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Can You File Taxes Without Working During the Year? Exploring Schedule C, Claiming a Child, and BOI Reporting
If you received your Employment Authorization Document (EAD) late in the year and didnβt work during that time, you might wonder whether you can still file taxes, especially if you have a child you want to claim as a dependent. In this post, weβll cover whether you can file taxes, the potential use of Schedule C, the need for a registered business, and the implications of Beneficial Ownership Information (BOI) reporting.
1. Can You File Taxes Without Working?
Yes, but with exceptions.
If you didnβt earn income through employment or self-employment, filing taxes might not be required. However, there are situations where you can file:
Claiming a Child as a Dependent: If you have a qualifying child, you may still be eligible for refundable credits like the Additional Child Tax Credit (ACTC), even without earned income.
Receiving Other Forms of Income: If you had taxable income from sources like rental income, investments, or unemployment benefits, filing is required.
If none of these apply and you didnβt earn any income, filing taxes simply to claim a child may not be possible since most tax credits are tied to earned income.
2. Can You Use Schedule C Without Working?
No, unless you have verifiable self-employment income.
Schedule C is used to report self-employment income. If you didnβt work or have any business activity, you cannot legitimately file a Schedule C. Filing without actual income could potentially trigger red flags with the IRS, potentially leading to audits or penalties.
3. Attempting Self-Employment After Receiving Your EAD
Even if your EAD was issued late in the year, attempting self-employment could make filing taxes possible. Self-employment income can include:
- Freelancing or offering services (e.g., tutoring, babysitting, rideshare driving).
- Selling goods online or locally.
- Any income earned independently, even for a short period.
If you earned income through these activities, you could file taxes using Schedule C and potentially claim credits tied to your earnings. However, you must keep detailed records (invoices, receipts, etc.) to substantiate your claims.
4. The Importance of a Registered Business
Having a registered business (e.g., LLC or sole proprietorship) is not required for filing self-employment taxes. However, registering a business:
- Adds credibility to your tax filings and income claims.
- May be necessary for BOI reporting requirements if your business meets certain criteria.
If you plan to pursue self-employment seriously, registering a business could simplify future tax filings and compliance.
5. BOI Reporting Requirements: How They Impact You
The BOI (Beneficial Ownership Information) rules apply to businesses and entities that meet specific criteria. While these rules donβt directly affect individuals filing taxes, they do require businesses to disclose ownership and activity information.
If you file a Schedule C and claim self-employment income without having an active or registered business, it could:
- Trigger scrutiny under BOI compliance if the reported income is inconsistent with other records.
- Lead to an IRS audit for misrepresentation.
Clear and Simple Illustrations
Example 1: Filing Taxes Without Income
Scenario: You received your EAD late in the year and did not work or earn any income.
Result: You cannot file taxes, as you have no reportable income. You also cannot claim your child because credits like the Child Tax Credit require earned income.
Example 2: Filing Taxes With Self-Employment Income
Scenario: After receiving your EAD, you offered tutoring services for two weeks and earned $600.
Result: You can file taxes using Schedule C to report the $600 as self-employment income. You may also claim your child and qualify for the Child Tax Credit, depending on the total earned income.
Example 3: Filing Taxes Without a Registered Business
Scenario: You worked as a rideshare driver after receiving your EAD but didnβt register a business.
Result: You can still file taxes using Schedule C because registering a business is not required for self-employment.
Key Takeaways
Filing taxes without income is generally not possible unless specific exceptions (e.g., other taxable income) apply.
You cannot file using Schedule C unless you earned self-employment income.
Attempting self-employment after receiving your EAD could help you establish reportable income and access tax credits.
Registering a business isnβt mandatory for self-employment filings but is beneficial for credibility and compliance with BOI requirements.
Misreporting income or attempting to file without actual earnings can lead to serious IRS scrutiny.