The IRS says you “have to” file a Form 1040 or Form 1040A if your gross income exceeds the total of your standard deduction and personal exemption, unless you are filing separately.
Head of Household = $13,050 (65 or older $14,600)
Married Filing Jointly = $20,300 (one spouse 65 or older = $21,500, both spouses = $22,700)
Married Filing Separately (any age) = $3,950
There are special rules for dependents.
The IRS tells us that “gross income means all income you received in the form of money, goods, property, and services that is not exempt from tax.” This is gross rents before deducting any expenses and gross proceeds from the sale of investments before deducting the cost basis.
If your gross income falls under the filing threshold, you are still required to file a federal income tax return if you are liable for other taxes, such as –
- Employment taxes on household employees (Schedule H).
- Self-employment tax (Schedule SE); you must file a tax return if you had net earnings from self-employment (Schedule C, Schedule C-EZ, or Form K-1) of at least $400.
- The premature withdrawal 10% penalty tax and other additional taxes on IRAs and qualified retirement plans (Form 5329).
- Repayment of the First-Time Homebuyer Credit (Form 5405).
- Unreported Social Security and Medicare tax on tips you did not report to your employer (Form 4137) or on misclassified wages (Form 8919).
- Uncollected payroll taxes on taxable group-term life insurance provided by a former employer.
Even though you are not required to file a tax return, there are several reasons why you should.
Obviously if you had income tax withheld from W-2 or other income you would file a return to get a refund.
File a return if you are eligible for a refundable Earned Income Tax Credit, Additional Child Tax Credit, American Opportunity Credit, or Premium Tax Credit.
File a return if your 2014 net investment activity results in a net loss that you can carry forward to 2015, or if you have a capital loss carryover from 2013 to 2014.
And file a return to report, or carry forward, any non-deductible IRA contributions on Form 8606.
A final, and important, reason why you may want to file a tax return even if you do not have to is to start the clock running on the IRS statute of limitations. The IRS has three years from the later of the due date of a tax return, generally April 15, or the actual date the return was filed to question that return. The statute is six years if the IRS finds you failed to claim income in excess of 25% of the amount of income you reported in a tax return you filed with the IRS.
If you file a 2014 tax return on April 15, 2015, the Service has until April 15 of 2018 to audit the return and assess tax, penalty and interest. On April 17, 2018, your 2014 tax return is “closed” and the IRS can never ask you for any more tax. But if you do not file a 2014 tax return there is no statute of limitations, and the IRS can come back and assess taxes for 2014 at any time in the future.
--Written by Robert D. Flach for MainStreet