EEach year, the IRS processes approximately 150 million personal income tax returns. Yours may be one of them, if you have to file a tax return.
Not everyone is required to file a tax return, and whether you are required to file depends on your age, filing status, income level, and source of that income.
Here’s what you need to know about filing a federal tax return in 2022 and why you might want to file even if the IRS doesn’t require it.
Who should file a federal income tax return for the 2022 tax season?
Each year the IRS publishes a table with the filing requirements for people who are not claimed as dependents on someone else’s return. Here are those numbers from the Draft Instructions for Form 1040 2021:
If your 2021 gross income exceeds the amount shown in the table above, you must file a federal income tax return. The IRS defines gross income as all income you receive in the form of money, goods, goods, and services, including income from outside the United States, sale of stock, business and the sale of your home, even if the gain is not taxable.
There are also a few situations in which you must file a tax return even if you do not meet the income requirements described above, including,
- You owe special taxes, such as alternative minimum tax, a penalty for early withdrawal of a IRA or 401(k), household employment taxes, Social Security or Medicare taxes on tips
- You (or your spouse) withdrew money from a health savings account
- You had a net income of at least $400 from self-employment
You can consult the complete list of situations in which you must file a tax return, regardless of your level of income in Table C (page 12) of IRS Form 1040 Instructions.
Deposit requirements for dependents
The IRS has different tax reporting requirements for people declared as dependents on another person’s return. For dependents, filing status and age are factors, but also the type of income received, whether earned or not.
- earned income includes salaries, wages, tips, professional fees, and taxable scholarships and fellowships.
- Unearned income includes taxable interest, ordinary dividends, capital gain distributions, unemployment benefits, taxable social security benefits, pensions, annuities and trust distributions.
Here are the minimum income limits from the draft 2021 Form 1040 instructions:
Dependent children can avoid filing a tax return if they only have interest and dividend income and a parent chooses to report the child’s income on their own return. To make this choice, you must meet all of the following conditions:
- Dependent child is under 19 (or under 24 and a full-time student) at the end of the year
- The child’s income consisted solely of interest, dividends and capital gains distributions
- Their interest and dividend income was less than $11,000
- The child does not file a joint return with a spouse
- The child has not made estimated tax payments, had federal income tax withheld, or received an overpayment from a previous year’s tax return
- You, your spouse or a dependent received an advance payment of the premium tax credit when you purchased health insurance coverage through HealthCare.gov.
If you meet all the conditions described above, you will report the child’s income on Form 8814 and file it with your Form 1040.
Why would you still want to file a federal tax return?
You may not be required to file a tax return in some cases, but it might be beneficial to file one anyway. Here are some situations where this might be the case:
You can get a refund of withheld or estimated taxes
If your employer withheld federal taxes from your pay or if you made estimated tax payments, filing a tax return may allow you to receive some or all of these overpayments in the form of a tax refund.
Keep in mind that if you regularly file a tax return just to get a refund of tax withheld by your employer, you may want to reduce your withholding.
Submit a new Form W-4 with your employer to reduce your withholding and increase your net pay, and you won’t have to worry about filing a return unnecessarily.
You can claim refundable tax credits
Refundable tax credits are particularly useful for low-income taxpayers, as they can provide a refund beyond what you paid for the year via withholding or estimated tax payments.
In other words, if it’s worth more than the tax you owe, the IRS will refund you the difference. Refundable credits include:
- Earned income tax credit (EITC). The EITC is a tax credit for low-income workers. For 2021, this is worth up to $6,728, but you must meet strict income limits and other requirements to qualify. Income limits change each year and depend on your filing status and the number of dependents you can claim. You cannot claim the credit if you have more than $10,000 of investment income. Consult the IRS table maximum adjusted gross income (AGI) amounts and credit amounts for 2021 to find out more.
- Child tax credit (CTC). The CTC is designed to help low- and middle-income families offset the cost of raising children. For 2021, that’s worth up to $3,600 for each child under age six and up to $3,000 per child age six through 17.
- Salvage rebate credit. If you didn’t receive a third economic impact payment, also called a stimulus payment, or if you didn’t receive the full amount, you may be able to take it as a tax credit on your tax return. 2021. The third stimulus check, which the IRS began sending out in March 2021, was actually a prepayment of a 2021 tax credit.
- US Opportunity Tax Credit (AOTC). The AOTC helps offset higher education costs for full-time students during their first four years of college. It is worth up to $2,500 per qualifying student, and up to $1,000 of the credit is refundable.
You can start the clock on prescription status
The IRS generally has three years from the filing date to audit your tax return – six years if your return includes a “substantial understatement” of income. But if you don’t file a tax return, the statute of limitations never starts. Indeed, the IRS could come after you in a decade or more and claim that you should have filed a return.
If you’re worried about an IRS audit, you may want to file a tax return even if you haven’t earned enough to trigger a filing requirement.
Don’t Forget Status Returns
The filing requirements outlined above apply to federal tax returns, but if you live in a state with state-level income tax, you may need to file there as well.
Filing requirements vary by state, so check with a tax professional or your state’s tax agency to determine if you need to file a state return.
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