File taxes with $0 income with a dependent?

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MrsRoos
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File taxes with $0 income with a dependent?

Post by MrsRoos » Tue Jan 10, 2017 1:11 am

Happy New Year everybody! I'm inquiring about this on behalf of a friend...

She's a single mother, with one dependent child and she didn't make any money in 2016. Is there any reason(s) for her to file her taxes? Thanks for your wisdom.
“Anyone who believes in indefinite growth in anything physical, on a physically finite planet, is either mad or an economist.” - Kenneth Boulding

LifeIsGood
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Re: File taxes with $0 income with a dependent?

Post by LifeIsGood » Tue Jan 10, 2017 8:39 am

Without any earned income, she's not eligible for any refundable credits like Earned income Tax Credit so I don't see any reason to file. The only other reason to file would be to decrease the likelihood of tax fraud (ie someone filing a fraudulent return using her SSN).

dziuniek
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Re: File taxes with $0 income with a dependent?

Post by dziuniek » Tue Jan 10, 2017 8:41 am

Single mother with no income. Who's paying the bills? Are they both someone's dependents?

If there's alimony or child support payments, I believe these get reported.

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neurosphere
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Re: File taxes with $0 income with a dependent?

Post by neurosphere » Tue Jan 10, 2017 9:30 am

LifeIsGood wrote:Without any earned income, she's not eligible for any refundable credits like Earned income Tax Credit so I don't see any reason to file. The only other reason to file would be to decrease the likelihood of tax fraud (ie someone filing a fraudulent return using her SSN).
I'm beginning to think that all adults should file taxes each year even if not required, mostly to mitigate against tax fraud and identity theft, but also establish a pattern of filing in order to prevent that "unlimited" statute of limitations on audits from every becoming an issue. Especially since filing is free if someone is capable of preparing a return on his/her own.

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KlingKlang
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Re: File taxes with $0 income with a dependent?

Post by KlingKlang » Tue Jan 10, 2017 9:34 am

She was probably on Medicaid, but if she did have health insurance through the ACA and received subsidies then she would be required to file.

"Didn't make any money in 2016" seems pretty extreme. Just because she and her dependent didn't receive a paycheck doesn't mean that they didn't have any reportable income. Besides the previously mentioned alimony there is interest, dividends, capital gains, 401(k) and IRA distributions, pensions, annuities, personal business and farm income, unemployment, disability, and Social Security.
Last edited by KlingKlang on Tue Jan 10, 2017 11:55 am, edited 2 times in total.

jf89
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Re: File taxes with $0 income with a dependent?

Post by jf89 » Tue Jan 10, 2017 9:49 am

For how easy it is to e-file, I would do it just to make sure I didn't miss something. And as others have stated, there are added benefits: reducing the possibility that someone else is filing on my behalf illegally and to maintain a record that I was filing annually.
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dbr
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Re: File taxes with $0 income with a dependent?

Post by dbr » Tue Jan 10, 2017 10:00 am

I think it is a good idea to file every year to establish a record. Sometimes one is asked for ones tax returns to establish qualifications or information for some purpose. It is also a good habit to have so that one does not overlook the requirement when one does have income and needs to file.

RudyS
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Re: File taxes with $0 income with a dependent?

Post by RudyS » Tue Jan 10, 2017 10:31 am

I agree. File anyhow - put $1 in interest to make it efile-able. Or just file paper. That's to deter ID theft.

Hikes_With_Dogs
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Re: File taxes with $0 income with a dependent?

Post by Hikes_With_Dogs » Tue Jan 10, 2017 11:07 am

dziuniek wrote:Single mother with no income. Who's paying the bills? Are they both someone's dependents?

If there's alimony or child support payments, I believe these get reported.
Alimony is taxable. Child support is not.

TIAX
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Re: File taxes with $0 income with a dependent?

Post by TIAX » Tue Jan 10, 2017 11:22 am

RudyS wrote:I agree. File anyhow - put $1 in interest to make it efile-able. Or just file paper. That's to deter ID theft.
This is bad advice. Please don't make up numbers just to be able to e-file.

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HueyLD
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Re: File taxes with $0 income with a dependent?

