Can Someone Really Pay Zero Tax?

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Some taxpayers are unaware of how their tax return works, so they make incorrect or untrue statements regarding their tax situation (i.e., having zero tax due).

Is It Possible To Pay Zero Taxes? |

The essential lines on your tax return

Total tax is on Line 15 and represents how much tax the IRS requires you to pay on your tax return (regardless if you’ve remitted the money or not).

Total payments are on Line 18 and displays all the federal income taxes withheld on your behalf or remitted by you for the tax year.

Amount you owe is on Line 21. If you haven’t prepaid enough tax, then you’ll owe the difference between what you remitted on Line 18 and the Total tax on Line 15.

TIP: You can view these lines on page 2 of Form 1040.

The common misconception

If you only focus on the Amount you owe line, it’s the wrong way to gauge your tax situation. You need to pay attention to Line 15 (Total tax). Compare the figure to what you’ve paid in prior years to see how it’s changed.
You need to pay attention to Line 15 (Total tax).
Other than an incremental increase in the tax rate, there shouldn’t be a dramatic shift unless you’ve experienced a new life event (e.g., marriage, divorce, a stock sale, business startup).

READ MORE: Why Is My Tax Bill So High?

Claiming to pay zero taxes

Do you have a friend who brags they don't pay tax? 

When you’re talking with someone about their taxes, they could make the mistake of basing their discussion on the amount of money due when they file the tax return (Line 21).

You also don’t know how their tax return differs from yours — caring for an elderly parent (additional tax deductions), sharing all critical details of their financial life with their accountant (missing information), or bragging in social situations (incorrect information).

TIP: Each taxpayer’s financial situation is different, so be careful not to assume that the person you’re talking with understands their tax return.

READ MORE: Small Business Owner: What Can I Deduct on My Taxes?

DISCLAIMER: Please consult with your accountant, attorney and financial advisor before implementing any information displayed on this website. DIY research does not replace the advice of a licensed professional who has thoroughly reviewed your file.