Who is required to file a tax return? is a very common question among people earning less or having a casual income. Well, legally speaking, filing a tax return is obligatory not just for a person having total income exceeding a specified limit but also a person who may not have income but satisfying certain conditions laid down in the Internal Revenue Code. This post jots down twelve such situations in which you’d want to file a tax return with IRS even if you’re not earning income exceeding the threshold to file taxes.
Video Summary of 12 situations , you must file taxes
1.Minimum income to file taxes
The basic rule for individuals is that filing taxes is obligatory if your gross income is more than standard deduction you are eligible for. The idea is if your gross income is equal or less than the standard deduction, then your total income after claiming the standard deduction is either zero or in negative. Therefore, you basically have no tax obligation. For example, if you are unmarried individual and earning more than the standard deduction for the tax year, that is, $12,400 for 2020 and $12,550 for the year 2021, only then you must file a tax return.
What is Gross Income ?The term “Gross income” means all the income you received during the year that was not exempt from tax. The receipts that may be regarded as your income includes:
- Income from sources outside the United States
- Income from the sale of your main home even if you can exclude part or all of it from tax
- Gains, but not losses, from sales of stock and other securities, and
- Business income reported on IRS Schedule C or Schedule F (not including losses)
If the aggregate of your earnings from various sources is above the threshold , then you are obliged to file tax return. You can use any of of the 10 free tax filing offers approved by IRS
The standard deduction for a year depends on filing status, age and whether you are blind. Following table provides a gross income chart for the year 2020 (due date 15th April 2021) and year 2021 (due date 15h April 2022). If you earn more than that, you must file a tax return.
Minimum Income for filing taxes table for 2020 & 2021
|Sl.No||Filing taxes required for the taxpayer||If gross income in Year 2020 is more than||If gross income in Year 2021 is more than|
|1||Single under age 65||$12,400||$12,550|
|2||Single age 65 or older||$14,050||$14,250|
|3||Single under age 65 & blind||$14,050||$14,250|
|4||Single age 65 or older and blind||$15,700||$15,950|
|5||Married filing jointly, both spouses under 65||$24,800||$25,100|
|6||Married filing jointly, one spouse age 65 or older||$26,100||$26,450|
|7||Married filing jointly, both spouses 65 or older||$27,400||$27,800|
|8||Married filing jointly, both spouses under 65 and one is blind||$26,800||$26,400|
|9||Married filing jointly, one spouse age 65 or older and one is blind||$27,400||$27,700|
|10||Married filing jointly, one spouse age 65 or older and both are blind||$28,700||$29,000|
|11||Married filing jointly, both spouses 65 or older and one is blind||$28,700||$29000|
|12||Married filing jointly, both spouses 65 or older and both blind||$30,000||$30,300|
|13||Married filing separately, any age||$5||$5|
|14||Head of household under age 65||$18,650||$18,800|
|15||Head of household under age 65 & blind||$20,300||$20,500|
|16||Head of household age 65 or older||$20,300||$20,500|
|17||Head of household age 65 or older and Blind||$21,950||$22,200|
|18||Qualifying widow(er) under age 65||$24,800||$25,100|
|19||Qualifying widow(er) under age 65 & blind||$26,100||$26,450|
|20||Qualifying widow(er) age 65 or older||$26,100||$26,450|
|21||Qualifying widow(er) age 65 or older & blind||$27,400||$27,800|
2.Income threshold for dependent person
If you are claimed as dependent on another person’s tax return, then you must file a tax return if your unearned income is greater than the standard deduction for dependents which is greater of
- $1,100 in 2020 & 2021
- Or the sum of $350 + the person’s earned income, up to the standard deduction for an unclaimed single taxpayer which is $12,400 in 2020.($12,550 in 2021)
Additionally, this rule does not apply if the dependent makes equal to or greater than the standard deduction for their filing status.
If you want to claim any tax refund due to you, you need to file tax return because IRS will only be able to refund once they find your claim through a valid tax return.
4.Special rule for married filing separately
If you, for any reason didn’t live with your spouse at the end of the tax year or because your spouse died during the year, you must file tax return as married filing separately if your gross income was at least $5 regardless of your age.
5.Filing rule for self employed
If your self-employment earnings is $400 or more, you must file taxes with the IRS.
If you owe social security and medicare tax on unreported tips to your employer or on wages you received from an employer who did not withhold these taxes or on group-term life insurance and additional taxes on health savings accounts.
7. Owe AMT
If you owe Alternative Minimum Tax, you must file tax return
8.Owe employment tax
If you owe household employment taxes you must file a tax return. However, if you owe just this tax, then you may avoid filing a tax return if you file Schedule H by itself. The Schedule H of tax Form 1040 or 1040-SR is for reporting household employment taxes.
9.Wages from church
If you earned wages of $108.28 or more from a tax-exempt church or church-controlled organization, then also you must file a tax return.
10.Receipts from HSA or MSA
Filing tax return is obligatory if you (or your spouse, if filing jointly) received distributions from any of following
- HSA distributions (in scope),
- Archer MSA distributions (Out of scope), or
- Medicare Advantage MSA distributions (Out of Scope).
11.Repaying homebuyer credit
If you are required to repay a 2008 Homebuyer Credit or other recapture tax, you must file tax return. See Instructions for Form 1040, Schedule 2
12.Owe taxes on qualified plan
If you owe, additional tax on any qualified plan like individual retirement arrangement (IRA), or another tax-favoured account, then you must file a tax return. However, the obligation to file a tax return is just because of these reasons, you may avoid filing a tax return by filing Form 5329 which is for reporting additional taxes on IRAs, other qualified retirement plans, modified endowment contracts, Coverdell ESAs, QTPs, Archer MSAs, or HSAs.