Post by HueyLD » Tue Jan 10, 2017 11:26 am

TIAX wrote:
RudyS wrote:I agree. File anyhow - put $1 in interest to make it efile-able. Or just file paper. That's to deter ID theft.
This is bad advice. Please don't make up numbers just to be able to e-file.
The above is what the IRS advises volunteer tax preparers to do to deter ID theft.

It is a GREAT advice.

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BL
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Re: File taxes with $0 income with a dependent?

Post by BL » Tue Jan 10, 2017 11:40 am

She is leaving a lot on the table with absolutely no earned income. Earned income credit is one.

She may be eligible for child tax credit or additional child tax credit, I don't remember. Anyway there are some refundable tax credits which mean she is giving up money by not filing.

If she is someone else's dependent that may change. Details count.

There are free e-file sites online and perhaps she can find a free VITA tax preparation service in her area.
Last edited by BL on Tue Jan 10, 2017 11:42 am, edited 1 time in total.

jane1
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Re: File taxes with $0 income with a dependent?

Post by jane1 » Tue Jan 10, 2017 11:41 am

dziuniek wrote:Single mother with no income. Who's paying the bills? Are they both someone's dependents?
This is important if they are someone else's dependents. That person should claim them on their tax return and the Single Mom can skip filing her own return.
If they cannot be claimed, as others have said, safer (for ID theft reasons) to file with $1 income.

RudyS
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Re: File taxes with $0 income with a dependent?

Post by RudyS » Tue Jan 10, 2017 1:08 pm

BL wrote:She is leaving a lot on the table with absolutely no earned income. Earned income credit is one.

She may be eligible for child tax credit or additional child tax credit, I don't remember. Anyway there are some refundable tax credits which mean she is giving up money by not filing.

If she is someone else's dependent that may change. Details count.

There are free e-file sites online and perhaps she can find a free VITA tax preparation service in her area.
If there isn't a VITA site nearby, check for AARP Taxaide. They also do lower income clients, "with an emphasis on seniors."

MrsRoos
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Re: File taxes with $0 income with a dependent?

Post by MrsRoos » Tue Jan 10, 2017 1:12 pm

OP here. Here is more information to prevent the thread/comments going down the wrong rabbit hole...

My friend is indeed a single mom, with a dependent child and no income (no child support, no alimony, no interest/dividend payments, no unemployment etc.). The Mom is in school and I believe she is living on student loans/grants and what little savings she has. Therefore, both Mom and Child cannot be dependents of another person. They don't have any medical coverage (unwise, I know) and I've been encouraging her to apply for Medicaid. This is definitely not an ideal situation.
“Anyone who believes in indefinite growth in anything physical, on a physically finite planet, is either mad or an economist.” - Kenneth Boulding

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CAsage
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Re: File taxes with $0 income with a dependent?

Post by CAsage » Tue Jan 10, 2017 1:18 pm

If she has any savings, she must have some interest. Pity she isn't living with family so they could deduct both of them! But, hey, she is in school so hopefully there is a plan and a future.
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verbose
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Re: File taxes with $0 income with a dependent?

Post by verbose » Tue Jan 10, 2017 1:19 pm

Your friend may be eligible for the additional child tax credit and receive a "refund" even though she paid no taxes. She should definitely file if this is the case.

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HueyLD
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Re: File taxes with $0 income with a dependent?

Post by HueyLD » Tue Jan 10, 2017 2:19 pm

verbose wrote:Your friend may be eligible for the additional child tax credit and receive a "refund" even though she paid no taxes. She should definitely file if this is the case.
She will not qualify for ACTC because one must have more than $3,000 in earned income to qualify for such a credit.

RudyS
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Re: File taxes with $0 income with a dependent?

Post by RudyS » Tue Jan 10, 2017 2:27 pm

If educational expenses are not covered by scholarship, maybe the refundable American Opportunity Credit would be available. Depends on student status. Proceeds from a student loan are not a scholarship. It'd be great if she has a VITA or AARP Taxaide site nearby.

TIAX
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Re: File taxes with $0 income with a dependent?

Post by TIAX » Tue Jan 10, 2017 5:47 pm

HueyLD wrote:
TIAX wrote:
RudyS wrote:I agree. File anyhow - put $1 in interest to make it efile-able. Or just file paper. That's to deter ID theft.
This is bad advice. Please don't make up numbers just to be able to e-file.
The above is what the IRS advises volunteer tax preparers to do to deter ID theft.

