Tax season is probably not your favorite time of year, but there is pretty much no way to avoid it. When it comes to figuring out where and how to file your yearly tax return, plenty of questions can arise. For instance, you might wonder what the minimum income threshold is that requires you to file a yearly tax return. You might ask, "Do I have to file taxes if I made less than $5,000?"
The best place to go to answer that question is the International Revenue Service (IRS) website. Each year, the IRS releases a filing requirements chart that you can use to begin to determine whether or not you are required to file a tax return. For the 2017 tax year, this information can be found in a publication from the IRS called "Exemptions, Standard Deduction, and Filing Information." This government publication might not be as thrilling to read as the next book on your own must-read list, but it will help you figure out your tax situation so you don't have Uncle Sam knocking at your door for money owed to the government.
Also, it's important to know what the IRS refers to as "gross income." In the 2017 information, the IRS explained that, "Gross income means all income you receive in the form of money, goods, property, and services that isn't exempt from tax."
According the filing requirements chart, U.S. residents under the age of 65 whose filing status is "single" are only required to file a tax return if they have a reported 2017 gross income of $10,400. So, an individual with a gross income of $5000 in 2017 is not required to file a 2017 tax return.
That sounds like pretty good news, right? You can sit back and relax without worrying about the April 17, 2018 filing deadline. Well, it actually turns out that you might want to file your taxes anyway if you made any earned income at all in 2017, according to The Balance.
Before I get to why you might want to take on the super fun task of filing taxes when you're not required to do so, I'll note that there are different filing rules for dependents. Make sure to check with your parent to see if they can claim you as a dependent on their tax return. If they plan to do so, there are different filing requirements that can be found in the filing requirements chart for dependents in the "Exemptions, Standard Deduction, and Filing Information" publication.
For single dependents under the age of 65, the chart indicates that the minimum earned income threshold to file is $6,350 (earned income includes your taxable wages received from working). It gets a little more confusing if you have unearned income (which is money from investments rather than work) totaling more than $1,050. In that case, if your gross income is more than $1,050, you are required to file a tax return. If your unearned income is less than $1,050, you don't have to file a tax return as long as your gross income is less than $6,300. I know, this sounds as confusing as you always assumed taxes to be, but if you are claimed as a dependent, you can always ask a parent for some help to figure it out.
While it is true in terms of your standing with the IRS that you are not legally required to file a tax return if your gross income falls under the filing requirements threshold, you might want to file your tax return anyway. The IRS recommends that you file an optional tax return "if you can get money back."
In "Exemptions, Standard Deduction, and Filing Information," the IRS cites certain situations that may apply to you when you're deciding whether or not to file an optional tax return. It might be a good idea to file taxes anyway if you had withheld income tax reported on your paychecks or if you're possibly eligible for a certain tax credits. According to The Balance, your eligibility for tax credits can only be assessed if you file a tax return calculating those credits and request a refund from the IRS.
If you evaluate your finances using the filing requirements charts and still have questions, you can always take this helpful quiz on the IRS website that can help you determine if you are required to file taxes for 2017. And if you still are feeling really unsure about your filing requirement, it's best to consult a tax professional for answers.
You'd probably rather avoid tax season altogether, but with a little time spent figuring out where you land on the filing threshold requirement chart, you can figure out exactly what you need to do to make sure that you're on the up and up with the IRS.