Tax Liability represents the total amount of tax owed by the individual to the IRS or any corporation. The liability itself means anything that the business or the individual owes to someone. This word is coupled with tax, and the word has a literal meaning. You have tax liabilities on you when you earn any income. It is possible to have tax liabilities because of other taxable events, such as selling real estate or an asset. There is a chance that someone might have a tax liability because of the taxes’ non-payment in the previous years.
For the year 2020, the tax filing and tax payment deadline was extended further. Instead of the usual April 15, the deadline was pushed to July 15. Some people receive a notification of no tax liability, referred to as Tax Liability Zero. People often get confused with these terminologies, and they are not sure what should be done next. We are going to help you in understanding these details now.
If you have tax liabilities zero, then there is no tax pending for the prior years. The tax liability zero can also be there when your income is less than taxable income.
How to check if my tax liability is zero?
Information about the tax liability can be checked with the help of the income tax form. The Form 1040 for US Individual Income Tax Return has all these details. In this form, there is a line that is labeled as Total Tax. You can check the figure corresponding to this line, and if it is 0, then your tax liability is 0. If the line has any figure in the negative, then the IRS owes a refund to you. Lastly, if there is a positive figure in the line item, you owe that much tax.
It should be noted that if your gross income was below the taxable income, then you may be exempted from filing the income tax. In this case, your tax liability is 0, and hence you will not have to pay any income tax. It is always better to consult a professional to get a clear picture of the tax liability. Failure to clear your tax liability can lead to severe charges and penalties. You can even refer to Publication 501 of the IRS, which has all the details about the Dependents, Standard Deduction, and Filing Information. This publication covers many taxpayers, so the publication should be able to resolve your query.
You can seek an exception from the tax liability if your taxable income is 0. In such a case, there are two more requirements. The first requirement is that the prior year should be taxable years. The second requirement is that you should be a citizen of the United States throughout the tax year. If you meet both the criteria and if your income is less than the threshold income, you can be relaxed as your tax liability will most likely be zero.