It is a GREAT advice.
Link please.

jebmke
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Re: File taxes with $0 income with a dependent?

Post by jebmke » Tue Jan 10, 2017 5:57 pm

HueyLD wrote:
TIAX wrote:
RudyS wrote:I agree. File anyhow - put $1 in interest to make it efile-able. Or just file paper. That's to deter ID theft.
This is bad advice. Please don't make up numbers just to be able to e-file.
The above is what the IRS advises volunteer tax preparers to do to deter ID theft.

It is a GREAT advice.
We have advised the preparers in our district to file unless the taxpayer does not want to file. In the past we have tried to convince them not to file in order to avoid soaking up capacity for people who don't need to file.

However, instructions are to file a "correct return" (putting in $1 in interest is OK as long as you don't leave anything out). What we don't want people doing is filing only a dollar if the taxpayer has other items like a 1099-R or W-2, lack of requirement to file notwithstanding. If you file and omit these items, you run the risk of a matching problem later for the taxpayer.
When you discover that you are riding a dead horse, the best strategy is to dismount.

TIAX
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Re: File taxes with $0 income with a dependent?

Post by TIAX » Tue Jan 10, 2017 9:25 pm

jebmke wrote:
HueyLD wrote:
TIAX wrote:
RudyS wrote:I agree. File anyhow - put $1 in interest to make it efile-able. Or just file paper. That's to deter ID theft.
This is bad advice. Please don't make up numbers just to be able to e-file.
The above is what the IRS advises volunteer tax preparers to do to deter ID theft.

It is a GREAT advice.
We have advised the preparers in our district to file unless the taxpayer does not want to file. In the past we have tried to convince them not to file in order to avoid soaking up capacity for people who don't need to file.

However, instructions are to file a "correct return" (putting in $1 in interest is OK as long as you don't leave anything out). What we don't want people doing is filing only a dollar if the taxpayer has other items like a 1099-R or W-2, lack of requirement to file notwithstanding. If you file and omit these items, you run the risk of a matching problem later for the taxpayer.
Does "we" mean you work for the IRS? Is there something in writing telling preparers to make up numbers on returns?

RudyS
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Re: File taxes with $0 income with a dependent?

Post by RudyS » Tue Jan 10, 2017 10:00 pm

TIAX wrote:
jebmke wrote:
HueyLD wrote:
TIAX wrote:
RudyS wrote:I agree. File anyhow - put $1 in interest to make it efile-able. Or just file paper. That's to deter ID theft.
This is bad advice. Please don't make up numbers just to be able to e-file.
The above is what the IRS advises volunteer tax preparers to do to deter ID theft.

It is a GREAT advice.
We have advised the preparers in our district to file unless the taxpayer does not want to file. In the past we have tried to convince them not to file in order to avoid soaking up capacity for people who don't need to file.

However, instructions are to file a "correct return" (putting in $1 in interest is OK as long as you don't leave anything out). What we don't want people doing is filing only a dollar if the taxpayer has other items like a 1099-R or W-2, lack of requirement to file notwithstanding. If you file and omit these items, you run the risk of a matching problem later for the taxpayer.
Does "we" mean you work for the IRS? Is there something in writing telling preparers to make up numbers on returns?
It is the training classes that VITA and TCE Taxaide voluntee4s receive. It was in my training this year again. The actual mechanism does vary. We (the volunteers) don't actually do the $1 interest anymore; we now put in $1 as miscellaneous income on line 21. The detail reads "To deter ID theft." Same effect - it lets one e-file! The IRS has gone along with this practice since it started several years ago. Don't worry; it's OK!

jebmke
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Re: File taxes with $0 income with a dependent?

Post by jebmke » Tue Jan 10, 2017 10:21 pm

RudyS wrote:It is the training classes that VITA and TCE Taxaide voluntee4s receive. It was in my training this year again. The actual mechanism does vary. We (the volunteers) don't actually do the $1 interest anymore; we now put in $1 as miscellaneous income on line 21. The detail reads "To deter ID theft." Same effect - it lets one e-file! The IRS has gone along with this practice since it started several years ago. Don't worry; it's OK!
Right; our SPEC knows all about this. A few years ago our SPEC even suggested we plug a dollar in Box 1 on a W2 for retirees who got W2s with HSA entries in Box 12 but no wages just so we could get the 8889 to populate properly without forcing the entry into the form. With the new software I think that is the only choice you have now that you can't get to the forms.
When you discover that you are riding a dead horse, the best strategy is to dismount.

