Do I Need to File an Income Tax Return Every Year?

Filing an income tax return might feel like a yearly obligation, but it’s not always necessary. In fact, some people don’t need to file a tax return every year. It may not be required if you don’t owe the Internal Revenue Service (IRS) and the IRS doesn’t owe you. But how do you know if you’re exempt?

For example:

• Single taxpayers under age 65 don’t need to file if their gross income is below $13,850 (2023 tax year) or $14,600 (2024 tax year).
• Married couples filing jointly (both under 65) can skip filing if their joint income is less than $27,700 (2023 tax year) or $29,200 (2024 tax year).
• Head of household filers under 65 can avoid filing if their gross income is under $20,800 (2023 tax year) or $21,900 (2024 tax year).

However, even if you fall below these thresholds, failing to file could cause you to miss out on tax credits that might put money back in your pocket. If you have any doubts about whether you need to file, the IRS supplies a short survey to help you figure it out.

Key Takeaways

• If you don’t owe the IRS and the IRS doesn’t owe you, filing may not be required.
• Your gross income includes wages, interest from savings accounts, Social Security payments, and other sources.
• You could miss out on tax credits designed to assist lower-income Americans by not filing.

When You Have to File Income Taxes

The IRS typically doesn’t need a tax return if your income is below the taxable threshold. Each year, the IRS revises these thresholds for single filers, married couples filing jointly, and heads of household. Any income above those levels must be reported on a personal income tax return.

Important

The federal income tax filing due date for individuals is April 15, 2024. If you chose to file an extension request on your tax return, the due date is Oct. 15, 2024. Payment of taxes owed can be delayed to the same date without penalty. Your state tax deadline may not be delayed.

Your Taxable Income

Your taxable income includes all the money you’ve earned—whether through wages, investments, or other sources. Here’s a breakdown:

• If you’re employed, you’ll receive a W-2 from your employer detailing your earnings.
• If you’re a gig worker or independent contractor, you might receive a 1099 form that outlines your income.
• If you receive Social Security payments, you’ll get similar documentation.

If you’re self-employed, you need to file to document your earnings and pay any taxes due on them. If you sporadically make money selling stuff on eBay or Etsy and make more than $400 in a year, that’s taxable income.

In any case, remember that your gross income figure reflects all sources of money you receive. If you get an interest payment from a savings account, earn a profit by selling stock, or earn dividends from stocks or bonds, that’s income.

If you win some money in a state lottery, it may be taxable.

Other Situations That Require Filing

Even if your income is below the taxable limit, there are other situations that require you to file a tax return:

• Selling a home: If you sold a property during the year, you may need to file to report the sale and deduct related expenses.
• Retirement account distributions: You’ll need to file if you took distributions or made excess contributions to a retirement account.
• Tips and side jobs: If you received tips, you are obligated to report them, even if they are under the reporting threshold, as they are subject to Social Security and Medicare taxes.
• Other large transactions: If you made significant financial transactions, like selling large assets, filing ensures you meet any tax obligations.

When in Doubt, File

Even if you don’t have to file, there are benefits to doing so. Filing a return could open the door to tax credits like:

• Earned Income Credit (EITC)
• Child and Dependent Care Credit
• Education Credits
• Savers Credit

These credits can reduce your tax liability or even result in a refund. For people with low or moderate income, filing a return may actually yield a refund that exceeds the amount of tax they paid.

Do I Have to File a Tax Return If My Income Is Below the Threshold?

If your income is below the IRS filing thresholds for your filing status, you are generally not required to file a tax return. However, if you qualify for certain credits, filing may still benefit you.

What Happens If I Don’t File, But I Should Have?

If you fail to file a tax return when you’re required, you could face penalties, interest on unpaid taxes, or even an audit. It’s important to file if your income exceeds the thresholds or if you have other reportable transactions like selling a home or receiving tips.

What Is the Penalty for Not Filing Taxes When Required?

If you fail to file a tax return when required, the IRS may impose penalties and interest on the amount of taxes owed. The penalty for not filing is typically higher than for not paying taxes, so it’s important to file even if you can’t pay your tax bill in full. You may also be subject to a failure-to-file penalty of up to 5% of the unpaid taxes for each month the return is late, with a maximum penalty of 25%.

The Bottom Line

You don’t always have to file an income tax return if your income is below certain levels, but filing could still benefit you by unlocking tax credits that result in a refund. Before deciding whether or not to file, it’s always a good idea to consult a tax professional to ensure you are maximizing any potential tax benefits available to you.