For most adults, filing a tax return by the middle of April is a necessity, but for those who don't make more than the minimum amount, tax season may be easy this year.

The minimum you need to make to require filing a tax return with the IRS depends on your age, marital/tax filing status, as well as other factors (such as whether you netted at least $400 from self-employment). For individual filers, the income that will trigger a mandatory filling out of a federal tax return currently ranges from $12,400 for single filers under age 65 to $26,100 for "qualifying widow(ers)" who are 65 or over (for tax year 2020).

Even if you don't have to pay taxes on the income you've earned, there are still several reasons why filing a return may indeed be worth it. First of all, you could end up with a refund via a tax credit. For those who are not eligible for a refund, you still may need to file in order not to receive penalties for late or non-filing. Here, we go over some of the benefits of filing your taxes, even if you're at those minimum filing requirements for income.

Key Takeaways

  • As tax season approaches, you may look at your past year's income and think that it was too low to send in a tax return.
  • Federal minimums range from $12,400 to $24,800 for tax year 2020, but even if you fall below that you may be eligible for certain credits that will lead to a tax refund.
  • If you have low employment income but conducted other taxable events, such as through an investment, real estate transaction, or retirement account you may also need to file.
  • Failure to properly file a tax return, even if it has little income to report, can result in fines, fees, and back taxes—so be cautious if you decide to forgo filing.

Refund Due: You Had Tax Withheld

If you're married, filing jointly and under age 65, you don't legally have to file a tax return if your household income is below $24,800 for your 2020 taxes. However, that doesn't mean that your employers didn't withhold taxes.

Filing a tax return will produce a refund of those withholdings, provided that you have no other taxes due. It's as easy as completing an IRS 1040 form in most cases, and companies like TurboTax or H&R Block will allow you to complete that form using its online software free of charge.

If you're eligible for one of these six tax credits, it's definitely worth filing your federal income taxes.

Earned Income Tax Credit (EITC)

The Earned Income Tax Credit (EITC) was set up by Congress to allow lower-wage earners the ability to hold on to more of their paycheck. Households that qualify for the credit can reduce their tax liability to zero, in which case they will owe no income taxes. If your tax obligation is less than the amount of the credit, you may still be eligible for a cash refund of the remaining credit amount.

To qualify for the EITC, a taxpayer’s earned income and adjusted gross income (AGI) must be below certain income limits. For the 2020 tax year, the maximum amount of the credit that could be claimed by a single or married taxpayer is:

As a result of the American Rescue Plan of 2021, the EITC originally capped at $543 for childless households, increases for those same households in 2021 to $1,502. 

2020 EIC Income Limits
Number of Children Single or Head of Household Married Filing Jointly Maximum Amount of Credit
0 $15,570 $21,370 $529
1 $41,094 $46,884 $3,526
2 $46,703 $52,493 $5,920
≥3 $50,162 $55,952 $6,557

Child Tax Credit

The IRS provides a credit for each dependent child for lower-income earners. If your tax burden is lower than the maximum credit, you may receive a refund. The child tax credit is currently $2,000 per minor dependent. This tax credit is phased out for higher-income families, as it was intended to help low- to middle-income workers. In order to qualify, you are subject to maximum income requirements.

Note that as a result of the American Rescue Plan of 2021, signed into law by President Biden, the limit on the Child Tax Credit, previously $2,000, has been raised to $3,000 for children ages six through 17 and $3,600 for children under six. The credit is also now fully refundable; previously, only $1,400 was refundable. These changes are part of the American Relief Act of 2021 and are effective only for the 2021 tax year, unless extended by an additional act of Congress. It is phased out for singles with incomes above $75,000 and couples with incomes above $150,000.

American Opportunity Tax Credit

The American Opportunity Tax Credit (AOTC) reimburses taxpayers up to $2,500 a year for qualified education expenses. This credit was recently expanded to allow those who do not owe any taxes to still qualify for a refund even if they wouldn't have normally filed a return. If you paid college tuition or other qualified education expenses, this generous tax credit could provide a nice refund check but is limited to a maximum of four years of eligibility per student. Check out this page of the IRS website to see if you qualify.

Health Insurance Marketplace Premium Tax Credit

This tax credit, often known simply as the premium tax credit, helps individuals and families with low to moderate incomes afford the premiums associated with health insurance purchased through a Health Insurance Marketplace under the Affordable Care Act (ACA).

To be eligible for the premium tax credit, your household income must be at least 100%—but no more than 400%—of the federal poverty line for your family size. Other qualifications apply, so click here to see whether you are eligible.

Savers Credit

You may be eligible for an additional tax credit for some portion of the money you put into a qualified retirement savings plan, such as a 401(k) or IRA. This credit is also subject to income limitations, with a cap of $64,000 for those who are married, filing jointly to $32,000 for individual filers. Known as the saver's credit, this non-refundable credit allows the lesser of either $1,000 or the tax amount you would have had to pay without the credit.

Refund or Not: Avoid a Penalty for Not Filing

Even if you didn't make enough money to meet the IRS minimums so that you aren't owed a refund, there are still good reasons to file your federal taxes. For instance, say you were self-employed and only earned slightly more than $400, but you also sold your home and received distributions from a retirement account. You would potentially owe Social Security or Medicare taxes that were not withheld, or you're subject to the alternative minimum tax (AMT), which would require a return to be filed. Be absolutely sure that you don't have to file a return because, otherwise, there could be IRS penalties and back taxes owed if you have to file later.

The Bottom Line

Don't assume that just because you didn't make enough money to file a return you shouldn't file. Many tax credits are available to you even if your tax bill will be essentially zero this year. Some of the credits are more than $1,000, so taking the time to read about the credits available to you could result in a healthy refund check this year.