Do You Need to File Taxes? Here’s What You Need to Know

Understanding the IRS Income Thresholds for Filing Taxes

If you are wondering whether you need to file a tax return, the first thing you need to know is whether your income exceeds the threshold set by the IRS. The income threshold varies depending on your filing status, age, and other factors.

For tax year 2021, the following income thresholds apply:

• Single filers under age 65: $12,550
• Single filers age 65 or older: $14,250
• Married filing jointly under age 65: $25,100
• Married filing jointly, one spouse age 65 or older: $26,400
• Married filing jointly, both spouses age 65 or older: $27,700
• Head of household under age 65: $18,800
• Head of household age 65 or older: $20,500

If your income is below these thresholds, you generally do not need to file a tax return. However, there are some exceptions. For example, if you earned income from self-employment, you may need to file a return even if your income is below the threshold. It’s important to review the IRS guidelines or consult with a tax professional to determine your filing requirements.

Income Sources That May Require You to File Taxes

Even if your income falls below the IRS threshold for filing taxes, you may still need to file a return if you have certain types of income. Here are some common examples:

• Self-employment income: If you earned more than $400 from self-employment, you generally need to file a tax return and pay self-employment taxes.
• Investment income: If you received more than $1,100 in interest, dividends, or capital gains, you may need to file a tax return and report this income.
• Social Security benefits: If you received Social Security benefits during the year, you may need to file a return if your total income exceeds a certain threshold.
• Unemployment compensation: If you received unemployment benefits during the year, this income is generally taxable and may require you to file a return.
• Rental income: If you received rental income from a property you own, you may need to file a tax return and report this income, even if your total income is below the IRS threshold.

These are just a few examples of income sources that may require you to file a tax return. It’s important to review the IRS guidelines or consult with a tax professional to determine your filing requirements based on your specific situation.

When Filing Taxes Can Be Beneficial Even If You Don’t Meet the Threshold

Even if your income is below the IRS threshold for filing taxes, there are some situations where it may still be beneficial to file a return. Here are a few reasons why:

• Claiming tax credits: Even if you don’t owe any federal income tax, you may be eligible for certain tax credits, such as the Earned Income Tax Credit (EITC) or the Child Tax Credit. These credits can provide a refundable tax credit, which means you could receive money back even if you didn’t owe any tax to begin with. However, you must file a tax return to claim these credits.
• Qualifying for government benefits: Some government benefits, such as Medicaid or the Supplemental Nutrition Assistance Program (SNAP), may require you to provide proof of your income by filing a tax return.
• Establishing a tax record: If you are not required to file a tax return but may need to in the future, filing a return can establish a tax record and make it easier to file future returns.

It’s important to consider your individual circumstances and consult with a tax professional to determine whether filing a tax return could be beneficial for you, even if your income is below the IRS threshold.

Common Tax Credits and Deductions That Can Reduce Your Tax Liability

If you do need to file a tax return, there are a variety of tax credits and deductions that can help reduce your tax liability. Here are a few common ones to keep in mind:

• Standard deduction: This is a flat amount that you can subtract from your income before calculating your tax liability. For tax year 2021, the standard deduction is $12,550 for single filers and $25,100 for married filing jointly.
• Itemized deductions: These are deductions that you can take if your expenses in certain categories exceed the standard deduction. Common itemized deductions include state and local taxes, mortgage interest, and charitable contributions.
• Retirement account contributions: If you contributed to a traditional IRA, 401(k), or other qualified retirement account, you may be able to deduct some or all of your contributions from your taxable income.
• Education credits: If you paid for higher education expenses, you may be eligible for tax credits, such as the American Opportunity Tax Credit or the Lifetime Learning Credit.
• Child and dependent care credit: If you paid for child care or care for a dependent so that you could work, you may be eligible for this credit.

These are just a few examples of tax credits and deductions that can help reduce your tax liability. It’s important to review the IRS guidelines or consult with a tax professional to determine which credits and deductions you may be eligible for based on your specific situation.

How to File Taxes and Get Help If You Need It

If you determine that you need to file a tax return, the next step is to actually file it. Here are some key things to keep in mind:

• Choose a filing method: You can file your taxes electronically using tax software, or you can file a paper return. Electronic filing is generally faster and more convenient, and you may be able to use free tax software if you meet certain criteria.
• Gather your documents: You will need to have certain documents and information ready to file your return, such as your W-2, 1099 forms, and Social Security number.
• Double-check your return: Before you submit your return, make sure to double-check all of your information for accuracy and completeness.
• Pay any taxes owed: If you owe taxes, you will need to make a payment by the tax deadline. If you cannot pay in full, you may be able to set up a payment plan with the IRS.
• Get help if you need it: If you have questions or need assistance with your taxes, there are a variety of resources available. You can consult with a tax professional, use IRS resources such as the Taxpayer Advocate Service, or seek assistance from community organizations.

Filing taxes can be a complex process, but with the right resources and assistance, you can navigate it successfully.