If you have one child and don’t earn any income subject to federal tax, then your chances of getting money back with a tax refund are extremely limited. In most cases, a tax refund is only available when you make excessive tax payments during the year or are eligible to claim a refundable tax credit. The fact that you claim one child on your return doesn’t necessarily increase your chances of getting a refund.
Income Tax Withholding
The most common way to receive a federal income tax refund is by having too much money withheld from your paychecks for taxes. This is because the IRS allows you to earn a certain amount of income each year that is automatically tax-free, which is generally equal to your standard deduction plus one exemption. If, at the end of the tax year, your annual income is less than this tax-free threshold, then you will report zero taxable income on your return and get a refund of all money withheld for taxes.
Claiming Child Exemption
When you have one child who you claim as a dependent on your tax return, then this allows you to claim an additional exemption. Exemptions work the same way as deductions and allow you to reduce the amount of your income subject to tax. Although this amount is not automatically tax-free, it eventually will be when you file your return. As a result, even when your annual income exceeds the standard deduction and your personal exemption, you can still end up with a zero taxable income because of your child’s exemption. For example, suppose you file as single in 2011 and earn $10,500. This requires you to file a return and potentially pay tax since the sum of your standard deduction and exemption equals $9,500. However, once you add your child’s exemption of $3,700 to this amount, it allows you to earn up to $13,200 without having to report one dollar of taxable income and receive a full refund of all withholdings.
Refundable Tax Credits
If your situation is one where you only receive tax-exempt income during the year, such as welfare benefits, municipal bond interest or Social Security payments, then both your gross income and taxable income will equal zero. However, it’s still possible to receive a refund if you claim a refundable tax credit. The only refundable tax credit available for taxpayers who don’t work is the American opportunity credit, which covers many of the education costs for you and your child. When you calculate the credit, up to 40 percent of it is refundable, meaning that you can get a tax refund even in years you don’t pay a single dollar of tax.
Tax Reporting Options
One thing to note about all of these situations is that if you do decide to file a tax return and claim your child as a dependent, your only tax form options are the 1040 or 1040A. Although the 1040EZ is simpler for taxpayers with less income, the IRS doesn’t allow you to claim any exemptions for your dependents on it.
Jeff Franco's professional writing career began in 2010. With expertise in federal taxation, law and accounting, he has published articles in various online publications. Franco holds a Master of Business Administration in accounting and a Master of Science in taxation from Fordham University. He also holds a Juris Doctor from Brooklyn Law School.