Not every taxpayer is required to file an annual federal income tax return. The IRS only requires a tax return when the income you earn during the year exceeds the standard deduction for your filing status plus one exemption amount if another taxpayer doesn’t claim you as a dependent. If your income does not exceed this threshold, then no federal tax is due.
Your filing status is the most important factor in determining whether you are required to file an income tax return. The allowable standard deduction amount for single, married and head of household filers is different. For example, a single taxpayer in 2010 can claim a standard deduction of $5,700 plus an exemption of $3,650. This means a single taxpayer only needs to file if his income exceeds the sum of these two, which is $9,350. However, because the standard deduction for a head of household taxpayer is greater, he only needs to file a tax return when he earns more than $12,050. This means that the first $12,050 a head of household filer earns is entirely tax-free.
You may find it beneficial to file a tax return to claim a refund even when the IRS does not require you to do so. This commonly occurs when you earn income during the year that is subject to federal income tax withholding, but don’t owe any tax because your annual income doesn’t exceed the sum of your exemption and standard deduction. Therefore, you are entitled to a refund for all amounts withheld from your earnings. However, the only way you can request a tax refund from the IRS is by submitting an income tax return reporting an amount due to you. Otherwise, the IRS will not figure this out for you and automatically send you a refund.
Since taxpayers who are the dependents of another taxpayer are unable to claim any exemption, the income threshold requiring the filing of a tax return is lower. For example, a dependent child who earns income during the year must file a return when it exceeds the standard deduction amount for a single taxpayer. In 2010, this is equal to $5,700. However, if that same dependent child has unearned income, such as interest and dividends, then as of 2010, he must file a tax return if the total exceeds just $950.
If you are one of the many Americans who live and work abroad, then you may be able to exclude a significant portion of your foreign earned income and housing payments from federal income tax in addition to your standard deduction and exemption. However, your requirement to file a tax return is the same as any other American taxpayer's in that a return must be filed when your income exceeds the sum of your standard deduction and exemption. Even if you know that no tax is due, your exclusions are only valid if you file a tax return.
- IRS.gov: Publication 501 - Exemptions, Standard Deduction, and Filing Information
- IRS.gov: Publication 556 - Examination of Returns, Appeal Rights, and Claims for Refund
- IRS.gov: Publication 929 - Tax Rules for Children and Dependents
- IRS.gov: Publication 54 – Tax Guide for U.S. Citizens and Resident Aliens Abroad