Tax season opens in a few days. The Internal Revenue Service expects to process nearly 150 million individual tax returns by the time tax season wraps. Will you be filing one of those returns? And more important, do you need to?
For the 2015 tax season, you’ll report the income that you received in 2014. That includes pay received in 2014 but not pay you receive in 2015 for services performed in 2014 (you’ll report that income next year).
Not every person who received income in 2014 has to file a federal income tax return. Several factors affect whether you have to file including how much you earned – and the source of that income – as well as your filing status and your age. For most folks, this is pretty straightforward.
Using the chart below, choose your filing status, your age, and your gross income for the year. If your gross income is above the threshold for your age and filing status, you should file a federal income tax return. These rules apply if no other person claims you on their federal income tax return.
For most taxpayers, the quick “cheat sheet” formula is this: find your standard deduction and add your exemption to that number (Remember to consider the increased standard deduction for those over age 65). You can find those numbers here.
For purposes of figuring your age, if you were born before January 2, 1950, you are considered to be 65 or older at the end of 2014.
If you can be claimed as a dependent on someone else’s return, the rules are a little bit different. Here are some basic guidelines:
- For single dependents who are under the age of 65 and not blind, you generally must file a federal income tax return if your unearned income (such as from dividends or interest) was more than $1,000 or if your earned income (such as from wages or salary) was more than $6,200.
- For single dependents who are over 65 or blind, you generally must file a federal income tax return if your unearned income is more than $2,550 or if your earned income is over $7,750.
- For single dependents who are over 65 and blind, you generally must file a federal income tax return if your unearned income is more than $4,100 or if your earned income is over $9,300.
- For married dependents when either of you is under the age of 65 and not blind, you generally must file a federal income tax return if your unearned income is more than $1,000; if your earned income is over $6,200; or if your gross income was at least $5 and your spouse files a separate return and itemizes deductions.
- For married dependents when either of you is over 65 or blind, you generally must file a federal income tax return if your unearned income is more than $2,200; your earned income is over $7,400; and your gross income is at least $5 and your spouse files a separate return and itemizes deductions.
- For married dependents when either of you is over 65 and blind, you generally must file a federal income tax return if your unearned income is more than $3,400; your earned income is over $8,600; and your gross income is at least $5 and your spouse files a separate return and itemizes deductions.
Keep in mind that these rules apply to dependents who are also married, not just simply married taxpayers. For tax purposes, your spouse is never considered your dependent.
You may also have to file for other reasons. The most frequent reason for filing a federal income tax return even when you don’t meet the basic income criteria is for self-employed persons: those who are self-employed must file a federal income tax return if net earnings are at least $400. Other reasons to file include owing special taxes like a recapture tax (such as the homebuyer’s credit), alternative minimum tax (AMT), write-in taxes (including uncollected social security, Medicare, or railroad retirement tax on tips you reported to your employer or on group-term life insurance and additional tax on health savings accounts), household employment taxes, taxes on tips you did not report to your employer or on wages from an employer who did not withhold those taxes.
You also need to file if you had wages of $108.28 or more from a church or qualified church-controlled organization exempt from payroll taxes. And, of course, you may have to file if advance payments of the premium tax credit were made for you, your spouse, or a dependent who enrolled in coverage through the Health Insurance Marketplace.
Don’t forget those tax-favored accounts. You need to file a return if you received HSA, Archer MSA, or Medicare Advantage MSA distributions during 2014. If you took an early distribution from a qualified plan or one over the appropriate amount from a qualified retirement plan, or if you made excess contributions to your IRA or MSA, you’ll need to file. If you didn’t take your minimum required distribution – and you were supposed to – you’ll also need to file.
Even if you don’t need to file a federal income tax return this year, you may still want to take advantage of tax breaks and credits that might be available: popular credits include the additional child credit and the American Opportunity credit. You might also be entitled to a refund for excess withholdings or a refundable credit such as the earned income tax credit (EITC).
It’s also important to consider that these are the federal rules. The rules for your state might be very different. In my state of Pennsylvania, for example, we have no personal exemption, and thus, taxpayers are subject to tax at the first dollar. You might have to file a state (or local) income tax return even if you are exempt from federal income tax so don’t assume otherwise.