Which of the following is an advantage of always filing a tax return, even if you are not required to do so?

• A. It eliminates the need to keep accounting records.
• B. It exempts you from future tax audits.
• C. You may be eligible to receive a tax refund for overpaid taxes.
• D. It guarantees that your net sales will increase.

Answer: (C)

Verified step by step guidance

1. Understand the context of the question: Filing a tax return is a process where individuals or businesses report their income, expenses, and other financial information to the tax authorities. Even if you are not required to file, there may be benefits to doing so.
2. Analyze the options provided: The question lists four potential advantages of filing a tax return even when not required. Evaluate each option critically to determine its validity.
3. Option 1: 'It eliminates the need to keep accounting records.' This is incorrect because filing a tax return does not exempt you from maintaining proper accounting records, which are essential for financial management and compliance.
4. Option 2: 'It exempts you from future tax audits.' This is incorrect because filing a tax return does not guarantee exemption from audits. Tax authorities may still audit your records if deemed necessary.
5. Option 3: 'You may be eligible to receive a tax refund for overpaid taxes.' This is correct because filing a tax return allows you to claim refunds for any taxes you may have overpaid during the year, even if you were not required to file. This is a key advantage of filing voluntarily.