Do I Have To File A Tax Return?

Do I have to file is a question many taxpayers ask during this time of year. But the question is more complicated than you’d think. To fully understand, consider that there are times when individuals are REQUIRED to file a tax return. And then there are times when it is to the individuals’ BENEFIT to file a return – even if they are not required to file.

When individuals are required to file:

Individuals are usually required to file a return if their income exceeds their filing threshold, as shown in the table below. The filing thresholds generally are the same amount as the standard deduction for individual(s).
Taxpayers are required to file if they have net self-employment income in excess of $400. At that point, one is required to file self-employment taxes. This is the equivalent to payroll taxes for an employee.
Taxpayers are also required to file when they are required to repay a credit or benefit. For example, taxpayers who underestimated their income when signing up for health insurance through a government Marketplace. If they underestimated and then received a higher advance premium tax credit (APTC) than they were entitled to, they are required to repay part of it. Therefore, all individuals who received an APTC must file a return. This helps reconcile the advance payments with the actual credit amount, even if their income is less than the filing threshold amount, and even if they don’t need to repay any of the advance credit.
Filing is also required when a taxpayer owes a penalty, even if the taxpayer’s income is below the filing threshold. This can occur when a taxpayer has an IRA 6% early withdrawal penalty. Or if a taxpayer receives the 50% penalty for not taking a required IRA distribution.

Filing Status	Age	Threshold
Single	Under Age 65 Age 65 or Older	$12,200 $13,850
Married Filing Jointly	Both Spouses Under 65 One Spouse 65 or Older Both Spouses 65 or Older	$24,400 $25,700 $27,000
Married Filing Separate	Any Age	$5
Head of Household	Under 65 65 or Older	$18,350 $20,000
Qualifying Widow(er) with Dependent Child	Under 65 65 or Older	$24,400 $25,700

When it is beneficial for individuals to file:

There are a number of benefits available when filing a tax return that can produce refunds even for a taxpayer who is not required to file:

Withholding refund. A substantial number of taxpayers fail to file their return even when the tax they owe is less than their prepayments. Examples include such as payroll withholding, estimates, or a prior over payment. The only way to recover the excess is to file a return.
Earned Income Tax Credit (EITC). If you worked and did not make a lot of money, you may qualify for the EITC. The EITC is a refundable tax credit, which means you could qualify for a tax refund. The refund could be as high as several thousand dollars, even when you are not required to file.
Child Tax Credit. This is a $2,000 credit for each qualifying child. A portion of this credit may be refundable for lower income taxpayers, and phases out for higher income taxpayers.
American Opportunity Credit. The maximum for this credit for college tuition paid per student is $2,500. And the first four years of post secondary education also qualify. Up to 40% of the credit is refundable when you have no tax liability, even if you are not required to file.
Premium Tax Credit. Lower-income families are entitled to a refundable tax credit to supplement the cost of health insurance purchased through a government Marketplace. If the credit is greater than the supplement provided by the Marketplace, it is refundable even if there is no other reason to file.

Don’t procrastinate – this is YOUR money after all – but time is limited. There is a three-year statute of limitations on refunds. After that – any refund due is forfeited. The statute is three years from the due date of the tax return. So, the refund period for 2019 returns, (due April 2020), expires on April 15, 2023.

For more information about filing requirements and your eligibility to receive tax credits, please contact us at (360) 778-2901, or fill out the contact form below.