible to file an income tax return even if you didn’t earn any money during the previous tax period.

In some cases, it might even benefit you to do so. Let’s take a look at how to file a tax return with no income.

What Are the Annual Income Requirements?

For those who are unaware, there are certain requirements that determine whether or not you are obligated to file.

These are also affected by your status and your household. For example, a single person who does not have any dependents will have different terms to adhere to compared to the head of a household who has three children.

The type of income in question also dictates your tax responsibilities. For example, someone who makes over $400 per year from a single self-employment source will need to file.

This may or may not be true for the types of income depending on that person’s status. However, being sure that you do not need to file for a particular tax year doesn’t mean that you should not file. For certified accountants who are looking to help people manage their own tax issues, you can check out this resource to find CPA jobs: https://www.taxfyle.com/freelance-cpa-jobs

Why Should I Consider Filing With No Income?

There’s a handful of reasons associated with filing even if you didn’t make any money over the previous tax period. When handled correctly, there are even benefits that you could take advantage of.

Listed below are some of the most notable that you should take into consideration.

You Can Establish Tax History

Getting audited by the IRS is a highly inconvenient and unpleasant process under most circumstances.

This is especially true for small business owners, as they will be asked to produce a large number of different documents that support their claims. Numerous different factors could cause the IRS to issue an audit. For example, someone who claims far too many deductions for a particular tax year might cause the organization to become suspicious of their activity.

The same can be said for someone who has a large amount of income across their bank accounts but only reports a small amount on their taxes. Unfortunately, not filing for a year or two (even if you don’t need to) could cause the IRS to think that you are simply failing to report income. More specifically, they might begin to suspect you of tax evasion.

So, having an established record where you claim to have made no money for a particular year will help the IRS develop a timeline of your financial activity. This could go a long way when it comes to helping prevent future audits.

You Can Acquire More Deductions

Business owners can only claim deductions as long as their business is still profitable. For example, let’s assume that you didn’t have a great year for your side hustle and you only made $5000. However, you spent more money than this on business expenses.

You can’t deduct purchases you made on electronics, supplies, etc. if this would bring your total profit below zero. Since you technically did not generate profit for this year, it makes more sense to claim zero income and then delay your deductions for the next year.

Otherwise, you could miss out on potentially thousands of dollars in tax savings. It’s also worth noting that you cannot claim deductions in the future if you did not file your taxes even when you had no income. So, be sure that you keep this in mind if you find yourself in a situation like this.

You will regret not doing so if you overlook this obligation now.

You Could Lose Your Healthcare Tax Credits

If you receive healthcare tax credits from the government, you will need to file your taxes in order to keep them. Since these credits are income-based, not reporting income at all may cause issues down the line.

As previously mentioned, it could cause the IRS to believe you are intentionally concealing income that you have made for that year. Although you will eventually get your tax credits back as long as you aren’t responsible for any wrongdoing, you might not be able to use them when you need them.

The Process Will Be Simplified

Reporting no income is often relatively straightforward.

If you didn’t work, then there’s a good chance that you don’t have any revenue streams for that year. If you were not able to profit, you would simply showcase both your income and your expenses to convey to the IRS that you did not have income for the year.

Knowing How to File a Tax Return With No Income Could Have Many Benefits

In some cases, you might even find that you get a significant amount of money in your pocket.

It’s also important to remember that knowing how to file a tax return with no income isn’t as convoluted as it might sound. The above guide will help ensure that you stay on the right track in the future.

Looking for more tips that can help you out later on? Check out the rest of our blog for plenty of more useful information.

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