No tax withheld, yet $323 return? How is that possible?

Question

So I just filed taxes. According to my W2, no federal income tax was withheld from my paycheck, and only $66 for state income tax. (Basically, fields 1 through 14 are empty, except 1. Wages, tips, etc, which is around $4200)

I have a couple thousand in deductions from money I paid for higher education. However, if there are no taxes paid, then what is there to deduct from right?

So why would Turbotax suggest that I will get a federal refund of $323 ? Refund of what? I didn't pay them income tax according to my W2.

I don't want to file this before I'm certain this is correct, so I don't have to pay it back later...

Yeah, I didn't even bother adding additional education expenses such as books and such, because I figured I was already getting way more credit than taxes paid, plus I didn't keep receipts for books and such. I only entered the tuition billed and grants received from my 1098T, since that's the only thing I have proper documentation of! Thanks!

Answer 1

You're probably getting an Earned Income Credit - check that line toward the bottom of your return. If you're between ages 25 and 64, or have a dependent child, you'd be eligible for EIC.

If your total tax was zero, adding additional deductions would not have changed that. And books and supplies aren't usually eligible for education credits anyway.

Answer 2

The EIC (Earned Income Credit) is a REFUNDABLE credit available to certain low income filers. With an income of $4200 and no dependents, you would receive an EIC credit of $323 if you qualify. Pages 46 and 47 of the 1040 instructions should tell you if you qualify. The requirements I believe are most likely to DISQUALIFY you are:
1. You must be between 25 and 65.
2. No one can be able to claim you as a dependent.
I suspect your parents may be able to claim you.

Answer 3

Generally - you are correct; looks like your return is showing some sort of REFUNDABLE credit (one in which you don't need to offset tax liability to obtain).

You get a $30 refundable telephone excise tax credit, so that will be part of your refund.

Do you have a child that you are getting an earned income credit (which is refundable)?

I don't believe there is a refundable education credit available - that would be my only other guess as to where the refund is coming from. What line of the return is the credit showing? This will indicate better as to what is being calculated.

Answer 4

Yes, if you qualify for things like earned income credit and others you can get back more than what you paid...and if you paid nothing, then 323 would still be possible. I had this happen for 3 years in a row, until of course I finished school and had to pay taxes....

Answer 5

Basically, yes it's possible.

There are different kinds of deductions. Some are basically a credit against your total income, so it lowers that number (and can even make it a negative number, sounds like what happened in your case).

As long as your numbers in TurboTax are correct and you have the paperwork to prove them, you should be ok. The main risk is if you entered the education expenses wrong. Might want to make sure you understand those rules correctly.

Scott

Answer 6

the phenomenon you refer to is called having a "refundable credit" and is the only way this could have happened. yes it does happen alot