Who Has to File a Tax Return?


Believe it or not, some people make it through tax-filing season without any hassle. That's because the Internal Revenue Service doesn't require a return from them.

In this tax tip:

  • File a return
  • Special circumstances
  • When it pays

Unfortunately, most of us aren't that lucky. So just who has to file a tax return?

File a return
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Three things must be considered when determining whether you have to file a return: your age, your filing status and your income. Generally, once you reach a certain income level, the law requires you to file. The amounts are adjusted annually for inflation.

For 2006 tax returns, individuals younger than age 65 must file if they make at least:

  • $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 threshold amounts go up a bit for older (65-plus) individuals:

  • $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.

The earnings target is the same -- $3,300 -- for married couples filing separately, regardless of age.

Special circumstances
Speaking of age, the IRS has a filing gift for you if your 65th birthday was Jan. 1.

In most situations, your age for tax purposes depends on how old you were on the last day of the year. But when it comes to determining whether you have to file a return, the IRS says if you turned 65 on New Year's Day 2007, you are considered to be 65 at the end of 2006. That one-day grace period allows you to use the higher income thresholds to determine whether you must file a return this year. And that means you can have earned hundreds more last year and still not have to send in a return this April.

There also are separate income thresholds for taxpayers who have special filing considerations.

In some cases, widows or widowers younger than 65 who care for a dependent child can make up to $13,600 and not have to file a return. Individuals age 65 and older in this situation can earn up to $14,600. In the year a husband or wife dies, the surviving spouse still files a joint return. Then, if caring for a dependent child, he or she can use this status (rather than head of household with its lower earning limits) for two subsequent years as long as he or she does not remarry.

The IRS also has different rules for dependents who earn money. Generally, a child must file a return and pay tax due. But the amounts that trigger the filing depend on the type of income:

Earned, generally characterized as a salary, wages or tips.
Or unearned, which includes investment interest or dividends, capital gains, unemployment benefits and some trust distributions.

If a child (or any unmarried dependent younger than 65) has unearned income of more than $850, that person has to file. A return is also required if the dependent's earned income is more than $5,150.

What if a dependent has both earned and unearned income but doesn't reach the required filing amount for either? In this case, you must look at the gross income, that is, the total of both earned and unearned amounts. A dependent has to file if his or her gross income exceeds either $850 or if the dependent's earned income plus $300 is more than that $850 amount.

For example, last year Jim, a 13-year-old who lives with his parents, received $400 in interest and made $1,000 walking neighborhood dogs. Neither amount is enough in the unearned or earned categories alone to require Jim to file a return. But when Jim's $1,400 gross income is considered, he must submit a return because that amount exceeds the gross income trigger of $1,300 (his $1,000 in earned income plus $300).

Don't forget about self-employment earnings, whether you're a teenager running a lawn service or an adult with a 10-person manufacturing operation. This money counts toward determining if you have to file a return, regardless of whether it was your sole source of income or just an occasional side job to make a little extra cash. If this annual gross income amount is at least as much as the income level for your filing status, you have to send in a 1040 and Schedule C or C-EZ reporting your self-employment earnings. And remember to file a Schedule SE to pay self-employment tax if your net earnings exceed $400.

When it pays to file
For those few who don't legally have to file, it sometimes pays to send in a return anyway.

This is the case for individuals who don't earn much but might be eligible for the earned income tax credit. This benefit is available to qualified individuals even if they owe no tax, meaning they would get money back from the federal government. Many people think the credit is available only to parents. It's not. But the credit amount is greater for eligible low-wage taxpayers with children.

Plus, the IRS says that most individual taxpayers are due a tax refund. But the only way they can get that cash is to send in a 1040, 1040A or 1040EZ.

You can check out the filing requirements section of IRS Publication 17 for more details on specific filing circumstances.

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