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Do I Have to File a Tax Return?

By Dan Caplinger - Jan 18, 2016 at 7:42AM

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Find out if you'll have to deal with the IRS this year.

Image source: John Morgan via Flickr.

Tax time is almost here, and the annual ritual of preparing a tax return is a huge burden for millions of Americans. What many people don't realize is that some taxpayers don't actually have to file a tax return with the IRS. However, even though the rules might let you off the hook as far as having to file, you might want to file in some situations even if you're not technically required to do so. Let's take a closer look at the rules and why you might want not to follow them.

Filing requirements
Whether you need to file a federal income tax return depends on your gross income, your filing status, your age, and whether you are a dependent for tax purposes. For most taxpayers, if you add up the standard deduction and the personal exemption amount assuming that you have no children or other qualifying dependents, then the answer gives you the threshold amount below which you don't have to file. The IRS table below gives the exact dollar amounts for 2015 that apply in most situations.

Image source: IRS.

If someone else claims you as a dependent, then the filing requirements are much stricter. If you're younger than 65 and not blind, then you'll typically have to file if your earned income was more than $6,300 or if you had $1,050 in investment income or other unearned income. In addition, if your total gross income was at least $1,050 and exceeded your earned income by more than $350, you'll have to file. Higher limits apply for those 65 or older or who are blind.

Special situations
There are certain cases in which you have to file a tax return even if you don't meet the income guidelines above. The most common case involves those who are self-employed, for whom filing is required if you had more than $400 in self-employment income.

In addition, if you owe alternative minimum tax, household employment taxes, certain write-in taxes, or Social Security and Medicare tax on tips or other unreported income, you'll have to file a return. Filing is also necessary for those who received advance payments of the Obamacare premium tax credit, as do those who got distributions from health savings accounts or medical savings accounts, or who had more than minimal wages from a church that's exempt from Social Security and Medicare taxes.

Should you file?
Even if you aren't required to file, it can be smart to do so. The best reason to do so is to get money back. The most common situation is when you had taxes withheld from your paycheck or made estimated tax payments during the year. In order to claim a refund for what you paid, you'll need to file a return.

There are also many credits that can potentially put money back in your pocket if you file. The earned income credit, additional child tax credit, refundable American Opportunity education credit, health coverage tax credit, or fuel tax credit are all refundable credits, which means that even if you don't have tax liability, you can claim a refund for all or part of the unused credit amount. If you don't file, though, then you don't have an opportunity to give the IRS the information it needs to process a refund check.

No one likes to take the time to prepare and file a tax return, and the IRS guidelines above recognize that many people don't have enough income to make filing necessary. Nevertheless, you should look closely at your personal tax situation to make sure that you don't miss out on any tax benefits by choosing not to file.

Dan Caplinger has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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