Do I have to file a federal income tax return?

This article was fact-checked by our editors and reviewed by Christina Taylor, MBA, senior manager of tax operations for Credit Karma. It has been updated for the 2020 tax year.

Each year, the IRS processes well over 100 million individual tax returns.

Will you file your own taxes and be among the millions hoping for a refund? And more importantly, do you need to file a return at all?

E-filing and free online tax preparation services have made filing your own taxes easier than ever. But wouldn’t it be great if you didn’t have to file at all? Here’s how to know if you have to file a federal income tax return — and why it may be a good idea to file even if you’re not required to.

• What are the IRS filing requirements?
• What if someone else can claim me as a dependent?
• What are some other must-file situations?
• Are there reasons to file even when I don’t have to?

What are the IRS filing requirements?

Filing requirements depend on your income, filing status and age. If your gross income (including wages, retirement benefits, investment income, and income from a business or self-employment) is above the threshold for your age and filing status, you must file a federal tax return.

Here are the thresholds for 2020, based on the IRS draft of the 1040 instructions.

These numbers apply if no other person claims you on his or her federal tax return. The rules are a bit different if someone else can claim you as a dependent.

And it’s important to note that these numbers can change from year to year. The IRS hasn’t released final instructions for the 2020 Form 1040 yet, which is generally where you can find these filing thresholds. It’s possible these numbers could change when the IRS releases the final instructions. If you have to file a 2020 federal income tax return, most taxpayers must file the return by April 15, 2021.

What if someone else can claim me as a dependent?

If someone else can claim you as a dependent on their tax return, you may be required to file a return even though your income is below the threshold shown in the table above. Or if you’re the parent or guardian of a dependent who qualifies under these guidelines but can’t file their own return (for example a child), you must file a return on their behalf.

To determine if a dependent must file, you need to look not only at gross income, but also at unearned income and earned income.

Unearned income is income that comes from sources other than work. It includes interest, dividends, capital gains, social security and pension payments, distributions from a trust and unemployment compensation. Earned income includes salaries, wages, tips, income from self-employment, taxable scholarships and fellowship grants.

The table below shows the limits for how much income dependents can earn before being required to file a tax return. There are also requirements related to gross income that are a bit more complicated (more on that in the next paragraph). If your unearned or earned income exceeds the limit in each one’s respective category, then you must file a federal income tax return. Here are the 2020 thresholds for unearned and earned income, based on the 1040 draft instructions from the IRS (which could change when the final instructions are published).

There are also rules related to gross income. If you are a dependent and you earned a certain amount of gross income during the year, you could be required to file a federal income tax return. The requirements around gross income can be complicated. Check out IRS Publication 501 to learn more.

For example, imagine that you’ve been claimed as a dependent. You’re a single 67-year-old, you’re not blind and you made $2,000 in unearned income and $14,500 in earned income. You would be required to file a tax return because you made more than the $14,050 earned income limit.

Additionally, if you’re a married dependent and your spouse files a separate return on which they itemize deductions, you must file if you have gross income of at least $5. This is true regardless of your age or whether you’re blind.

What are some other must-file situations?

Self-employment is a common reason for filing a return even if you don’t meet the basic income criteria. If you had net earnings from self-employment of $400 or more, you’re required to file a return. Basically, if you owe any self-employment tax, you’re required to file Form 1040.

Here are some other reasons you’ll need to file.

• Owing special taxes. These can include the alternative minimum tax, additional taxes for nonqualified distributions from tax-favored accounts such as IRAs and HSAs, Social Security or Medicare tax on tips not reported to your employer, or employment taxes for a household employee
• You received distributions from a medical savings account or health savings account.
• You received wages of at least $108.28 from a church or organization that is exempt from employer Social Security and Medicare taxes.
• You, your spouse or your dependent received advanced payments of the premium tax credit by enrolling in coverage through the Health Insurance Marketplace.

Are there reasons to file even when I don’t have to?

In some cases, you may not be required to file, but it could be beneficial to file anyway.

Image: txupdatewhofile

For example, filing might allow you to receive a refund of any federal income tax withheld, excess estimated payments or an overpayment from last year’s return you applied to this year’s estimated tax. Or you may be able to take advantage of refundable tax credits like the additional child tax credit, the American Opportunity Tax Credit or the earned income tax credit.

You may also want to file if you received Form 1099-B (or a substitute statement). You’ll get this form if you made trades through a brokerage or made any official barter exchanges. Filing a return could keep you from getting a notice from the IRS because you’ll have already acknowledged the income and notified the IRS.

Finally, it may still be a good idea to file a tax return even if none of the above situations applies.

That’s because filing a return starts the clock on the statute of limitations. In general, the IRS can go back three to six years to audit your old tax returns unless it identifies a substantial error that can add additional years. But that time frame doesn’t start until you actually file a return.

So even if you didn’t earn enough to trigger a filing requirement, you might want to make sure the IRS can’t come back a decade later and ask why you didn’t file a return for a specific tax year.

Bottom line

Not everyone is required to file a federal income tax return every year, and if you’re one of them, you may be feeling fortunate. But if you don’t file, you could miss out on the opportunity to take advantage of refundable tax credits that could give you a refund, even if you didn’t need to pay taxes.

And of course, if you don’t have to pay tax, the last thing you want to do is pay to file a tax return.

Christina Taylor is senior manager of tax operations for Credit Karma. She has more than a dozen years of experience in tax, accounting and business operations. Christina founded her own accounting consultancy and managed it for more than six years. She co-developed an online DIY tax-preparation product, serving as chief operating officer for seven years. She is the current treasurer of the National Association of Computerized Tax Processors and holds a bachelor’s in business administration/accounting from Baker College and an MBA from Meredith College. You can find her on LinkedIn.