Most people with gross income of $12,400 or more must file a federal tax return. Some people with a lower income are not required to file. However, these individuals should still consider filing for a refund of federal income tax withheld. They may also be eligible for certain tax credits, like the earned income tax credit, the recovery rebate credit and others.
Pandemic-related tax topics
Here are a few important things for taxpayers to know this year.
• Anyone who is eligible for an Economic Impact Payment but did not get the payments or did not get the full amount, must file a tax return to claim the recovery rebate credit even if they aren’t normally required to file.
• Unemployment benefits are taxable. People should watch their mail for a Form 1099-G. In some states, people may be able to get their Form 1099-G from the website where they signed up for benefits.
• There's a new rule to help people who lost their job or had a change in income in 2020. Filers can use their 2019 earned income to figure their earned income tax credit, if their 2019 earned income was more than their 2020 earned income. This new rule also applies to the additional child tax credit.
Choose e-file with direct deposit to avoid delays
The IRS strongly encourages people to file electronically and choose direct deposit to avoid pandemic-related paper delays. Some options are available in Spanish.
How to decide whether to file a tax return
In most cases, income, filing status and age determine if a taxpayer must file a tax return. Other rules may apply if the taxpayer is self-employed or can be claimed as a dependent of someone else. There are other reasons a taxpayer must file. The Interactive Tax Assistant can help someone determine if they the need to file a return.
If the answer to any of these questions is yes, a person might be due a refund, but they must file a tax return to get their money.
• Did an employer withhold federal income tax from their pay
• Did the person make estimated tax payments?
• Did they overpay taxes in 2019, and have their refund applied to 2020 taxes?
Some individuals may qualify for the recovery rebate credit
Most people who are eligible have already received the full amount for the recovery rebate credit as Economic Impact Payments. Some people may be eligible to claim the recovery rebate credit if they didn't get Economic Impact Payments or received less than they were entitled. People must file a tax return to claim the recovery rebate credit even if they aren’t normally required to file. The maximum Economic Impact Payments for qualifying individuals were:
• $1,200 per person and $500 per qualifying child for the first payment
• $600 per person and $600 per qualifying child for the second payment
If they’re eligible for the recovery rebate credit, people will need the amount of any EIPs they received to calculate their credit amount using the RRC worksheet or tax preparation software. Individuals with an account on IRS.gov can view the amounts of the Economic Impact Payments they received.