At the end of every year, the Internal Revenue Service expects to receive tax returns from most taxpayers. But some taxpayers aren’t required to file tax returns because they don’t make enough money and aren’t subject to any other filing requirements. Knowing the answer to “Do I have to file taxes?” can save you the time, effort and expense of completing a tax return if you’re not required to file. However, even if you aren't legally required to file, you should still consider whether it would be advantageous to do so.
Each year, if you have less than the minimum amount of total income for your filing status, you may not have to file an income tax return. However, the amounts are different if someone can claim you as a dependent, and you might be required to file under another rule even if your income doesn’t exceed the threshold.
Minimum Income to File Taxes
The most common reason people aren’t required to file taxes is their income doesn’t exceed the minimum taxable income for their filing status. When determining whether you have the minimum income to file a return, you must include all taxable income without accounting for any deductions that you might be eligible to claim on your return.
For example, say your total taxable income for the year is $3,000 over the filing threshold for your tax filing status, but you know that you’re eligible to claim a $4,000 deduction. You are still required to file an income tax return even though you don’t expect to have any taxable income after accounting for your deductions.
You do, however, have to include all of your taxable income for the year, even if it isn’t reported to you on an official tax form. For example, if you work for an employer, but that employer doesn’t pay you more than $600 during the year, the employer isn’t required to file a Form W-2 with the IRS or send one to you to document that income. But those wages still count as taxable income to you. Similarly, if you receive less than $10 in interest from a bank or financial institution, the bank isn’t required to send you a Form 1099-INT. But you’re still responsible for reporting that income on your taxes.
These filing thresholds are equal to your standard deduction for the year, which increased substantially in 2017 after the passage of the Tax Cuts and Jobs Act. For the 2019 tax year, the income thresholds for being required to file a tax return are as follows for most taxpayers:
- $24,400 if you are married filing jointly
- $18,350 if you are filing as head of household
- $12,200 if you are single or married filing separately
If you are over 65 or blind, your standard deduction is higher. If you’re unmarried, you can add $1,650 if you are blind or over 65. If you’re married, for each spouse who is blind or over 65, the standard deduction increases by $1,300. For example, say you’re single and 68. Your standard deduction is $13,850 instead of $12,200. So, as long as your income is less than $13,850, you don’t have to file a tax return.
Lower Thresholds for Dependents
If, however, someone else can claim you as a dependent on their tax return, the income threshold before you are required to file your own tax return is lower because the standard deduction for dependents is lower. For dependents, the 2019 standard deduction equals the larger of $1,100 or $350 plus your earned income. And, if your total income exceeds this standard deduction, you’re required to file a tax return.
For example, say that your parents can still claim you as a dependent on their tax return. If you have $500 of investment income plus $550 from your summer job, your standard deduction is $1,100, because $1,100 is larger than your earned income of $550 plus $350, or $900. But because your total income of $1,050 is less than your standard deduction of $1,100, you aren’t required to file a tax return.
Alternatively, say you have $1,000 of earned income and $2,000 of investment income. Your standard deduction equals $1,350 because your earned income of $1,000 plus $350 is larger than $1,100. However, because your total taxable income equals $3,000 and your standard deduction is only $1,350, you are required to file a tax return that year.
Filing Required If You Owe Special Taxes
Even if you don’t owe ordinary income taxes, you could still be required to file a tax return if you owe certain special taxes. For example, if you owe the additional tax penalty on a non-qualified distribution from a qualified retirement account, such as an IRA or 401(k) plan, or other tax-favored account, like a qualified tuition plan, you must file a tax return. But if you only have to file because you owe the penalty, you can simply file Form 5329 instead of a complete tax return.
For traditional IRAs, you owe a 10 percent additional tax penalty on distributions taken before age 59 1/2 unless an early withdrawal penalty exception applies. So, if your only taxable income for the entire year was a $9,000 early withdrawal from your traditional IRA, you wouldn’t be required to file a tax return under the minimum income filing thresholds because your total income wasn’t high enough. However, you would still have to file a tax return because you owe the 10 percent early withdrawal additional tax penalty on the traditional IRA distribution.
Other taxes that require you file even if your income doesn’t meet the minimum for your filing status include the alternative minimum tax, household employment taxes and Social Security tax or Medicare tax on tips you didn’t report to your employer. You must also file a return if you are subject to paying back all or a portion of a first-time homebuyer credit you received in prior years or any other recapture taxes.
