Do You Have to File a Tax Return?

By Jeffery Levine, IRA Technical Expert  

Follow Me on Twitter: @IRAGuru4EdSlott

One of the most common questions asked during tax season is, “Do I have to file a tax return?” The answer, of course, is a bit complicated, but in general, if your income is equal to or greater than the sum of the standard deduction plus your personal exemption, you must file a return. The standard deduction is higher for those 65 or older, so age makes a difference in some cases.

For 2011, the standard deduction was $5,800 for single filers under 65 and $7,250 for single filers 65 or older. If you are married, file a joint return and both you and your spouse were under 65 in 2011, the standard deduction is $11,600. If you file a joint return but one of you was 65 or older, the standard deduction is increased $12,750, and if you were both over 65, the standard is increased to $13,900. The personal exemption amount for 2011 was $3,700. Whew, that was a lot of (important) numbers.

So what does that all mean? Well, let’s put it in more explicit, less IRS-like lingo. If you are a single filer and your 2011 income was equal to or greater than $9,500 ($10,950 if you were 65 or older), you should file a return. If you are married and file a joint return, and you and your spouse have $19,000 ($20,150 if one of you was 65 or older, $21,300 if you were both 65 or older) or more of income, you must file a return. Other limits apply if you are married but file a separate return from your spouse, if you file as head of household or if you file as a qualifying widower.

A word of warning, the rules above only apply if no one else can claim you as a dependent on their return. There are also other rules for self-employed persons so be sure to speak with your tax professional before deciding not to file a return.

For more information on determining whether or not you have to file a return, see IRS Publication 501 (Exemptions, Standard Deduction, and Filing Information). You can also visit the IRS web page devoted to the issue aptly titled “Do You Need to File a Federal Income Tax Return?”

Of course, it should be noted that just because you don’t have to file a tax return doesn’t mean that you shouldn’t file a tax return. There are many reasons to file including:

• You’re entitled to a refund or can claim a refundable credit.

• You want to start the statute of limitations “clock” ticking.

• You want to file a return showing the income you’ve earned to back-up an IRA or Roth IRA contribution.

• You think your CPA is not busy enough during tax time.

Okay, so maybe not that last one. But you get the point. There are some compelling reasons to file a return even when it’s not required. The one good thing about filing a return is that there really isn’t much downside. It’s not like you can ever owe more than you otherwise would. If your tax liability is $0 without a return, it will be $0 with a return. The only difference is, if you file a return, after 3 years, IRS can’t question that amount (except in cases of fraud).