Are you wondering if you will be required to file taxes this year? Income tax laws can be confusing, especially when limits change each year. There are a few basic rules that apply to most people. Individuals with self-employment income of $400 or more must file, and employees who made more than the current standard deduction must file.
- Income for tax purposes includes money made by working for an employer, self-employment and tips, interest earned, excess retirement distributions and the sale of a home. Specific IRS rules apply for each type of income. Follow the link in the Resources section to the IRS website to find a chart with specific questions to help you decide. If an employee working for an employer made over the standard deduction plus the exemption amount, then the employee must file taxes. Single students who are being claimed by parents or guardians must file if their income exceeds the standard deduction amount.
- Individual taxpayers who are required to file taxes have until midnight of April 15 each year to file their income taxes or have them postmarked. However, individuals may apply for an extension of that deadline by filling out Form 4868. The extension is solely for submitting paperwork, not money. If you owe taxes, you must pay them with Form 4868, or penalties will apply.
- Even those individuals who are not required to file taxes should consider filing if they meet certain criteria. For example, in 2007 only those who filed a return qualified for Economic Stimulus checks. If federal, state or city taxes were withheld from your paycheck, but you did not earn more than the standard deduction, you still must file income taxes to have the money returned to you. Also, individuals with earned income who have children or are 25 or older may qualify for EIC, the Earned Income Credit.
- Separate rules apply for church employees; they must file taxes if their income exceeds $108.28. If you earned tips and owe Social Security and Medicare on those tips because you did not report them to your employer, then you must file taxes. If you took an early distribution, made excess contributions or failed to take the minimum required distribution from your qualified retirement plan, IRA or MSA, then you must file taxes.
- Individuals with Internet access may go to the IRS website to look at various tax forms, which they can also print and use. The 1040 EZ, for those without dependents, has only a few lines to fill in, and you can ascertain if you need to file taxes. The IRS also has links to Internet sites where individuals can calculate their federal taxes and e-file without charge. Those who file electronically typically receive their money much faster than those filing by U.S. mail.