Tax Education Series #5: Do You Need to File an Income Tax Return Every Year?

Hello everyone,

Here is another frequently asked question: “Do you need to file an income tax return every year?”

The short answer is it depends on your income level, filing status, and age.

For example, if you are single, not a dependent on someone else’s return, and made less than $10,350 (in 2016), you do not have to file an income tax return.

That is because the government cannot tax you below a certain threshold income level; in this case, the threshold is $10,350 which is made up of two parts.

• The standard deduction (which every taxpayer is entitled to) of $6,300
• one personal exemption of $4,050 (if you are not claimed as a dependent by someone else)

Things to consider:

As with most tax codes, there are certain exceptions to consider. So let’s explore.

1. If you are a dependent on someone else’s return, different rules apply to determine whether you need to file a return. First, the threshold comes down t​o 6,300, which is equal to the standard deduction only. The personal exemption of 4,050 cannot be claimed by you, since someone else already did on their return where you show up as a dependent. Second, the threshold goes down even further if you have unearned income (such as interest and dividends) to 1,050 dollars. That means that if you are a dependent and received more than $1,050 in dividends from stock investments, you need to file a tax return.

2. On the other hand, if you are at least 65 years old and receive Social Security income, your threshold will be higher before you need to file a return. If you are single, the threshold is $11,850, and normally you would not include Social Security income in the threshold calculation. But over a certain limit, IRS will start taxing you on a portion of Social Security.

3. One things to remember when calculating the threshold income levels in all scenarios; you do not include tax-exempt income in the equation. For example, if you received interest from a municipal bond investment, that is tax-exempt income and does not apply to the threshold.

Finally and most importantly, even if you don’t need to file a tax return, you may still want to because you may be eligible to get a tax refund! For example, let’s say that you earned 10,000 dollars working for a company and the company withheld 2,000 in federal taxes from your paycheck. If you are single and not claimed as a dependent by another taxpayer, you are entitled to receive all 2,000 back as a refund! That is because the IRS cannot tax you for any amount below the threshold of $10,350 (if single and not a dependent). But you must file the return to get the refund; sorry, the IRS will not issue the refund if you don’t file!

Hope that helps to understand this topic. As always, feel free to reply to this post with any questions and I can try to help you. Thanks for reading!

About the Author : I am a cryptocurrency enthusiast and a U.S. Certified Public Accountant with over 15 years of experience in accounting, taxation, and finance.

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