Do I Need to File a Tax Return?
Understanding whether you need to file a tax return is crucial to ensure you comply with tax laws and avoid potential penalties. Factors such as your age, disability, income, and filing status all play a role in determining your tax filing requirements. In this comprehensive guide, we’ll discuss different filing statuses, examples of various tax situations, and other relevant information to help you determine if you need to file a tax return.
2022 Filing Requirements
(for taxes due in April 2023)
| Filing Status and Age | Minimum TI Requirement |
|---|---|
| Single (under age 65) | $12,950 |
| Single (65 and over) | $14,700 |
| Joint (under age 65) | $25,900 |
| Joint (only one 65 and older) | $27,300 |
| Joint (both 65 and older) | $28,700 |
| Head of household (under age 65) | $19,400 |
| Head of household (65 and over) | $21,150 |
| Married filing separately (MFS) | $5 |
Filing Status Types
Single
This status typically applies if you are unmarried, divorced, or legally separated under state law.
Married Filing Jointly
If you’re married, you and your spouse can file a joint tax return.
- Common law marriage recognized
- Separated under a temporary order
- Legally married same sex couples (Windsor decision)
If US citizen or resident alien married to a nonresident alien, he/she is not considered married.
Head of Household
In most cases, this status applies if you are not married, but there are some special rules.
- Unmarried or legally separated on December 31
- Must have a qualifying individual (except: Qualifying individual can be used by a former spouse, but if a child lives with a taxpayer, head of household is allowed)
- A dependent parent does not have to live with the taxpayer
- The goal for divorced parents is to both be head of household
- Adult non-dependent child: Not allowed
- Qualified dependent must live more than 50% of the time in the taxpayer’s household
- Dependent can’t provide more than 50% of own support
Example 1: Head of Household or Not?
John is 28 and single. He maintains his own needs. His brother, who is 15, lives with him all year. John’s brother has a gross income of over USD 4,400. However, John maintains over half of his support.
John can claim head of household filing status. His brother stays in his home over half of the filing period. Also, his brother is under age 19, and meets the relationship test, and regarded as a qualified child.
Example 2: Supporting a Parent and Head of Household status?
Janice is single and supports, and pays living expenses of his father in another city. Janice pays over half of her father’s support. Janice’s father receives USD 32,000 social security benefits and USD 3,300 pension income per year. He also receives interest income of USD 750.
Janice can claim head of household filing status because her father is a qualified dependent. Generally, a parent does not have to live in the same household, and his/her net worth is not considered as a factor.
Qualified dependent must pass gross income of USD 4,400 to be taxed. In our case, her father’s social security benefits are not taxed, and his taxable gross income is less than the minimum amount.
Surviving Spouse
If you are the surviving spouse, the year your spouse died is the last year for which you can file a joint return with that spouse. After that, if you don’t remarry, you must file as a qualifying widow(er), head of household, or single.
- File as surviving spouse for the two subsequent years
U.S. Citizen or Resident Alien Married to Nonresident Alien
If US citizen or resident alien married to a nonresident alien, he/she is not considered married.
- Is eligible to file as head of household
- May elect to treat the nonresident spouse as a U.S. resident and file a joint return
Innocent Spouse Relief
Many married taxpayers choose to file a joint tax return because of certain benefits this filing status allows them. When filing jointly, both taxpayers are jointly and severally liable for the tax and any additions to tax, interest, or penalties that arise from the joint return even if they later divorce. In some cases, however, a spouse can get relief from being jointly and severally liable.
- Spouse didn’t know and didn’t have reason to know of the understatement
- Two-year election deadline
Example 3: Innocent Spouse Relief Start Date?
IRS sent levy notice to both husband, and wife on February 5, 2022. IRS levies the husband’s employer on May 15, 2022. IRS also levies the wife’s employer on June 14, 2022.
The two-year statute start date for innocent spouse relief is February 5, 2022, in our example.
Married Filing Separately
A married couple can choose to file two separate tax returns. This may benefit you if it results in less tax owed than if you file a joint tax return. You may want to prepare your taxes both ways before you choose.
Generally, a separate tax return is used for minimizing Adjusted Gross Income floors for 7.5% for medical expense, and 10% for qualified casualty losses and avoiding Section 1231 gain or loss netting.
Filing Status Amendments
IRS allows you to change your filing status for a tax return you’ve already filed if no more than three years have passed since the original tax filing deadline.
You cannot change from married filing jointly to married filing separately after the original April 15 filing deadline.
Dependency Tests
Qualifying Child
- Relationship — includes siblings and their children
- Age — 19 (24 for full-time students)
- Child must live with you (or your spouse if you file a joint return) in the United States for more than half of the year
- Child has not provided more than half own support
- The dependent is younger than the taxpayer
- Has not filed a joint return with their spouse except to claim a complete refund
- Residency test — Time at school, hospital, military or prison not included
Example 4: Eligible Dependent or Not?
George is 16 and lives with his mother. He gets 1/3 support from his mother, 1/3 from a grandparent, and 1/3 from a trust. George’s mother does not provide more than 50% of George’s support, and George does not provide more than 50% of his own support.
George’s mother may files as head of household with George as the qualifying dependent.
Tiebreaking Rules
If eligible taxpayers cannot agree on who qualifies to claim the benefits for a dependent, the following rules apply:
- Parent before grandparent
- If non-parent is claiming the dependent, must have AGI higher than the parents
- Individual with whom the child resided for the longest period of time during the year. Count nights for determining residence.
- In the case of two parents with equal custody nights, the dependent goes to the parent with the highest AGI
- Dependent must be younger than the taxpayer
- Dependent cannot file MFJ return except for complete refund
Example 5: Tiebreaker Rules
John and his mother, Amy, reside with Amy’s father. Amy, her father, and John’s father are eligible to use John as a qualifying dependent.
Amy’s father may claim John if his AGI is greater than that of either Amy or John’s father.
Qualifying Relative
- Relationship or member of household
- Gross income test — Less than USD 4,400 for 2022
- Support test
- Not a qualifying child
- Residency test
Example 6: Qualifying Relative
Henry’s father received USD 22,000 of Social Security benefits, USD 3,000 of pension income, and had USD 1,000 of interest income.
Henry’s father passes the gross income test for being a qualifying relative because Social Security benefits are not taxable.
Henry must provide more than 50% of his father’s support to claim him. He must provide at least USD 26,001 of support.
Even if you aren’t required to file a federal tax return, you may want to do so to take advantage of tax breaks and credits. Additionally, check your state tax filing requirements, as you might need to file a state or local tax return even if you don’t have to submit a federal tax return.
In conclusion, understanding your tax filing requirements is essential to stay compliant with tax laws. Familiarize yourself with the different filing statuses, dependency tests, and other relevant factors to ensure you file your tax return accurately and on time.
Sources: IRS and AICPA materials are used for this post.
Author
Mehmet E. Akgul
Covers investment, financial analysis and related financial market issues for BrightHedge. He has extensive experience in portfolio management, business consulting, risk management, and accounting areas.