Even if your income is below the requirements for filing a federal income tax return, if income tax was withheld from your pay, you may be due a refund and should file a return. And if you qualify for any of the refundable credits, even if no tax or too little tax was withheld from you pay, you could still receive a refund.
Depending on how much income you have, you may be able to e-file your federal tax return for free using the IRS free-file option. When you use tax software you will probably be prompted to enter the information needed to calculate and claim the credits you are eligible for. If you use the IRS free-file fillable forms or you file a paper return, you need to know which credits you qualify for and how to claim them.
Making Work Pay Credit
For 2010, you can claim the Making Work Pay Credit if you have earned income. If you received a salary or wages you saw the benefits of the credit through lower tax withholding and a larger paycheck. But you can also claim the Making Work Pay Credit if you were self-employed or worked on a farm. The credit is 6.2% of earned income, up to a maximum credit of $400 on a single return and $800 on a joint return. To claim the credit you need to file Schedule M – Making Work Pay Credit with your Form 1040 or 1040A. If you file Form 1040-EZ you need to fill out the worksheet on the back of the form to claim the credit.
Earned Income Credit
You may qualify for the earned income credit if you worked at a job or were self-employed and your income is not more than a certain amount based on your filing status and the number of children you have. The earned income credit can provide you with a refund, but you need to file a tax return to claim it, even if you are not required to file, do not owe any tax, or you didn’t have any tax withheld from your pay. To see whether you qualify, you can use the EITC Assistant on the IRS website.
Additional Child Tax Credit
If you have a qualifying child under age 17 who you could claim as a dependent on your tax return, you may be eligible for the child tax credit. This credit can reduce your taxes by up to $1,000 for each child, but is not refundable. However, if you qualify for the child tax credit you may also qualify for the additional child tax credit, which can give you a refund even if you do not owe any tax. The additional child tax credit is claimed on Form 8812.
American Opportunity Credit
For 2010, if you, your spouse or a dependent is attending college or pursuing other postsecondary education, you can claim the American Opportunity Credit for the costs of tuition, fees, books and other course required materials. The credit is 100% of the first $2,000 of expenses and 25% of the next $2,000. So if your total expenses are over $4,000, you could qualify for a total credit of $2,500. Forty percent of the credit is refundable. So even if you do not owe any tax, you could get a refund of up to $1,000 for each eligible student. To claim this credit, you need to file Form 8863 – Education Credits (American Opportunity and Lifetime Learning Credits).
EITC Assistant – IRS
Form 8812 – Additional Child Tax Credit
Form 8863 – Education Credits (American Opportunity and Lifetime Learning Credits)
Free File – IRS
Schedule M – Making Work Pay Credit