Contrary to common opinion, not everyone is required to submit a tax return each year. Simply stated, if you do not owe the Internal Revenue Service (IRS) and the IRS does not owe you, you may not be compelled to file. As an example:
- You do not have to file if you are unmarried, under the age of 65, and your gross income in 2020 was less than $12,400.
- If you are married filing jointly, both spouses are under 65, and your combined income was less than $24,800, you do not need to file.
- If you are the head of the household and under the age of 65, and your gross income was less than $18,650, you do not need to file.
It is crucial to note, however, that if you do not file, you may lose out. If you have a low income, you may be eligible for tax credits that you will not be aware of until you file. That implies the IRS will compensate you.
If you are unsure whether you need to file, the Internal Revenue Service (IRS) provides a brief survey to assist you.
When You Have to File Income Taxes
If your income is below the taxable threshold, the IRS usually does not need to hear from you. These thresholds are adjusted annually for single taxpayers, married couples filing jointly, and heads of household.
Any earnings beyond such limits must be declared on a personal income tax return.
If you don’t submit your 2020 taxes, you might miss out on tax benefits. The American Rescue Plan has launched a slew of generous reimbursements and credits to help families deal with the financial fallout from the COVID-19 outbreak. If a family of four earns less than a particular amount, they will get an additional $8,200 in payments and tax credits.
- You may not be obligated to file if you do not owe the government and the government does not owe you.
- Your taxable income includes not just salaries but also interest from savings accounts, Social Security payments, and a variety of other sources.
- If you do not file, you may lose out on tax breaks provided specifically for low-income Americans.
Your Taxable Income
Don’t forget that your whole gross revenue is considered. If you have earned money, your employer should provide you with a W-4 form that details your earnings. You will obtain comparable papers if you receive Social Security benefits. If you work as a freelancer, you may get a form 1099 indicating how much you were paid.
If you work for yourself, you must file in order to record your earnings and pay any taxes owed on them. If you earn money on eBay or Etsy on an irregular basis and make more than $400 in a year, it is taxable income.
In any event, keep in mind that your gross income number includes all sources of revenue. Income includes interest payments from savings accounts, profits from stock sales, and dividends from stocks or bonds.
If you win a state lottery or get a financial present from a kind friend, the money may be taxed.
There are other big-ticket goods that must be reported, whether your income is below the threshold level or you owe income taxes on them:
- If you sold your house during the tax year, you must submit an income tax return. If this is the case, you may have a lot of expenditures to deduct from any gains from the sale, therefore now is a good time to hire an accountant to prepare your taxes.
- If you have withdrawals or excess contributions from a retirement account to declare, you must file.
- If you get tips for any services, you must file because you will owe Social Security and Medicare taxes on that money.
Individuals’ federal income tax filing deadline has been pushed out from April 15, 2021 to May 17, 2021. Tax payments may be postponed to the same day without penalty. Your state tax deadline cannot be pushed back.
When In Doubt, File
You can’t blame yourself for deciding not to file your income taxes if you don’t have to, but there are advantages to doing so.
Filing an income tax return allows you to claim a variety of tax credits, including the earned income credit, child and dependent care credit, educational tax credit, and savings credit.
These credits may be used to offset the amount of income taxes owing by those with low incomes, and in certain situations, they may even provide them with more money than if they had not paid taxes on that low income. Before deciding whether to submit an annual income tax return, it is critical to contact with a tax specialist.
This will be especially critical in 2021, after the enactment of the American Rescue Act. The Child Tax Credit has been boosted significantly to $3,600 for children under the age of six and $3,000 for older children, and it is available regardless of income. Furthermore, credits for Child and Dependent Care have been raised.
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