Filing a tax return with no income.

[Alan]

Our son took a year off work. He starts work again next week but he quit his job end of 2019 and no income for all of 2020.

He usually files using my copy of TurboTax so it won’t cost him anything to file. He owes nothing in taxes and is owed nothing. He recently received his $600 stimulus payment.

I think he should file just to maintain a filing record with the IRS.

Anyone have any thoughts or suggestions?

https://www.creditkarma.com/tax/i/who-files-taxes

Finally, it may still be a good idea to file a tax return even if none of the above situations applies.

That’s because filing a return starts the clock on the statute of limitations. In general, the IRS can go back three to six years to audit your old tax returns unless it identifies a substantial error that can add additional years. But that time frame doesn’t start until you actually file a return.

So even if you didn’t earn enough to trigger a filing requirement, you might want to make sure the IRS can’t come back a decade later and ask why you didn’t file a return for a specific tax year.

 

[euro]

I wouldn’t file. So what if they come back 5 years later and ask why he didn’t file in 2021? The answer will be: “because I had no income”.
Unless they have a solid reason not to believe him (and they won’t because he really didn’t have an income, right?), they’ll drop the matter.

 

[audreyh1]

I would file.

 

[Alan]

I should mention that he lives and works in England so the IRS only know he has income because he tells them. (He is a USC so is taxed on worldwide income regardless of where he lives).

 

[FIREd]

I owed no taxes for 2019 and my accountant said that I didn't even need to file a return because my income was too low. I asked her to file a return anyways. I had to file FATCA and FBAR forms so it seemed safer to go through the usual process.

 

[Alan]

I owed no taxes for 2019 and my accountant said that I didn't even need to file a return because my income was too low. I asked her to file a return anyways. I had to file FATCA and FBAR forms so it seemed safer to go through the usual process.

Thanks. He does have to file an FBAR report for 2020 which is a reason I think he should file as his foreign financial accounts are very high for someone with income below the filing threshold

 

[Montecfo]

There is no downside to filing. I would file.

 

[SecondCor521]

Two thoughts:

You mentioned he received an EIP payment. If he received one, he's probably entitled to both. If he received one but was entitled to both, he may need to file to get the second one. Look for the term "Recovery rebate credit" on line 30 of his Form 1040. Turbotax should ask how much he received for both payments; if he puts $0 in for whichever one he did not receive, then that should calculate the proper amount on the Recovery Rebate Credit line of his return. If he only received $600, then that is probably the second one; the first one would be $1200, so he would get a $1200 refund.

Also, filing a return can prevent others from filing a fraudulent return with his SSN, which is helpful. If someone files a fraudulent return with his SSN this year, he would probably have to get an IRS identity theft PIN, which is a hassle to deal with.

 

[Alan]

Two thoughts:

You mentioned he received an EIP payment. If he received one, he's probably entitled to both. If he received one but was entitled to both, he may need to file to get the second one. Look for the term "Recovery rebate credit" on line 30 of his Form 1040. Turbotax should ask how much he received for both payments; if he puts $0 in for whichever one he did not receive, then that should calculate the proper amount on the Recovery Rebate Credit line of his return. If he only received $600, then that is probably the second one; the first one would be $1200, so he would get a $1200 refund.

Also, filing a return can prevent others from filing a fraudulent return with his SSN, which is helpful. If someone files a fraudulent return with his SSN this year, he would probably have to get an IRS identity theft PIN, which is a hassle to deal with.

He did receive a $1,200 payment as well.

Preventing someone filing a fraudulent return is another good reason to file.

I think I have enough ammunition to convince him that he should file.

 

[ivinsfan]

I'd just file it and forget about it. As far as IRS is concerned it's always better if you act like you give a crap...

He took a gap year from work? That's awesome. I've always admired my English relatives mindset about switching jobs, taking time off, and spending money on vacations. It seems better for your mental and physical health.

 

[38Chevy454]

I agree with the others, no harm to file except a little time for filling out and sending the forms. The potential benefits are greater than the time cost.

 

[pb4uski]

There is no downside to filing. I would file.

+1

 

[Alan]

Thanks everyone, very useful feedback indeed.

 

[SheitlQueen]

I haven't had to pay taxes since I retired, but I always file a return anyway. It's easy, cheap and I like being able to retain the information.

 

[ATX78701]

My thought is focusing on three years down the road. The IRS decides that he should have filed a return. No biggie because no income. BUT will it be easy in three years to file the return? Will the software for that year still work ? Will you still have a version of that software? I hope he takes the 30 minutes or less to file and have piece of mind.

