Only individuals whose incomes exceed certain levels must file tax returns. However, income isn’t the only factor involved. Numerous other circumstances can affect your filing status, too, and there are some situations in which you’d want to file even if you’re not required to.
Eligibility for the many benefits in the American Rescue Plan Act (ARPA), signed into law March 11, 2021, require filing a tax return, because the thresholds for eligibility were temporarily lowered for the 2021 tax year.
ARPA temporarily eliminates the $2,500 minimum income to be eligible for the child tax credit and temporarily expands the credit to up to $3,600 for children below age six. While these changes only apply to the 2021 tax year, you don't have to wait until 2022 to get the benefit. Families who have filed a recent tax return can receive half of the 2021 Child Tax Credit through periodic payments (beginning in July of 2021) and can claim the other half when they file their 2021 taxes in 2022.
Four Factors That Impact Income Thresholds
Four factors determine whether you must file, and each circumstance has its own gross income threshold. The four factors are:
- Whether someone else claims you as a dependent
- Whether you're married or single
- Your age
- Whether you're blind
Some of these factors can overlap, which can change the income thresholds for required filing.
Minimum Gross Income Thresholds for Taxes
The IRS defines "gross income" as anything you receive in the form of payment that's not tax-exempt. Gross income can include money, services, property, or goods. The thresholds cited here apply to income earned in 2020, which you must report when you file your 2020 tax return in 2021.
In a practical sense, the limits are equal to the year’s standard deduction, because you can deduct this amount from your gross income and only pay income tax on the difference. You would owe no tax and would not be required to file a return if you’re single and earned $12,400 in 2020, because the $12,400 deduction would reduce your taxable income to $0. But you would have to file a tax return if you earned $12,401, because you’d have to pay income tax on that additional dollar of income unless you had applicable tax credits you could use.
As of the 2020 tax year, these figures are:
|Single under age 65||$12,400|
|Single age 65 or older||$14,050|
|Married filing jointly, both spouses under 65||$24,800|
|Married filing jointly, one spouse age 65 or older||$26,100|
|Married filing jointly, both spouses 65 or older||$27,400|
|Married filing separately, any age||$5|
|Head of household under age 65||$18,650|
|Head of household age 65 or older||$20,300|
|Qualifying widow(er) under age 65||$24,800|
|Qualifying widow(er) age 65 or older||$26,100|
Qualifying Rules for 2020 Standard Deductions
There are various rules and requirements you have to meet in order to file in some of the situations mentioned in the table above.
Head of Household
You must be unmarried on the last day of the tax year, pay more than half the cost of maintaining the home, and have a qualifying dependent to file as head of household.
Widow or Widower
A qualifying widow(er) with a qualifying child dependent is entitled to use the same standard deduction as married taxpayers who file jointly for up to two years after the death of a spouse. Other rules also apply.
Over 65 or Blind
Taxpayers who are 65 or older and blind persons get an additional standard deduction on top of the regular standard deduction. Their filing requirements differ because of these additional amounts. They can add an additional $1,300 per spouse to their standard deduction for a total of $2,600 if they’re married, or $1,650 if they're single or file as head of household.
Qualifying Rules if You Can Be Claimed as a Dependent
You must file a tax return for 2020 under any of the following circumstances if you're single, someone else can claim you as a dependent, and you're not age 65 or older or blind:
- Your unearned income was more than $1,100.
- Your earned income was more than $12,400.
- Your gross income was more than $1,100, or $350 plus your earned income up to $12,050, whichever is greater.
Married dependents who are not age 65 or older or blind are subject to these filing requirements plus one more: They must file if their gross income was at least $5, and their spouse files a separate return and itemizes deductions.
Unusual Tax-Filing Situations
You'll have to file a tax return even if you don't earn these income thresholds if you owe any special taxes. These include the additional tax on a qualified retirement plan such as an IRA or other tax-favored account. But if you only have to file a return because you owe a particular tax, you can submit IRS Form 5329 by itself instead.
Other special taxes include the Alternative Minimum Tax, and Social Security and Medicare tax on tips you didn't report to your employer, or taxes on wages you received from an employer who didn't withhold these taxes from your pay.
You must file if you had net earnings from self-employment of at least $400, or if you had wages of $108.28 or more from a church or qualified church-controlled organization that's exempt from employer Social Security and Medicare taxes.
A return is required if you, your spouse, or a dependent were enrolled in coverage through the Healthcare.gov Marketplace under the terms of the Affordable Care Act, and Premium Tax Credit payments were made to you or your insurer. You'll know whether this pertains to you, because you'll receive a Form 1095-A detailing the payments.
Why You Might Want to File a Tax Return Anyway
You might want to file a return even if you're not required to do so, if it will result in receiving a tax refund—otherwise, you're just letting the IRS keep that money. This would be the case if, for example, you had any taxes withheld from your income, such as withholding on wages or retirement plan distributions, so you overpaid your taxes because the income falls below these filing thresholds—no tax would be due. You'd be entitled to a refund of the money that was withheld, because you don't have a tax liability.
Filing could also generate a tax refund if you're eligible for one or more of the refundable tax credits, such as the Earned Income Credit, the Child Tax Credit, or the American Opportunity Tax Credit. You'd have to file a tax return to calculate and claim these credits and to request a refund from the IRS.
The IRS has certain time limits, called "statutes of limitations," for issuing tax refunds, conducting audits, and collecting taxes that someone might owe. It generally has three years from the date a tax return is filed to begin an audit, and it has 10 years to collect a tax.
These time limits never begin running if a return isn't filed, so the IRS would effectively have forever to look into your tax situation. Filing a return starts the clock ticking on these statutes of limitations.
You might also want to file a return if you have been—or think you might be—a victim of identity theft. Filing a return puts the IRS on notice as to what your true income was for the year, and it prevents a thief from filing a false tax return using your name and Social Security number.