It’s critical to get all of your tax information ready as soon as possible (which means you should start now if you haven’t already).
But, depending on how much money you make and how you want to file your taxes, there’s one more item to consider: do you even make enough money to be required to file taxes?
If you’re not making a lot of money, it’s a good question to ask. You may not have to submit them if your annual income is below a specified threshold.
Even in these situations, other factors such as your health insurance, whether you’re self-employed, or if you’re eligible for an earned income tax credit may demand filing a tax return.
In this article, we’ll take an in-depth look at how much you have to earn to file taxes in the US. We’ll also look at other scenarios that affect tax filing.
Make sure you read through this article to the end, as it promises to be very informative and insightful.
The amount you must earn to avoid paying federal income tax is determined by your age, filing status, reliance on other taxpayers, and gross income.
For example, a single person under the age of 65 earning the maximum amount before taxes in 2018 was $12,000.
If your income falls below the IRS’s threshold, you may not be required to file taxes, however, it is still a good idea to do so.
What is the Bare Minimum for Filing Taxes?
You don’t have to file a federal income tax return if your gross income for the year is below a certain threshold.
However, the precise threshold is determined by a number of circumstances.
- Your filing status – For example, single filers have a lower filing threshold than married couples filing jointly.
- Age – Filing thresholds for those 65 and older are generally higher in all filing statuses.
- Dependency status – Filing thresholds for children and other dependents vary according to the sort of income they make (earned or unearned).
If you’re self-employed, you may be subject to additional rules.
How much money Do you need to make?
This depends on your filing status. If you’re planning to file as a single person, a married couple filing jointly, a married couple filing separately, or the head of household?
Let’s take a look at each one individually.
If you are single and under the age of 65, you can earn up to $12,200 in annual gross income without having to file a tax return.
If you’re 65 or older and intend to file a single tax return, the minimal amount increases to $13,850.
Head of Household:
If you make $18,350 or more and are under the age of 65, you must submit a tax return if you qualify for head of the household status and wish to file as such. If you’re 65 or older, your gross income is $20,000 per year.
If you’re an eligible widower with a dependent kid, you can file as married filing jointly, with the age disparity remaining in effect: at least $24,400 if you’re under 65, at least $25,700 if you’re 65 or older.
Married and filing separately:
Those who are married and filing separately must file a tax return even if their gross income is mere $5.
Married and filing jointly:
The amount you must earn if you’re married and filing jointly is determined by the age of both you and your spouse, but it’s usually double what a single person would need.
You must earn at least $24,400 if both spouses are under the age of 65. You must earn a minimum of $27,000 if both couples are 65 or older. Split the difference if one of you is 65 or older; you’ll need to earn $25,700.
Read Also: 50 Best Paying Apps To Earn Extra Money
The Rules for Adults and Dependent Children
When someone can claim you on their tax return, the regulations change. Even if your income is lower than that depicted in the chart above, you may be required to submit a federal tax return in this situation.
Because the IRS divides your gross income into two categories — earned income and unearned income — the thresholds appear to be different.
Earned income is money earned via working for someone else or owning a business.
Investment income, such as interest, dividends, or capital gains, is considered unearned income. It could also include debt forgiveness, taxable Social Security income, pensions, and other assets.
The threshold requirements for when a dependant must file can be complicated, so study them carefully.
They’ve usually contained in the Form 1040 instructions for each year. More information is also available in IRS Publication 501.
If you get Social Security benefits and don’t have any other taxable income, you should examine whether you need to submit a return since tax-exempt income can make your benefits taxable even if you don’t have any other taxable income.
Here’s an example of where you might need to file, even though your income is tax-exempt:
You are under 65 years old and receive $30,000 in Social Security income, plus $31,000 in tax-free interest. Your Social Security benefits will be taxed at a rate of $14,700.
You’d have to submit a tax return because this is more than your standard deduction ($12,550 for a single taxpayer in 2021).
To see if your Social Security benefits are taxable, do the following:
To any other income, including tax-exempt interest, add one-half of the Social Security income.
