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Why, sometimes, Filing Taxes is OPTIONAL...such as it is for me for 2009 (And the BENEFIT of doing so)

For a moment, visualize a person screaming and yelling for three hours: "Yes, yes she does have mental problems! She bought herself some coffee and it was $6.99 !"   In real life.

Yes. With my own paycheck, that I earned from work, one payday in October 2009 - shortly before that  above mentioned incident...I bought myself a bag of coffee for the month...and it was $6.99.  

A couple days later, at 8:15pm, October 29,2009...I was put out on the street ...to live outside. As a result, I lost both of my new jobs that I had for a short time.    Yes. A very wicked abuse tactic for the purpose of preventing me from having a job, advancement in a career, and putting an end to my earning an income was  once again put into action..and it worked. For real. In real life....

Here  is what it has to do with filing taxes being optional for me....and for many other people who had little income:  The income, although it is not so much that requires a person to have to file taxes, is EARNED INCOME (even when no tax was withheld from the pay). 

1. Earned income qualifies a taxpayer to be eligible for  tax credits.  (even if no tax was withheld from the pay)

2. If tax was withheld from the pay, but the income is too little to have been taxed...GET the paid tax REFUNDED to you by filing (lets the IRS know that they have to- or you want them to- give your money back) ..and remember to claim the refundable credits that you qualify to receive.

I can choose not to file if I decide I don't want the credit..or my money back...because the income was too low to have taxes paid on it anyway. (i.e. Since I'm not required by the IRS to have to file because no tax would be levied on such a low amount...but can still benefit by a refundable credit and /or a return of any taxes that were paid on the income...I'm allowed to file).  If you have a similar income situation, you are allowed to file..and doing so will benefit you. You'll get a refund.  However, there are two categories of tax credits...

REFUNDABLE credits..and NON-refundable credits.  The following is how the credits work:

Refundable credit, such as the earned income credit,   may first reduce the amount of tax you have to pay (your tax liability)...and the leftover gets sent to you. If you have no tax to pay..the entire amount of the refundable credit gets sent(refunded) to you.  NON-refundable credits can only reduce your tax liability (the amount of tax you have to pay) to  only zero...OR  the excess of  certain nonrefundable credit can become (gets carried over to) refundable under, or via, a different credit such as going from the "child tax credit"to the "additional child tax credit"  while some other  nonrefundable credits' excess might carry over to the next year..BUTgenerally, the NONrefundable credit can only reduce your tax liability to zero, and no farther, leaving no excess of the credit being refunded to you.

So, suppose $100 came out of your pay for taxes, but the tax you must pay( your tax liability) is $300, and you are eligible to receive a refundable earned income credit of $2000.00 ?  Here is what happens:  You already paid $100, thus now only owe $200. Then,  $200 of the earned income credit is going to cover the $200 you owe..and the rest of the credit $1800.00 gets refunded to you. 

Suppose you find you didn't have to pay any tax at all? You get back the $100 that was paid (your refund) and the $2000.00 credit  = $2100        

Here's my situation: I had earned income too low to be taxed, thus no tax was withheld, nor paid... I'm not required to file..and I don't have to get any paid tax refunded.  However, I qualify for a  refundable credit and the personal option to claim the credit is mine.

Using the same income scenario  for the NONREFUNDABLE credit...$100 comes out of your pay for taxes, you must pay $300 of tax, and you get a nonrefundable education credit of $1000.  Here is the benefit:  .  Then, $300 of the nonrefundable credit covers the $300  tax you have to pay. Now, you have NO tax to have to pay. Your tax liability is zero. Yet, you had paid $100. You get your $100 back, and no more.  

OR...$100 is already paid..$200 is covered by the nonrefundable tax credit..thus..you get no money back, nor owe any tax payment. ZERO (the IRS not owing you anything, and you not owing anything to them), by the way- which is very, very rare- is considered to be the perfect tax return.  

Please NOTE : you are not likely to be eligible for a NONrefundable credit if you do not have a tax liability. The purpose of the nonrefundable credit is to reduce the tax liability. Therefore, without one, there is nothing to reduce.    Whereas...

A refundable credit that you are eligible to receive is allowed, and gets issued, even if there is no tax liability. (if there is some tax liability; the refundable credit will first reduce it, and then the excess of the credit will be refunded to you). 

(Another major difference between the two types of credits is that you must have LESS THAN a certain amount of earned income  in order to be eligible for the refundable credit...  but, usually more than a certain amount of income to qualify for the nonrefundable credit).

SO...File anyway..if you can get a refundable credit or your tax money back...and especially if you qualify for both!!   Money back is the benefit!!!

To Your Success

Carol M. Marchetti


tax credits


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