Everyone knows someone who missed the boat

Everyone knows someone who missed the boat

This year's April 18 tax deadline has come and gone, but not everyone has filed a 2016 tax return. While many have filed an extension and intend on getting their return in order, too many taxpayers who should file simply do not. This missed tax filing opportunity costs taxpayers over $1 billion in refunds every year.

While you may be done with your tax filing, you probably know someone who could be helped with a little reminder. Common culprits are older, retired parents and young adults who are new to tax filing requirements.

Here are some of the reasons why it will help them to file a tax return.

Get withholdings. People who work but earn less than the required filing threshold, may need to file a tax return so they can get back any withholdings that their employer has taken out of their paycheck.

This happens because many taxpayers focus on the income threshold required to file a tax return and forget to look at their W-2 to see if money was taken out of their paycheck. Single individuals making less than $10,350 and married couples making less than $20,700 in 2016 don't have to file, but they may want to anyway to recover those withholdings.

Get refundable credits. There are a number of refundable or partially refundable tax credits that are only available if you file a tax return. Refundable credits are special because they come off the top of your tax bill and can even reduce it below zero. In that case you'd get the amount of the credit back in a refund check from the IRS.

Examples of refundable credits include the earned income tax credit, the additional child tax credit, and the premium tax credit available to those using the Affordable Care Act marketplace to purchase their health insurance. The American opportunity tax credit to help students pay for college is also partially refundable by up to $1,000 – but only if you file a tax return.

Help apply for loans or financial aid. Many banks or colleges will ask to see your tax return information to help you qualify for loans or financial aid, particularly for students. Filing a tax return, even if you're not required to, will help support your application.

Protect yourself. There's a disturbing trend of identity thieves filing false returns in order to try to collect illicit refunds from the IRS. They often target people who do not usually file a return. By filing even a simple return, you can shut down this attempt at fraud by identity thieves.

Close the door. By filing, you also limit the potential for an IRS audit stretching back years. The agency typically has three years to audit a return from the date it's filed or the original due date, whichever is later. If no return is filed, this audit window is never closed.

You may know someone who hasn't filed and who needs help doing so. If so, feel free to pass on this article and suggest they get in touch for a consultation.

 


Burzenski and Company, P.C.