Then compare that amount to the filing status’s base amount. Some of your benefits may be taxable if the total exceeds the base amount.
What is the Maximum Amount a Small Business can earn before Paying Taxes?
You must pay taxes on all income, regardless of profit or loss, if you own a small business.
The tax return you must file is determined by the structure of your company. If you own a sole proprietorship, for example, you’ll include schedule C with your personal tax return.
If you earn more than $400 as a freelancer, you must also pay self-employment taxes. These levies cover Medicare and social security taxes.
If your net income is more than $400, you must file IRS Form 1040, Schedule C, and Schedule SE. You must withhold federal and state income taxes, as well as Social Security and Medicare taxes, from each employee if you have one.
Other circumstances that necessitate filing a tax return
You’ll have to file a tax return regardless of your income if:
- You earned at least $400 through self-employment.
- A health savings account, an Archer Medical Savings Account, or a Medicare Advantage MSA made distributions to you.
- On an IRA, a health savings account, or any tax-favored account, you owe taxes.
- Household employees owe you taxes.
- Alternative minimum tax is due.
- A church or church organization provided you with more than $108.28.
- You are liable for recapture taxes.
- On tips that you didn’t submit to your employer or that your employer didn’t deduct from your pay, you owe Social Security or Medicare tax.
- The premium tax credit was paid in advance for you, your spouse, or a dependent who purchased health insurance through the insurance marketplace.
- The health coverage tax credit was paid in advance for you, your spouse, or a dependent who purchased health insurance through the insurance marketplace.
- On tips you reported to your company, group-term life insurance, and additional taxes on health savings accounts, you owe uncollected Social Security, Medicare, or railroad retirement taxes.
Do you want to be exempted from filing a tax return? There’s a compelling reason why you should do it in the first place.
You might be eligible for a tax relief that will result in a refund. So, if you’re thinking about filing, consider the following:
- Your pay had income tax deducted from it.
- You paid estimated taxes or had a rebate from the previous year applied to this year’s projected tax.
- The earned income tax credit is available to you.
- The additional child tax credit is available to you.
- The American Opportunity education credit is available to you.
- You are eligible for the health-care tax credit.
- You are eligible for the federal fuel tax credit.
How Can I Lower My Taxable Earnings?
Adding to your retirement savings with standard (not Roth) IRAs and 401(k)s, up to the maximum permissible contribution, is one strategy to lower taxable income.
Another strategy to reduce your taxable income is to contribute to a Health Savings Account (HSA) or a Flexible Spending Account (FSA).
Before paying taxes, you might possibly earn thousands of dollars. Even if your income is below the cut-off level and you are not required to pay taxes, you must file taxes in order to receive a refund check.
You can utilize the information you record for seeking a tax return, including unearned income, for the next tax year. You can pay and file tax returns each year, as well as seek tax credits if applicable, by estimating your taxable income.
Talk to a tax specialist about filing your personal taxes, bookkeeping, payroll, company taxes, and incorporation in the United States if you have any queries or need tax help.
We hope you found this article very helpful. Do well to adhere to the guidelines stipulated here.
If you earned less than $5,000, do you have to file taxes?
If a filer files less than $5,000 per year, they usually don’t have to file anything with the IRS. You can also utilize your work status to see if you make less than $5,000.
If you don’t make a lot of money, do you have to file taxes?
If you don’t make much money throughout the year, it’s permissible to forego filing a return. It’s also acceptable to send a return stating that you earn less than the minimum wage.
To file a tax return, you must earn a certain amount of money.
To complete your tax returns, you should earn at least $12,400, though this number may vary depending on your age and filing status.
How Long Will I Have to Wait for a Refund?
If you need to file paper returns, you’ll have to wait six to eight weeks after the IRS receives them. Individuals who file their taxes electronically will get their returns in about three weeks.
5. When Should I File My Taxes?
Every year, you must file your tax information. You must collect all taxable activity by the yearly due date during the year. You can file for a calendar or fiscal year, depending on how you handle your finances.