Who Has to File a Federal Income Tax Return?
How to Determine If You Should File a Tax Return With the IRS
Are you wondering if you need to file a tax return? While most people who earn an income must file a Federal income tax return, that is not true for everyone.
Depending on your filing status and the amount of income you made during the year, you may not be required by law to file a return with the IRS. However, even if you do not have to file, it may still be in your best interest to submit a tax return.
Determining Whether to File a Federal Income Tax Return
There are a number of factors that determine whether you need to file a tax return — including your annual income, your age, your marital status, and whether or not you have dependents. It is important to make sure that you are exempt from filing so you don’t mistakenly neglect to submit a tax return to the IRS.
In most cases, you will need to file a return if any of the following are true:
- Your gross income was over $10,000 as a single filer (or over $20,000 as a married couple filing jointly)
- You earned over $400 from self-employment
- You sold your home during the tax year
- You owe taxes because of your retirement account, either from distributions or excess contributions
- You owe Social Security and Medicare taxes on tips that were not reported to your employer, or on wages that your employer did not withhold these taxes from
Note that there are many other circumstances that may require you to file an income tax return, even if none of the above factors apply to you. If you are unsure, a tax professional can help advise you on whether or not you need to file.
The Advantages of Filing a Federal Income Tax Return
Even if you are not required by law to file a tax return, in some cases it may be in your interest to file one anyway. For example, almost anyone who has dependents can benefit by filing an income tax return.
Most people who are exempt from filing do not owe any taxes. However, they may still be eligible for a tax refund. There are several tax credits and tax deductions that you might qualify for, which can help reduce your tax liability or increase your tax refund.
NOTE: Non-refundable tax credits cannot exceed your tax liability — so once your tax balance is brought down to $0, you have maxed out on that credit for the year. On the other hand, refundable tax credits can go beyond your tax liability and result in a tax refund check.
Some of the available tax credits include:
- Earned Income Credit — This is a refundable credit designed for taxpayers who earn wages, yet fall into a low income tax bracket. In many cases, people who qualify for this credit can receive a tax refund that is larger than the total amount of taxes withheld from their paychecks.
- Child and Dependent Care Credit — If you paid to take care of a child (under the age of 13 and in your custody) or a spouse or adult dependent who is incapable of self-care, you may qualify for this tax credit, which can offset a percentage of the cost of their care.
- Education Tax Credits — There are 2 main education tax credits for qualified expenses (such as tuition and enrollment fees) paid by certain taxpayers for themselves, their spouse, or a dependent.
- Savers Credit — Some taxpayers may be eligible to claim a tax credit for a portion of the money they contributed to a qualifying retirement account.
On top of the credits available, there is another reason you may want to file a Federal income tax return every year. In certain situations, such as applying for a loan or for government benefits, a copy of your most recent tax return(s) is often required.
Most people who earn income (either from wages, self-employment, or dividends) are obligated to file a Federal income tax return every year. Not doing so can result in harsh penalties and interest fees owed to the IRS. If you are not sure whether or not you need to file a return, consult a tax professional for advice. In some cases, you may want to file a return just a precaution.
For more information, please refer to the IRS Form 1040 Instructions.