 

[frayne]

+1 on filing if nothing more than for a matter of record.

 

[Texas Proud]

I should mention that he lives and works in England so the IRS only know he has income because he tells them. (He is a USC so is taxed on worldwide income regardless of where he lives).

But you get the expat exemption...


Plus, they do not come back that many years unless they are looking for fraud... that is as close to a zero probability that you can get...


I have a nephew that has over 20 years living in NZ and Australia and has never filed a US tax return... they are not coming after him as he was on the dole almost all that time..

 

[Alan]

But you get the expat exemption...


Plus, they do not come back that many years unless they are looking for fraud... that is as close to a zero probability that you can get...


I have a nephew that has over 20 years living in NZ and Australia and has never filed a US tax return... they are not coming after him as he was on the dole almost all that time..

Not sure what you mean by the expat exemption. To pay no US taxes for his foreign earned income he HAS to file to exclude his foreign earnings, he can't just not report foreign income.

My concern is that at some point the IRS computers might look at the fact he has filed a tax return every year since he started work in 2007, then nothing filed in 2020, but restarted filing in 2021. They can also see a large sum of money in foreign accounts as he has to file an FBAR so may wonder why any income from this cash is not reported. I reckon filing a return with no income will prove that he hasn't simply failed to file when he should have. It will give piece of mind going forward and cost nothing but 30 minutes of effort.

 

[Sunset]

I'd file.

I have a relative, in his late 60's , the son (lazy) lives with his dad so has not worked in decades.

He proudly was telling his Dad to not file a tax return as not required if no taxes are payable.

I've been doing his Dad's return for years (for free) and continued to file.

Come 2020, his dad got his $1,200 stimulus check. The son didn't.

The son had to go register (I don't know what he did) Son said he got the money later.

Now his Dad got the $600 stimulus check, The son still didn't

 

[RetireeRobert]

Costs him nothing to file. Hardly any effort to file. Why not just keep the IRS "system" happy, and preclude them from flagging his SSN for "non-filing", and possibly hassling him a couple years down the road. Easier just to file now with a "no income" return.

He should file.

 

[Texas Proud]

Not sure what you mean by the expat exemption. To pay no US taxes for his foreign earned income he HAS to file to exclude his foreign earnings, he can't just not report foreign income.

My concern is that at some point the IRS computers might look at the fact he has filed a tax return every year since he started work in 2007, then nothing filed in 2020, but restarted filing in 2021. They can also see a large sum of money in foreign accounts as he has to file an FBAR so may wonder why any income from this cash is not reported. I reckon filing a return with no income will prove that he hasn't simply failed to file when he should have. It will give piece of mind going forward and cost nothing but 30 minutes of effort.

My point was that if he had foreign income in previous years then more than likely he would have it now... if the IRS did not get any tax forms from companies etc showing income they are not going to go looking for a tax return that more than likely has zero tax due...


I would also assume that he already had a large balance in the account the previous year when he reported.... if not then it might make sense to file...

 

[Alan]

My point was that if he had foreign income in previous years then more than likely he would have it now... if the IRS did not get any tax forms from companies etc showing income they are not going to go looking for a tax return that more than likely has zero tax due...


I would also assume that he already had a large balance in the account the previous year when he reported.... if not then it might make sense to file...

Foreign companies do not send forms to the IRS which is why they may be suspicious if suddenly he does not file a tax return. The IRS are dependent on the taxpayer to report foreign income.


You only report foreign account balances to the IRS if they are very large. $200k at year end or $300k at any point during the year for a person filing single.

 

[VanWinkle]

He should file for many of the reasons already stated in this thread.

 

[ncbill]

I'd file.

I have a relative, in his late 60's , the son (lazy) lives with his dad so has not worked in decades.

He proudly was telling his Dad to not file a tax return as not required if no taxes are payable.

I've been doing his Dad's return for years (for free) and continued to file.

Come 2020, his dad got his $1,200 stimulus check. The son didn't.

The son had to go register (I don't know what he did) Son said he got the money later.

Now his Dad got the $600 stimulus check, The son still didn't

Yeah, I wonder if I'd get a check for my died-in-2019 relative whose income was just a few bucks for that year if I file for them now.

 

[audreyh1]

Well, no, because they died before 2020. The IRS is now checking who died before 2020. Wasn’t there a requirement to file for 2019 notifying that it was the final return for a deceased person?