Don’t you want free money? It may be the most ridiculous question ever, but it’s one that local and national governments probably ask when they have stimulus funds, rebates and other payments that end up going nowhere because the recipient never filed a tax return.
These opportunities are the number one reason you should always file a return every year, even if you are out of work, didn’t make enough wages or live solely on Social Security in a state where they don’t tax those earnings.
“If you don’t file, you can’t collect what is essentially free money on the table,” said Jefferson Public Radio in an article noting how many Californians missed out on a constant stream of stimulus payments sent out by the state in 2022, and all because they didn’t get the paperwork in on time. State governments use tax returns and the information on them, plus banking info from direct deposits of tax refunds, to process those payments. If you don’t file, there’s no record of you for the processing system to pull from.
California tax board representative Andrew LePage noted that anyone can file a state tax return any year, even if there was no income brought in from work. This applies to other states, as well. He suggested doing so for free with 1040 EZ forms and the IRS Free File system that walks you through all the steps to complete the task.
But it’s not just stimulus payments — there are other financial incentives you may be missing out on if you don’t file your taxes:
Inflation Reduction Act Rebates & Credits
Passed in August 2022, the Biden Administration’s sweeping Inflation Reduction Act is a $739 billion dollar package that offers financial incentives for clean energy upgrades that are implemented beginning this year. This includes up to $7,500 in tax credits for an electric vehicle purchase and up to 30% for installing residential solar or wind energy equipment.
Live Richer Podcast: You Might Be Losing Your Credit Card Reward Points: Here’s What You Should Do
Earned Income Tax Credit
You may also be eligible for the earned income tax credit if your earned income fell below certain thresholds. The EITC ranges from $560 to $6,935 depending on how many qualifying children you claim. The maximum credit increases to $7,430 for tax year 2023. Use the EITC Assistant on IRS.gov to determine your eligibility.
Child Tax Credit or Credit for Other Dependents
If you have qualifying children under the age of 18 and meet other criteria, you may also be eligible for the child tax credit or credit for other dependents. This includes people who have:
- Dependent children who are age 18 or older at the end of 2022.
- Parents or other qualifying individuals they support.
The 2022 credit is nonrefundable, which means it can’t reduce your tax liability to less than $0, which would result in a refund. However, dependent children who were age 17 or younger at the end of the 2022 might qualify you for an additional child tax credit that would allow up to $1,500 of the credit to be refunded. Note that you must wait until mid-February to file your return if you want to claim one or both credits.
You could be eligible for the American opportunity tax credit or the lifetime learning credit. To be eligible, you, your spouse or your dependent must have been a student enrolled in an eligible post-secondary educational program at least half time for one academic period during the tax year. You may qualify even if you don’t owe taxes. Use Form 8863, Education Credits to claim the credit when filing your tax return.