Many people operating on a low income assume that filing tax returns is voluntary and tend to avoid it altogether, believing it is unnecessary and burdensome. However, this is an unhealthy perspective toward tax filing in the United States, particularly with the 2023 tax season underway. The IRS has set out guidelines to help in completely free tax filing for low income taxpayers.
While filing taxes in the United States can be a bit complicated, it is essential for citizens to understand the importance of timely filing and paying taxes. It is the responsibility of taxpayers to file on time, even if they aren’t able to pay the entire amount in due time. Don’t forget, the sooner you pay, the less you will owe to the Internal Revenue Service (IRS).
Why is tax filing in the US so important?
Tax filing is an annual activity that is regarded as a moral and social responsibility of every citizen of the country. It is the basis for the federal government to assess and determine the amount and channels of expenditure of citizens and provide them with a claim refund, among other benefits from time to time.
There are numerous benefits associated with filing your taxes in the US. For instance, timely paying of your taxes can help you avoid added interest and penalties. Furthermore, a taxpayer can prevent losing future refunds.
How does tax filing for low income work in the US?
The Tax Code has provided guided assistance to low income taxpayers. Notably, low income filers are also entitled to several tax credits and deductions which taxpayers in other categories may not be eligible for. The tax code considers certain situations, specifically having children or making retirement plan contributions while providing credits and other benefits. However, note that these incentives may phase out as taxpayers reach a higher income level.
Certain lower-income taxpayers can receive considerable credits for making retirement plan contributions, with the amount of the credit ranging from 10% to 50% of the first $2,000 that you put into your plan (for instance, individual retirement account (IRA). In 2022, a single filer was eligible for a maximum of 50% credit if their adjusted gross income was $20,500 or less.
Earned Income Tax Credit
In addition, lower- and middle-income taxpayers are particularly eligible for a key benefit namely the earned income tax credit (EITC). Unlike a number of other credits, the EITC is refundable.
To claim EITC, a low income taxpayer has to file an IRS income tax form, such as Form 1040, 1040A or 1040EZ. If you have one or more qualifying children, you must also complete Schedule EIC and attach it to your tax return. Schedule EIC helps in providing necessary information to the IRS about the qualifying children, including names, ages, Social Security numbers, relationships and the duration they have lived with you during the financial year.
Low income taxpayers may also qualify for credits designated for the elderly and disabled based on their overall earnings. However, you must meet one additional criterion – either you are 65 or older at the end of the year or you have retired on total and permanent disability.
As a low income taxpayer, you can also take an IRA deduction, even if both you and your spouse are covered by retirement plans at work. Let’s dive into the various ways of free tax filing for low income groups in the US.
What are IRS’ free tax-filing options?
The IRS has opened up several ways for the payment of taxes. For instance, IRS Direct Pay is a great option for those who want to pay a part of all of what they owe to the agency. It is a fast and free way to pay directly from a checking or savings account. For those who aren’t able to pay their taxes right away, the IRS has instituted ways to work with them and resolve their tax debt. Almost everyone can set up a payment plan using the Online Payment Agreement tool on IRS.gov.
IRS Free File is another method that can help you with free income tax filing for low income individuals. It is a partnership between the IRS and a nonprofit organization called the Free File Alliance. It provides access to free guided tax preparation software from several tax-prep companies, such as TaxAct and TaxSlayer. This platform can help in filing taxes online free tax filing for low income filers.
Free tax filing for low income groups in the US
If you are wondering how to file taxes for free for low income groups, these tips can come in handy.
Volunteer Income Tax Assistance
The IRS has set up a number of institutions to offer free tax preparation and electronic filing for low- and moderate-income individuals and families. One such method for free income tax filing for low income individuals is Volunteer Income Tax Assistance (VITA). It is a federal grant program that allows community organizations to provide free tax preparation for low- and moderate-income tax filers. The program also includes the disabled, the elderly and limited-English speakers to help in filing taxes for low income individuals. The income limit for eligibility for the free tax help program is $60,000.
Tax Counseling for the Elderly
In addition to the VITA program, the IRS also offers Tax Counseling for the Elderly (TCE) programs to provide free basic tax return preparation for those who are 60 years and above. The program specializes in questions about pensions and retirement-related issues specific to the elderly of the country.
At a time when leading organizations are charging hefty amounts from innocent taxpayers to assist them in filing their taxes, federal agencies like the IRS and private channels like Line financial app are offering free and easy resolutions to all your tax filing queries. Such platforms assist in free tax filing for low income individuals.
