The Truth About Paying Fewer Taxes: Not Everyone Has to File
- "I like to pay taxes. With them I buy civilization."
- —Supreme Court Justice Oliver Wendell Holmes, Jr.
Taxes are truly one of the most egalitarian of institutions. Young and old, rich and poor, living in the United States or abroad, most Americans must deal with paying what has been described as the price of a civilized society.
But the U.S. tax code’s reach, while long, is not absolute. In fact, for some folks, April 15 is just another day because they don’t have to worry about filing a return.
How do these lucky individuals get off the tax hook? They don’t meet the filing requirements. But arriving at that fortunate tax place requires assessment of three different factors.
Generally, whether the IRS requires a 1040 from you is determined by the following:
- Your income
- Your filing status
- Your age
Income—The primary consideration is how much you make. It is, after all, called an income tax. And after you make a certain amount in a tax year, the IRS wants to know about it via a Form 1040 (or 1040A or 1040EZ).
There is, however, no set dollar amount that initiates the filing requirement. There are several threshold amounts, and the IRS adjusts them each year to account for inflation. That way, you won’t find yourself automatically bumped up into a higher tax bracket just because you got a raise. The annual filing requirement amounts are published each year in each of the instruction booklets for Forms 1040, 1040A, and 1040EZ or are available online at IRS.gov.
- The primary consideration is how much you make. It is, after all, called an income tax.
But it’s not just your salary that counts toward determining the income filing trigger. There are various types of income that, if the total is large enough, trigger the filing requirement.
Gross income is all the compensation you receive. It can be as money, goods, property, and even services. Income from sources outside the United States also must be counted when considering whether you make enough to require a 1040 submission.
Self-employment income, either as your full-time job or a weekend enterprise, also is part of the equation. The trigger for filing in this case is $400. If you are married and live in a community property state, half of any income your state law deems community earnings may be considered yours. This amount affects your federal filing requirement, even if you and your spouse do not file a joint return.
Filing status—In addition to inflation, the income amounts that determine whether you must file also vary depending upon your filing status. You can choose from single, married filing jointly, married filing separately, head of household, and widow or widower with a qualifying child.
In most instances, the required income amount for a single taxpayer is half that of a couple who sends in a joint return.
However, if a husband and wife decide to file separate returns, the income threshold for each is substantially lower. Why isn’t it the same as single filers? In part, the tax laws want to reward joint filings because it makes the processing easier. Some tax benefits are not available to “married but separate filers,” which makes things more complicated for taxpayers and IRS examiners alike.
A head of household taxpayer is one who is supporting others. Because of that, the income trigger amount for this status is a bit more than for single taxpayers. Similarly, a widow or widow raising at least one dependent child is allowed to earn even a bit more before he or she must submit a return.
Age—Finally, your age can affect whether you must file a return.
Youngsters are not automatically off the tax hook. When a child earns money, he or she must face the same tax consequences as other taxpayers. However, when a child is also the dependent of another taxpayer—that is, he or she can be claimed on another person’s tax return for that person to obtain some additional tax benefits—different filing requirements apply.
A dependent filer must take into account both money earned from a job, as well as income from investments. How much income from each of those two sources determines whether the dependent must file his or her own tax return.
While dependents typically are children, a dependent could be an adult relative. And that dependent, regardless of age, much use the formula for determining whether he or she must file.
Older taxpayers, however, do receive some other special consideration when it comes to determining whether they must file. If you are 65 or older, you are able to collect more gross income than other taxpayers before you must file.
- If you are 65 or older, you are able to collect more gross income than other taxpayers before you must file.
Vision issues also can bump up the amount of money necessary to require filing. This extra income amount is calculated separately and could make a difference as to whether you must file, regardless of your age.
Other considerations—The general tax-filing requirements apply not only to U.S. citizens, whether living in America or abroad, but also to residents of Puerto Rico and resident aliens—that is, persons whose permanent residence is in the United States but who are not citizens.
Even if you don’t have to file, sometimes it literally pays to do so. If you’re due any refund amount or you’re eligible for certain tax credits, submitting the proper paperwork to the IRS is the only way to get that money.