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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.


 

 

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