Self-Employment and Church Employee Income
If you’re self-employed or are a church employee or church-controlled organization that is exempt from withholding payroll taxes, the income thresholds for filing are much lower. For self-employment income, if your net self-employment income is $400 or more, you’re required to file a return. The threshold for church employees is even lower: just $108.28.
Your net self-employment income equals your total proceeds from self-employment minus your deductible expenses, such as the cost of goods sold, advertising and supplies. For example, if you have $800 in total proceeds, but you were selling goods that cost you $500 to acquire, your net self-employment income for the year is only $300. But, if you just did consulting without incurring any expenses and were paid $500, you would need to file a return.
Receipt of Certain Distributions
You must file an income tax return if you received distributions from certain types of accounts or advance payments of certain tax credits. If you or your spouse received a distribution from a medical savings account, like a health savings account, Archer MSA or Medicare Advantage MSA, you must file a tax return. You’re also required to file a tax return if you received advance payments of the premium tax credit or the health coverage tax credit for you, your spouse or your dependent.
Failing to File Income Taxes
If you don’t file an income tax return when you’re required to submit one, you could face interest and penalties from the IRS. First, a failure to file penalty accrues at 5 percent of your unpaid taxes each month or part of a month your return is late and is capped at 25 percent. But if you’re more than 60 days late filing your return, the minimum penalty is the smaller of $135 or 100 percent of the unpaid tax.
In addition, you could also face a failure to pay penalty. This penalty accrues at 0.5 percent of the unpaid tax for each month or portion of a month your return is late and is in addition to any interest owed on the unpaid balance. However, if you requested an extension to file your tax return and by the original due date you paid at least 90 percent of what you owed, you will only owe interest, but not any penalties, on the amount of money you still owe as long as you paid it in full by the deadline for filing your tax return.
Requesting a Tax Extension
If you can’t finish your tax return by the normal April 15 deadline, you can request a six-month extension of time to file your return. The extension can’t be rejected, so as long as you file Form 4868, either online or by mail, prior to the original filing deadline, you have an extra six months to file your return. You also receive an extension of time to file if you make a payment electronically before the standard filing deadline because the IRS will treat that as a request for an extension.
However, this extension only applies to the amount of time you have to file your return, not to pay your taxes. If you owe taxes, interest will start accruing on the unpaid balance as of the regular deadline even if you have an extension. And, unless you have paid at least 90 percent of what you owe, you will also be charged late payment penalties when you ultimately file your tax return. To avoid interest and penalties, you can make a tax payment in the amount you expect to owe when you request your tax extension. If you end up owing less than you expected, you will receive the excess back as a tax refund when you file your tax return.
Filing When Not Required Benefits
Even if you’re not legally required to file a tax return, you might benefit from filing one if you’re due a tax refund. For example, if your employers withheld money from your paycheck but you don’t end up owing any taxes, the IRS doesn’t just give you the money back automatically. Instead, you must file a tax return showing that you had money withheld and didn’t owe any taxes to receive your refund.
In addition, even if you won’t owe any income taxes, you could still be entitled to a refund if you qualify for a refundable tax credit, like the Earned Income Tax Credit or the American Opportunity Credit. Many credits are nonrefundable, which means that they can’t reduce your tax liability below zero.
For example, if you have a tax liability of $500 and a nonrefundable tax credit of $750, the first $500 of your nonrefundable credit will wipe out your tax liability entirely. However, the last $250 of the credit will be wasted because you don’t have any tax liability to offset. But if the $750 credit were a refundable tax credit instead, you would not only wipe out the $500 tax liability, but you would also receive a $250 refund check.
Read More: When Can You Get That Tax Refund?
- Legal Information Institute: 26 USC 63
- Legal Information Institute: 26 USC 6012
- IRS: About Form W-2
- IRS: Eight Facts on Late Filing and Late Payment Penalties
- IRS: Topic Number 403 - Interest Received
- IRS: Taxable and Nontaxable Income
- IRS: Form 4868
- IRS: Topic No. 554 Self-Employment Tax
- Forbes: IRS Announces 2019 Tax Rates, Standard Deduction Amounts & More
- IRS. "Publication 501 Dependents, Standard Deduction, and Filing Information," Pages 2-5. Accessed March 20, 2020.
- Tax Foundation. "2019 Tax Brackets." Accessed March 20, 2020.
- IRS. "Filing Status," Page 7. Accessed March 20, 2020.
Based in the Kansas City area, Mike specializes in personal finance and business topics. He has been writing since 2009 and has been published by "Quicken," "TurboTax," and "The Motley Fool."