According to IRS estimates, roughly 73.4 million Americans use paid preparers to complete and file their electronic tax returns. Tax preparers charge exorbitant fees for different types of tax filing purposes from citizens. In 2021, the average cost of hiring a certified public accountant (CPA) for assistance in preparing and submitting a Form 1040 and state return was $220. These charges could go up depending on the complexity of a tax return. In order to avoid such costly tax preparers or other apps, try to take advantage of the IRS official platforms that offer tax filing assistance for low income individuals.
Tips for making your 2023 tax filing easier
You can follow these simple tips and tricks to make your 2023 tax filing quick and simpler. These tips can help in ease of tax filing help for low income filers.
- Start early to avoid any delays. If your return gets flagged for review, your refund can get delayed unnecessarily.
- File an accurate return. Inaccuracies in your tax filing can result in an unprecedented IRS audit. That is why it is important to file all the data carefully and accurately.
- Plan for an extension ahead of time if you think you may need one in the future. It can help avoid any delays especially while filing taxes for low income taxpayers.
- Check the new rules and regulations related to Credits and Deductions beforehand so that you can avail all the benefits and avoid any errors while filing your taxes. The federal agency has simplified the process for tax filing for low income people.
- Select the correct filing status. It determines your standard deduction amount and the income thresholds used for credits and deductions. The tax filing status you choose could significantly impact your refund.
- While filing taxes, low income filers should itemize their deductions wherever possible. If you have made potential charitable contributions or medical expenses, it’s worth assessing them and checking if you could save some money by itemizing these deductions.
Things to keep in mind
Certain measures can help in free IRS tax filing for low income filers.
- Stay cautious of scammers who use regular emails and telephone numbers to set up low- and middle-income taxpayers. Thousands of people have lost their hard-earned dollars and their personal information to such tax scams. One way you can protect you and your family’s personal information against tax-related scams is by signing up for an IRS Identity Protection PIN (IP PIN). It is a six-digit number that only you and the IRS will know. The agency can prevent someone else from filing a tax return under your Social Security Number (SSN).
- Keep in mind, the IRS doesn’t contact taxpayers by email, text messages or social media channels seeking their personal or financial information.
- You must keep documentation ready before you file for certain popular tax deductions, including retirement account contributions, educational expenses, medical bills, charitable donations and classroom expenses.
- The IRS has loosened the eligibility rules for claiming a home office deduction to allow more self-employed workers to claim this break. If you are among the many filers who have no fixed location to conduct your businesses, you can claim a home office deduction by following simple procedures set by the agency. A low income taxpayer generally pays anywhere between $600-$800 a month for an apartment and uses it as a home office. You can save this rent by availing of the home office deduction credits.
2023 tax season: All you need to know
Experts suggest that 2023 is the year of reset for taxes. Noting that the past three tax seasons have been seriously tough for many taxpayers due to consistently changing rules and regulations in the aftermath of the Covid-19 pandemic, experts are hoping that the 2023 tax season is a better one for citizens.
The IRS is expecting to receive more than 168 million individual tax returns this filing season in the wake of the Inflation Reduction Act, a measure passed in August 2022 to provide additional staffing and resources to citizens across the country.
Revised tax filing deadlines
Most Americans are required to file their tax returns by April 18, 2023. This is because April 15 (which was officially the deadline) is a Saturday and the next weekday, April 17, will be marked as a holiday on the occasion of Emancipation Day in Washington, DC. In addition, residents of Alabama, California and Georgia impacted by severe storms can file their taxes until May 15.
A majority of the states are also adhering to the April 18 deadline, with exceptions including Iowa (May 1), Virginia (May 1), Delaware (May 2) and Louisiana (May 15). Nine states, namely Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington and Wyoming don’t have state income taxes.
Taxpayers seeking an extension to file their taxes have until October 16, 2023, to do the same. If you aren’t able to finish filing your tax return on time, you will be required to file Form 4868 by April 18, which will give you an extension of the deadline. On the form, you must provide a reasonable estimate of your tax liability for 2022 and pay any balance due with your request. It is crucial that you request a timely extension to avoid any delays or penalties.
The IRS officially started accepting individual tax returns on January 23, with employers sending W-2 and 1099 income tax forms to their workers by January 31. If you have all your paperwork ready and in order, you must get your refund within 21 days of filing your taxes if you chose direct deposit and there aren’t any issues with your return.