WHO HAS TO FILE A TAX
RETURN
Would you believe that there are people that breeze
through tax season without any stress? That's because
they are not required to file a return! Regrettably,
most consumers are not that fortunate. Who is required
by the IRS to file a tax return?
You must consider three variables when determining
whether or not you have to file a return: age, filing
status and income. Typically speaking, once a certain
income level is reached, you are required by law to
file. The amounts are adjusted every year for inflation.
Income
For 2006 tax returns, those under the age of 65 must
file if they earn a minimum of:
-- $8,450 as single filers
-- $10,850 as head of household filers
-- $16,900 as married couples filing jointly and both husband and
wife are younger than 65.
The earnings limits are higher for those 65 and older:
-- $9,700 for single filers
-- $12,100 for head of household filers
-- $17,900 for married couples filing jointly where one spouse is
age 65 or older
-- $18,900 for married couples filing jointly where both partners
are 65 or older
Age
In most cases, your age for tax purposes will depend on
how old you were on the last day of the year. However,
according to the IRS, if you turned 65 on New Year's Day
2007, you are considered to be 65 at the end of 2006.
This allows those falling into this category to use the
higher income thresholds when determining if they should
file a return or not. Ultimately, you can end up saving
several hundred dollars if you do not have to file!
The income thresholds for taxpayers who have special
filing considerations are also different.
-- $13,600 for widows or widowers younger than 65 who care
for a dependent child.
-- $14,600 for individuals age 65 and older in the same
situation as above situation.
** A surviving spouse is still entitled to file a joint
return in the year their wife or husband has died. Also,
if caring for a dependent child, they can utilize this
this status (as opposed to head of household and its
lower earning limits) for two succeeding years as long
as they do not remarry.
There are also rule for dependents that earn income. A
child must typically file a return and pay taxes.
However, the amounts that trigger the filing will depend
on what type of income.
-- Earnings are characterized as as a salary, wages or tips.
-- Or unearned, which includes capital gains, investment
interest or dividends, unemployment benefits and/or some
trust distributions.
Any child, or unmarried dependant under the age of 65,
that has generated at least $850 in unearned income must
file a return. If the earned income is greater than
$5,150, a return must be filed.
Suppose a dependant has both unearned and earned
incomes, but does not arrive at the mandated filing
amount for either. If this is the case, the gross income
must be analyzed. A return must be filed by a dependant
if their gross income exceeds either $850 or if the
dependent's earned income plus $300 is greater than the
$850 amount.
If you are self-employed, you need to consider the
earnings generated when determining if you have to file
taxes, no matter how you old you are.
When it makes sense to
file
Even if you are not obligated by law to file a
return, it sometimes make sense to do so anyway.
This is true for consumers that do not earn much income
but are eligible for an earned income tax credit. Even
if you do not owe any taxes, you still may be eligible
to receive money back from the federal government. These
credit is not only available for older people, but for
anyone over the age of 18. The credit amount is going to
be greater for eligible low-wage taxpayers with
children.
According to the IRS, most individual taxpayers are due
a tax refund. However, the only way for them to collect
is by sending in a
1040,
1040A or
1040EZ.
For more details on the filing requirements, please
visit the section of
IRS Publication 17.
