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This may come as a surprise to many people, but not everyone needs to file a federal tax return. The Internal Revenue Service (IRS) has threshold levels for tax return requirements just like tax brackets. Whether or not you need to file is primarily based on your level of gross income and status for the tax year. However, keep in mind that even if you aren’t required to file because of your gross income, you may still be eligible for a refund.
Key Takeaways
- Not everyone is required to file federal taxes.
- Your tax filing status and gross income are the primary factors that determine whether you need to file.
- Most states require that you file a state tax return if you file a federal one.
- You may want to file a return even if you aren’t required to do so because you could be eligible for a tax refund.
- Penalties are imposed if you are required to file but fail to do so.
Federal Filing Requirements
Gross income and tax filing status are the primary factors for determining whether or not you are required to file federal taxes. Overall, there is no minimum age set for filing taxes, so tax returns are all primarily about income and tax status. But here are a few things to consider:
- It’s important to note that 65 is a key age for seniors. Anyone who is that age has the option of using 1040-SR: U.S. Tax Return for Seniors, which is a variation of the standard Form 1040. It gives senior-related tax benefits more prominence.
- Another factor to consider is that any married individual filing separately who earns more than $5 must file a return.
Notes and updates for future years can be found in Publication 17 and Publication 501 from the IRS.
Note
In 2024, the IRS announced its Direct File pilot that will allow filers to file their 2023 tax returns online directly with the IRS for free. The pilot will be rolled out in phases and is not available to the public. It is expected that by mid-March it will be more widely available.
Source: Internal Revenue Service
Source: Internal Revenue Service
There may be some special considerations for dependents under the age of 19 or for dependents who are full-time students under the age of 24. The IRS provides the following details for dependents, also from Publications 17 and 501. You can also find more details about dependents in Publication 929.
Consult a tax professional if you’re unsure of how to file, what your tax obligations are, or what consequences you may face if you don’t file.
State Filing Requirements
The majority of U.S. states also collect income taxes, so it is important to know your state tax requirements as well. Most states generally require that you file a state tax return if you file a federal return.
If you earned income from a job in a different state than your principal residence or if you lived in multiple states during the tax year, you may need to file multiple state returns.
Specific requirements for each state can be found through TurboTax.
Tax Refunds
Many tax filers who fall below the income threshold may receive a refund through their tax filing, which can make filing beneficial. Tax refunds are available for W-2 employees and others who had tax withheld from their paychecks during the year. The government also offers a few tax credits for low-income individuals that may provide you with some money back at tax time.
If taxes are withheld from your payroll during the year and your gross income falls below the tax thresholds, you can be eligible to get that money back. As for all taxpayers, knowing the tax credits you are eligible for can also help you during tax season.
The earned income credit (EIC) is the most popular tax credit for low-income earners. You must be between 25 and 65 to qualify. The EIC varies depending on your income, tax status, and dependents, with more dependents providing you with higher credit.
- For single filers with no children, the maximum credit is $600 for the 2023 tax year
- For filers with three or more children, the maximum credit is $7,430 for the 2023 tax year
Some other credits to consider for low-income individuals include:
Note
Maintain a record of your returns for up to six years in the event that the IRS comes back for clarification or if the agency schedules you for an audit.
Penalties for Non-Filers
If your income is above the specified thresholds, you are expected to file and pay the necessary taxes to the government. If you have a substantial tax obligation and do not file, the IRS can contact you. Generally, the IRS provides you with a clear notification of your obligations. Keep in mind that all unpaid taxes accrue penalties.
Here is how they are calculated:
- A penalty of 5% of the unpaid tax
- Reduced by the failure to pay penalty for any month in which both penalties apply
- Charged each month a return is late, up to five months
- If the return is more than 60 days late, the minimum late filing penalty is 100% of your unpaid taxes or a set dollar amount that increases each year, whichever is smaller. The last noted dollar amount by the IRS was $485.
You must begin taking RMDs by April 1 from your eligible retirement accounts if you turn 73 on or after Jan. 1, 2023, according to the new SECURE Act 2.0. This bill raised the age from 72 for those who reached that age between Jan. 1, 2020, and Dec. 31, 2022. Retirees were required to take these withdrawals when they turned 70½ before 2019.
Other Considerations
In some cases, there may be additional considerations for annual tax filings. Below are some of the scenarios that may require a tax return, even if you fall below the threshold:
Do I Have to File a Tax Return?
Generally, yes, most people will have to file a tax return. The numbers vary, however. For example, if you are single and under 65 and have a gross income of $13,850 or more, you will have to file a return. If you’re married filing jointly and both spouses are under 65, you must file if you have a total gross income of $27,700 or more.
How Do I File My Taxes?
There are a few ways to file your taxes. You can fill out the appropriate forms and send them to the IRS. You can have a tax advisor do your taxes for you. The most simple and cost-effective way is to use a tax software program such as TurboTax to complete and file your taxes.
What if you Don’t File Your Taxes?
If you don’t file your taxes, you will incur a penalty. The penalty is 5% of the unpaid amount for every month the taxes are not filed up to 25% of unpaid taxes.
The Bottom Line
Understanding the IRS’s annual threshold limits is a primary factor in determining whether or not you must file a tax return each year. Most individuals will have similar tax scenarios from year to year, which can be helpful in knowing and understanding your tax obligations.
Some people may experience drastic changes from year to year as a result of a drop in income from a lost job, a marriage, new children, or even a jump in income when moving beyond dependency or higher education. The IRS provides detailed information each year for every scenario, so the key is staying up to date on the requirements relative to your personal situation.