To put it another way, you probably aren't obligated to submit tax returns if you don't owe the Internal Revenue Service (IRS) any money and the IRS doesn't owe you any money. Take, for example:
- If you were a single taxpayer in 2020 with a gross income of less than $12,400 and were under the age of 65, you did not have to file taxes.
- If you are married and filing jointly, both of your spouses are under the age of 65, and your combined income was less than $24,800, you are exempt from submitting the tax return.
- If you are the head of the household and your gross income was less than $18,650, and you are under the age of 65, you are exempt from filing the tax return.
- It is essential to keep in mind, though, that if you don't file, you can end up losing out on anything. Whether you don't submit your taxes, you won't know if you're qualified for tax credits designed to help those with low incomes. That indicates the Internal Revenue Service will pay you.
The Internal Revenue Service (IRS) provides a quick quiz that might assist you in determining whether or not you are required to submit tax returns if you are unsure about this need.
When You Are Required to File Your Income Tax Returns
If your income is below the threshold, you must file taxes, and the Internal Revenue Service often does not need to hear from you. These thresholds are adjusted annually for those who pay their taxes as single, married, filing jointly, and head of household. Any income earned above such thresholds must be disclosed on a taxpayer's tax return. If you don't submit your taxes for 2020, you run the risk of missing out on tax benefits that are rightfully yours. The American Rescue Plan has made a range of substantial reimbursements and credits available to families to mitigate the negative impact that the COVID-19 outbreak has had on their finances. If a family of four's annual income falls below specific thresholds, the family will be eligible for additional payments and tax credits totaling $8,200.
- It is possible that you will not be compelled to file if you do not owe money to the government and the government does not owe you money.
- Your taxable income consists not only of salaries but also of interest on savings accounts, payments from Social Security, and income from various potential sources.
- If you don't submit your taxes, you could not be eligible for some tax benefits created specifically for low-income Americans.
Your Taxable Income
Remember that the total of your gross revenue is what matters. If you have earned money, your employer should provide you with a W-4 form containing information about your income. You will get similar documents if you receive Social Security benefits. If you work as a gig worker, you may be eligible to get a form 1099 that outlines the amount of money you were paid. You are required to file taxes if you are self-employed to keep track of your earnings and pay any taxes that are owed on those profits. If you sell items on websites like eBay or Etsy and generate more than $400 in a given year from those sales, the money you make is considered taxable income.
In any event, it is important to keep in mind that the total amount of your gross income includes all of the many ways you get money. An interest payment from a savings account, a profit from the sale of shares, or dividends from stocks or bonds are all examples of income. Other forms of income include royalties and bonuses. Any money you win in a state lottery or receive as a gift from a friend in cash may be subject to taxes. Other big-ticket goods need to be reported, regardless of whether or not your income is at or below the threshold level and regardless of whether or not you owe income taxes on them:
- If you sold your house during the tax year, you must submit a return of income earned because of the sale. If this is the case, you could have quite a few costs that can be deducted from the proceeds of the sale; hence, now is a good time to hire an accountant to handle your tax preparation.
- You must submit if you have payouts or excess contributions from a retirement account to report.
- If you get gratuities for any services, you must submit a tax return since you will be responsible for paying Social Security and Medicare taxes on that money.
When in Doubt, File
You cannot be faulted for choosing not to submit your income tax return if you are not required to, but there are certain advantages to doing so. When you file your income tax return, you can claim additional tax credits, such as the earned income credit, the child and dependent care credit, the educational tax credit, and the savings credit.
