Please ensure Javascript is enabled for purposes of website accessibility

Do I Need to File a Tax Return?

By Kailey Hagen - Jan 25, 2020 at 4:30PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The answer may surprise you.

Believe it or not, it is possible -- and legal in some circumstances -- to skip your taxes, even if you earned money this year. The IRS won't charge you penalties or send you letters in the mail. You just get to go on living your life. The catch is, not everyone can do this.

It all depends on your gross income -- that is, money you earn from a job, self-employment income, investment income, retirement income, and any other source that is not tax-exempt -- and your tax filing status for the year. I explain all of this in more detail below, along with why you might still want to file a tax return even if you don't have to.

Woman doing financial calculations

Image source: Getty Images.

It's all about the standard deduction

Every tax filing status has a standard deduction. This is a set dollar amount that everyone with that tax filing status gets to write off, unless they choose to itemize deductions. Here are the standard deductions for each tax filing status for the 2019 tax year:

Tax Filing Status

Standard Deduction for 2019 Tax Year

Single

$12,200

Married Filing Jointly

$24,400

Married Filing Separately

$12,200

Head of Household

$18,350

Data source: IRS.

If you're a single adult and your gross income was $40,000, you would subtract the $12,200 standard deduction for your tax filing status from your income to get $27,800. This is the amount you would owe income tax on, unless you qualified for other deductions that reduced your taxable income further. But now let's say that your income was only $12,000 for the year. Well, in that case, you wouldn't technically have to file a federal tax return because the standard deduction is more than your income. If you were to subtract the standard deduction from your income, you would get a negative value, which means there isn't any money left that the government can tax.

Adults 65 or older may add another $1,300 to their standard deduction if married filing jointly, or $1,650 if using one of the other tax filing statuses. If you're married filing jointly and both individuals are over 65, you may add another $2,600 to your standard deduction. Blind individuals may also add $1,300 to their standard deduction if married filing jointly, or $1,650 if using one of the other tax filing statuses. Adults who are both blind and over 65 may claim both of these for a total boost of $2,600 if married filing jointly or $3,300 if using another tax filing status. Keep this in mind when trying to determine whether you need to file a tax return this year.

Why you might want to file a federal tax return anyway

Even if you don't legally have to file a tax return this year, it still might be in your best interests to do so. If you're working a job where you have taxes automatically withheld from your paychecks, filing a tax return is the only way to get back the funds you already paid in. The government won't come after you if you choose not to file a tax return, but it's also not going to chase you down to give you the money it owes you if you're not going to take the time to file a return.

Filing a tax return also makes sense if you believe you'll qualify for refundable tax credits, like the Child Tax Credit or the Earned Income Tax Credit. Tax credits are a dollar-for-dollar reduction of your tax bill, and refundable tax credits are the most valuable because if your tax liability drops below zero, the government will refund you the extra. So if your income is below the standard deduction for your tax filing status and you qualify for a $1,000 refundable tax credit, it's definitely in your best interest to file a tax return because you'll get that $1,000 back in the form of a refund.

What about state taxes?

Every state has its own laws surrounding taxes, so check with your Department of Revenue to see whether you must submit a state tax return based on your income. It's important to check rather than assuming that you don't have to file a state tax return because you don't want to run into penalties. Just like with your federal taxes, it might be smarter to file a return even if you're not required to if you've had state taxes withheld from your paycheck or you believe you qualify for some refundable tax credits.

Skipping taxes might sound more appealing than dealing with all that paperwork, but it could come back to haunt you, so think that decision through carefully. When in doubt, it's better to just file your taxes anyway to be safe.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
336%
 
S&P 500 Returns
115%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 06/28/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.