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Happy New Year to all of you! May 2020 be a year of prosperity, happiness and peace in your homes and in the world!
Of all the significant dates that mark the course of the year, April 15 is a deadline few people are looking forward to.
Yet, tax time doesn’t have to be a dreadful time. In fact, for some of you it doesn’t even need to be at all as not everyone is required to file an income tax return each year.
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Generally, if your total income for the year doesn't exceed certain thresholds, then you don't need to file a federal tax return. The minimum income required to file a tax return for tax year 2019 depends on your income, age, and filing status during the tax year. The minimum income levels for the various filing statuses are listed in the table below.
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* If you were born on January 1, 1955, you are considered to be age 65 at the end of 2019.
**Gross income means all income you received in the form of money, goods, property, and services that isn't exempt from tax, including any income from sources outside the United States or from the sale of your main home (even if you can exclude part or all of it).
***If you didn't live with your spouse at the end of 2019 (or on the date your spouse died) and your gross income was at least $5, you must file a return regardless of your age.
If you earned below the minimum income for your filing status and you are not required to file a federal tax return, you must still file a return if any of the conditions below apply for 2019:
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| 1. |
You owe any special taxes, including:
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- Alternative minimum tax;
- Additional tax on a qualified plan, including an IRA, or other tax-favored account (but if you are filing a return only because you owe this tax, you can file Form 5329 by itself);
- Household employment taxes (but if you are filing a return only because you owe this tax, you can file Schedule H by itself);
- Social security and Medicare tax on tips you didn't report to your employer or on wages you received from an employer who didn't withhold these taxes;
- Recapture of first-time homebuyer credit;
- Write-in taxes, including uncollected social security and Medicare or RRTA tax on tips you reported to your employer or on group-term life insurance and additional taxes on health savings accounts.
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| 2. |
You (or your spouse, if filing jointly) received health savings account, Archer MSA, or Medicare Advantage MSA distributions.
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| 3. |
You had net earnings from self-employment of at least $400.
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| 4. |
You had wages of $108.28 or more from a church or qualified church-controlled organization that is exempt from employer social security and Medicare taxes.
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| 5. |
Advance payments of the premium tax credit were made for you, your spouse, or a dependent who enrolled in coverage through the Marketplace. You, or whoever enrolled you, should have received Form(s) 1095-A showing the amount of the advance payments.
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| 6. |
Advance payments of the health coverage tax credit were made for you, your spouse, or a dependent. You or whoever enrolled you should have received Form(s) 1099-H showing the amount of the advance payments.
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| 7. |
You are required to include amounts in income under section 965 or you have a net tax liability under section 965 that you are paying in installments under section 965(h) or deferred by making an election under section 965(i). (Section 965 requires United States shareholders to pay a transition tax on the untaxed foreign earnings of certain specified foreign corporations as if those earnings had been repatriated to the United States.)
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When determining whether you need to file a return and you receive Social Security benefits, you need to consider tax-exempt income because it can cause your benefits to be taxable even if you don't have any other taxable income. To figure out if your Social Security benefits are taxable, add one-half of the Social Security income to all other income, including tax-exempt interest, then compare that amount to the base amount for your filing status. If the total is more than the base amount, some of your benefits may be taxable.
There are special rules that apply for children and other dependents. Those claimed as dependents on someone's tax return are subject to different IRS filing requirements, regardless of whether they are children or adults. Since a dependent is unable to claim their own exemption, a tax return is necessary when their earned income is more than the standard deduction for a single taxpayer. However, the threshold decreases to more than $1,000 when the dependent's income is unearned, such as from dividends and interest.
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If you are in any of the above categories and not required to file a federal tax return, you may still want to do so for any of the reasons stated below.
Even if your income is below the thresholds mentioned earlier, you may be entitled to receive a refund through your tax filing. Refunds are available for W-2 employees and others who have had tax withheld from their paycheck during the year.
There are also a few refundable tax credits that may provide you with some money back at tax time. (A refundable credit is a tax credit that is refunded to the taxpayer no matter how much the taxpayer's liability is.)
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If you qualify, you must file a return to receive the refundable Earned Income Tax Credit.
- Those entitled to claim education credits, must file to be refunded the American Opportunity Credit.
- If you have a qualifying child but owe no tax, you can file to be refunded the Additional Child Tax Credit.
- You must file a return to be able to claim the refundable Health Coverage Tax Credit.
- If you adopted a qualifying child, you must file to claim the Adoption Tax Credit.
- If you overpaid estimated tax or applied a prior year overpayment to this year, you must file to receive the refund.
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Are you still not sure whether you should file a tax return this year? Remember you don’t have to fight this battle on your own, contact a good tax professional who will offer you the best option for your specific financial situation and take care of all your dealings with the IRS.
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