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teen persuasion
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Re: File taxes with $0 income with a dependent?

Post by teen persuasion » Tue Jan 10, 2017 11:27 pm

MrsRoos wrote:OP here. Here is more information to prevent the thread/comments going down the wrong rabbit hole...

My friend is indeed a single mom, with a dependent child and no income (no child support, no alimony, no interest/dividend payments, no unemployment etc.). The Mom is in school and I believe she is living on student loans/grants and what little savings she has. Therefore, both Mom and Child cannot be dependents of another person. They don't have any medical coverage (unwise, I know) and I've been encouraging her to apply for Medicaid. This is definitely not an ideal situation.
Loans are not taxable income, but grants and scholarships not used for tuition are taxable income reported on line 7 just like wages. It's possible she could be eligible for AOTC if she allocated loan proceeds to tuition (up to $4k) and grants/scholarships to living expenses (claiming them as taxable income, which will likely not generate any tax after standard deductions and exemptions). Of course, there's most likely a requirement of earned income to be eligible for the refundable portion of the AOTC.

Still, to be thorough, she should correctly claim taxable grants/scholarships as income, and possibly for future FAFSA purposes (make sure she's eligible to file 1040A or EZ, with AGI under $25k will mean she's eligible for Auto EFC = 0).

RudyS
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Re: File taxes with $0 income with a dependent?

Post by RudyS » Wed Jan 11, 2017 10:33 am

teen persuasion wrote: .....Of course, there's most likely a requirement of earned income to be eligible for the refundable portion of the AOTC.

Still, to be thorough, she should correctly claim taxable grants/scholarships as income, and possibly for future FAFSA purposes (make sure she's eligible to file 1040A or EZ, with AGI under $25k will mean she's eligible for Auto EFC = 0).
IRS Publication 17 makes no mention, so far as I can see, of a requirement of earned income for the AOTC. We are all trying to be helpful, but she really needs help from VITA/TCE or other knowledgeable source, which also must have details of what money she does have coming in", to make sure she gets the most out of this situation.

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teen persuasion
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Re: File taxes with $0 income with a dependent?

Post by teen persuasion » Wed Jan 11, 2017 1:57 pm

I was remembering the convoluted rules about when/if the refundable portion can be claimed if the student is under 24. The instructions for the form includes the details, so I looked it up. Essentially, they cannot claim the refundable credit unless their earned income is greater than half their support, or both of their parents are dead, or they are over age 24.

MrsRoos
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Re: File taxes with $0 income with a dependent?

Post by MrsRoos » Thu Jan 12, 2017 1:49 am

OP here...It sounds like this is not a straightforward answer. We are seeing our tax guy in a month or two. I'll ask him about it and will post his recommendations here. Thanks everyone.
“Anyone who believes in indefinite growth in anything physical, on a physically finite planet, is either mad or an economist.” - Kenneth Boulding

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KlingKlang
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Re: File taxes with $0 income with a dependent?

Post by KlingKlang » Thu Jan 12, 2017 9:24 am

MrsRoos wrote:They don't have any medical coverage (unwise, I know) and I've been encouraging her to apply for Medicaid.
Ouch. This could actually make them subject to the ACA penalty for not having health insurance. There are a number of exceptions for things like bankruptcy and homelessness, and the penalty is only assessed against current and future tax refunds.

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HueyLD
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Re: File taxes with $0 income with a dependent?

Post by HueyLD » Thu Jan 12, 2017 2:25 pm

KlingKlang wrote:
MrsRoos wrote:They don't have any medical coverage (unwise, I know) and I've been encouraging her to apply for Medicaid.
Ouch. This could actually make them subject to the ACA penalty for not having health insurance. There are a number of exceptions for things like bankruptcy and homelessness, and the penalty is only assessed against current and future tax refunds.
There is no ACA penalty if the OP's friend is not required to file a tax return.

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