As tax season arrives, there can be a lot of questions in people's minds. If your income situation has changed since last year, you may even wonder if you need to file federal income taxes at all. To help answer this question, here is a handy guide to deciding.
Who Could Be Affected?
Since the vast majority of U.S. citizens and residents must file taxes each year, it can seem strange to contemplate not doing so. But, there are a number of situations in which you can legitimately skip it for a year or more. For example, if you find yourself in any of the following situations:
- Full-time students earning little money
- Temporarily unemployed workers, with or without benefits
- Seasonal workers
- Retired workers
- Self-employed persons with a new business or a business loss
- Stay-at-home single parents
Are You Required to File?
If you may fit into one of these categories or a similar situation, the first question to answer is whether you are obligated to file taxes. Generally, you must file if you have reached one of two income thresholds: For employees, this threshold is $10,350 for single filers and $20,700 for married filers. Other taxpayers may have a slightly different threshold. For self-employed persons, the threshold is much lower: $400 of self-employment income, regardless of receiving a Form 1099 or not.
Add up your total income and determine if you must file based on these numbers. If not, determine if you must file due to being subject to any special circumstances. For example, if you received federal assistance paying premiums through the health insurance marketplace, you must reconcile these payments through filing. Other situations may include receiving an IRA or Health Savings Account distribution.
Should You File?
Even if you aren't required to file taxes, you may benefit from doing so. There are several refundable credits that you may benefit from, including the following:
- Earned Income Tax Credit (low income credit)
- Additional Child Tax Credit (credit for dependent children)
- American Opportunity Tax Credit (education credit)
If you may qualify for any of these credits, it's a good idea to claim them. In addition, you will likely want to file taxes to request a refund of any income taxes that were withheld from your paycheck or Social Security payments.
If you're still unsure if you should be filing federal or state income taxes, it may be a good idea to consult with a qualified accountant like Alexander & Associates CPA.