Typically, the minimum filing requirement for most people is the standard deduction. However, there are times when it is required or an individual simply desires to file a return for income totaling less than the amount of the standard deduction. The IRS has specific guidelines regarding who must or should file a tax return.
Who Must File?
The IRS requires that all individuals earning more than the standard deduction must file an income tax return. For single filers under 65, the amount of earned income is $12,550 and for joint married filers, it is $25,100. If an individual can be claimed as a dependent by another taxpayer, then their standard deductions will be a bit different. Dependents who work will take their income and add $350, not to exceed the standard deduction for their filing status.
Individuals earning at least $1,100 in unearned income, such as interest or dividends, must file even if their income is not $1,300. For example, if someone has $1,150 in interest or dividend income, then they are required to file, even if they earned less than the standard deduction.
A taxpayer who owes Social Security and Medicare tax on income from tips must also file, regardless of total income. Qualifying children who can be claimed by another taxpayer must file if their gross income is the greater of $1,100 or the amount of earned income is up to $12,200 (plus $350). Other relatives cannot earn more than $4,300 gross and still qualify as a dependent in 2021, while self-employed individuals must file their taxes if they have income above $400.
Read More: Do I Need to File Taxes If I Didn't Work?
Who Else Should File?
Aside from instances when individuals must file, a taxpayer may simply want to file in order to recover overpayments of tax as a tax refund. Another compelling reason to file is to claim the Earned Income Credit. This refundable credit is available for lower-income individuals who have earned income. A filer with no children would potentially be eligible for up to a $1,502 Earned Income Credit for the tax year 2021.
Individuals eligible to file as Head of Household should also file. Someone filing as Head of Household with three dependents could be eligible for an Earned Income Credit of up to $6,728 on their 2021 taxes.
Even further, a Head of Household filer may also be eligible for the Child Tax Credit. The Child Tax Credit is a refundable credit for which the IRS allows up to $3,600 per child for the 2021 tax year. Even if a Head of Household filer has no income at all, they may be eligible to receive this credit.
Another reason to file is to obstruct thieves from fraudulently filing a tax return using a stolen Social Security number. The IRS tracks which Social Security numbers have been filed and only allows for each number to appear on a single return. The IRS will not permit multiple returns to be filed with the same Social Security number, effectively blocking thieves from using the number of someone who has no filing requirement.
Read More: Child Tax Credit: What Is It & How to Qualify
What Are the Filing Requirements?
All individual filers will use Form 1040, and additional forms or schedules will be included based on income sources. For example, individuals with investment income will likely include Schedule 1 and Schedule B with their tax returns. Self-employment income will require a Schedule C to be filed with the tax return. For dependent children who must file, parents may elect to include the child's income on their return. If kiddie tax is due, it will go on Form 8615.
The Earned Income Credit is often abused due to fraudulent claims for this particular credit on tax returns. In order to claim the Earned Income Credit, a filer will include the Schedule EIC with a tax return. The Child Tax Credit and Additional Child Tax Credit will go on Form 8812.
If the filing is done through a third party, such as a tax preparer, the return will include Form 8867 to prove due diligence for both the Earned Income Credit and Child Tax Credit.
Hashaw Elkins is a financial services and tax professional, as well as a project management consultant. She has led projects across multiple industries and sectors, ranging from the Fortune Global 500 to international nongovernmental organizations. Hashaw holds an MBA in Real Estate and an MSci in Project Management. She is further certified in organizational change management, diversity management, and cross-cultural mediation.