Filing taxes with no income is beneficial when taking a refundable tax credit or claiming a refund of your withholding.
The Internal Revenue Service generally doesn’t require you to file a tax return unless your income exceeds the threshold for your filing status. This doesn’t mean, however, that the IRS won’t accept a return that reports no income. In fact, you may even get a tax refund when filing without any income if you’re eligible to take one of the refundable tax credits.
Claiming Refundable Tax Credits with No Income
Federal tax credits reduce the amount of tax you owe for the year on a dollar-for-dollar basis. Some credits are nonrefundable, meaning they can reduce your tax bill to zero but don’t allow for refunds of excess unused credits. However, fully refundable credits include the premium tax credit that subsidizes the plans you purchase through the Health Insurance Marketplace, the additional child tax credit, the American opportunity credit that offsets taxes for school expenses, and the earned income credit -- which you’re not eligible for if you don’t have income to report.
Essentially, the tax law treats these credits as tax payments that can be refunded when the amount exceeds your tax bill, which presumably is zero when filing taxes with no income. Therefore, you may want to evaluate your eligibility to claim one of these credits before deciding not to file taxes this year.
Other Reasons to File with No Income
In most cases, the IRS cannot audit a tax year more than three years after the later of the date a return is filed or its original due date, which is April 15 for most taxpayers. To avoid any surprise audits in the future, getting your taxes filed -- even with no income reported on it -- will get that three-year period running. Without filing, the IRS can audit you at any time. In the event you did earn some wages during the year, but not enough to require filing taxes, -- meaning you have income but no taxable income -- the only way to claim a refund of the taxes your employer withheld is to file a tax return.
How to Report Zero Income
You have three tax forms to choose from when filing: the 1040, 1040A and 1040EZ forms. When reporting little or no income, you can file on the 1040EZ, -- the shortest and simplest of the three forms to prepare -- but if you plan on claiming a refundable tax credit other than the earned income credit, you’ll need to file on the 1040 or the 1040A, which is shorter than the 1040 but longer than the 1040EZ.
Regardless of the form you choose, you’ll enter zeros in both the income and adjusted gross income, or AGI, sections of the return. You can take the standard deduction and exemptions you’re entitled to claim despite the fact you have no income to offset. When it comes time to figuring out your refundable credits, you may need to calculate them on separate forms that must be filed with your return.