Does everyone with earnings have to file a tax return? What about an elderly parent who gets a Social Security check but has no other income, or a teenager whose sole earnings are from occasional or seasonal part-time work?
More than 150 million 2018 tax returns were filed last year. Who has to file and who doesn’t? The answer depends on gross income, filing status, age and whether you are a dependent. These terms are defined in IRS publication 501, “Dependents, Standard Deduction, and Filing Information for Use in Preparing 2019 Returns” at irs.gov/pub/irs-pdf/p501.pdf
Before going any further, people who are married filing separately don’t get a break-even if they meet the other factors. Another hard stop is earning tax-exempt interest. That is, if you have any tax-exempt interest of any amount, you’ll have to file a tax return.
The earnings cutoffs depend on filing status and age. For people under age 65, a single person does not need to file a tax return if his gross income was less than $12,200 in 2019; the figure is $18,350 for head of household and $24,400 for married filing jointly.
Income caps are slightly higher for people 65 or older. A single person 65 or older does not need to file a tax return if his gross income was less than $13,850 in 2019; $20,000 for head of household and $27,000 for married filing jointly.
Complications arise when getting into the details of gross income, especially when Social Security payments are involved. So, it’s best to use a tool that takes you through a list of questions that you can apply to your particular situation. It’s called the Interactive Tax Assistant tool, which you can find on the IRS website at irs.gov/help/ita/do-i-need-to-file-a-tax-return.
Some of the questions are easy to answer, such as date of birth, but some are harder to answer, such as what is your filing status? When an answer takes some knowledge, you can click a link to a pop-up box for an explanation. You don’t need to input any confidential data. Importantly, once you complete the questions, you can print out your answers and the conclusion reached by the tool (yes, you do have to file a return, or no, you don’t). You can also do what-if scenarios that test different answers.
Let me get you started.
To begin, you’ll choose the tax year (2019), then, your marital status on the last day of 2019. Your options are single, unmarried or legally separated; married; widowed (spouse died during the tax year); widowed (spouse died before the tax year).
Next, you’ll choose your filing status. Your options are single, head of household or “I don’t know.” If you don’t know, the tool takes you through a series of questions that brings you to a conclusion. For example, did you pay more than half the cost of keeping up a home in which you lived, or costs for keeping up a home for a parent that did not live with you? If yes, you add the person who lived with you or for whom you provided support for more than one half of the year. There is a drop-down list to choose from, for example, brother, stepchild, parent or grandparent.
If you are married, for example, the tool asks you whether you intend to file a joint return with your spouse. If the answer is no, then the tool tells you that you must file a tax return. If the answer is yes, you are asked whether either spouse received Social Security benefits in 2019. You’ll be asked to input data from IRS Form SSA-1099 (specifically Box 5 “Net Benefits for 2019”), totaling this figure for both spouses.
The tool then takes you through a series of questions about previous tax returns and credits claimed. If you don’t recognize the credit or did not claim it, the answer is “no.” The list includes health coverage tax credits previously claimed; health insurance purchased through a marketplace; federal tax on fuels; and the American opportunity credit.
As to tax, the tool requests information about federal income tax withheld, estimated tax payments and previous tax overpayments. Again, you’ll be taken through definitions if you need them, but pretty much, you will no doubt recognize whether any of these are familiar to you.
I’ve provided a complete report for a hypothetical couple and another for a college student earning $10,000. To view them, go to juliejason.com and click on “blog.”
To hedge your bets, talk with a CPA or tax accountant before making a final decision on whether you need to file a tax return. If you are on the fence, file. Why? To avoid penalties. There are three types of filing penalties: failing to file; failing to pay taxes; and failing to pay proper estimated taxes. For more on penalties, see irs.gov/businesses/small-businesses-self-employed/understanding-penalties-and-interest.