Does One Have To Always File Their Taxes Each Year?

paoli2
  |     |   2,636 posts since 2011

The IRS is not available to answer questions so I wondered if anyone in this group has incurred this problem. I was researching the rules and ended up confused. If someone's only income is a Disability check which is untaxable according to their worksheet and one has no other taxable income, do they still have to file a tax report? Especially if the person is single and the SSDI check is under $25,000.00 a year? The IRS rules seem to state that being under $25,000.00 with no other taxable income makes the SSDI untaxable but they don't make it clear if the person still has to fill with nothing to report??? Thanks for any information anyone can share.



Answers
Choice
  |     |   307 posts since 2020
Credits requires returns...with that $ amount I use to find allowable credits
paoli2
  |     |   2,636 posts since 2011
Thanks Choice but I guess I didn't make my concern clear. What if you don't file the return even if it means you lose any credits? Can they come back at you and charge you penalties for not filing if you had no taxable income to pay taxes on? Thanks.
Choice
  |     |   307 posts since 2020
Sorry don’t have that info readily available ...besides irs publication, a google search may be good start ...good luck!
GreenDream
  |     |   92 posts since 2019
Short answer: You don't have to file when your income is low enough

Long Answer: If you haven't had money taken out by the IRS (thus don't have a refund coming to you) and you don't qualify (or wish to forgo) any refundable tax credits (such as the Earned Income Credit) and your taxable income does not equal or exceed $14,050 (filing single) then you don't have to file.

The IRS has a calculator to help you determine if you need to file
https://www.irs.gov/help/ita/do-i-need-to-file-a-tax-return
It'll ask you a long series of questions, estimated time to complete is 12 minutes.
GreenDream
  |     |   92 posts since 2019
Mea Cupla I only specified one amount (the 65 over number) should have specified the numbers for both under 65 and 65 and over. according to the irs 1040 instructions for 2020 taxes the minimum taxable income for having to file is:
under 65 and single: 12,400
65 and over and single: 14,050
senda
  |     |   11 posts since 2015
You might look to see if there are some free volunteer tax help centers in your area you might be able to call and ask these questions to. Every year at tax time I hear about such centers locally, usually for people with lower income to ask questions.

If that fails, you can always ask Wesley Snipes if you need to file taxes or not...
alan1
  |     |   569 posts since 2015
GreenDream wrote: Whether or not you have to file is dependent on the amount of taxable income you have (IE "gross income" that "isn't exempt from tax" per Chart A

But according to the IRS, the filing requirement is dependent on "gross income" and the IRS does not seem to agree with GreenDream's interpretation of the Internal Revenue Code nor his definition of "taxable income".

Take at a look at Form 1040 for 2020 at https://www.irs.gov/pub/irs-pdf/f1040.pdf

Line 9 is total income.
Line 10 is adjustments to income.
Line 11 is adjusted gross income (line 9 minus line 10c)
Line 12 is the standard deduction or itemized deduction amount
Line 13 is the qualified business income deduction.
Line 14 is the total of lines 12 and 13.
Line 15 is taxable income: Adjusted gross income minus the standard or itemized deduction amount, minus the qualified business income deduction.

But that's just the opinion of the Internal Revenue Service. Taxpayers are free to use other interpretations and definitions, at their risk.
GreenDream
  |     |   92 posts since 2019
From the irs, (you should know this already as you quoted it before)
"Gross income means all income you received in the form of money, goods, property, and services that isn't exempt from tax,"

income that isn't exempt from taxes = taxable income
Choice
  |     |   307 posts since 2020
Or...Income/money from exempt sources is not included in gross income definition
alan1
  |     |   569 posts since 2015
GreenDream writes: "income that isn't exempt from taxes = taxable income"

Yet according to IRS Form 1040, taxable income is determined after (among other deductions) taking the standard or itemized deductions. That's a deduction from adjusted gross income (AGI). And AGI is itself a deduction from gross income.
GreenDream
  |     |   92 posts since 2019
alan1, you are arguing semantics (despite all your puffery about opinions all you could call me out on to assuage your butt hurt over my calling you out on your puffery is semantics In fact the only opinion around here appears to be the unduly high one you have of yourself/the low one you have of everyone else who post "opinions" here). I was talking in "layman's terms" not in legalese. More importantly I pointed the OP to the relevant IRS tool to determine for themselves if they need to file or not and the relevant document and chart - an *HOUR* before you came along to refer to that same document and chart!!!. In fact everyone who attempted to answer the question posed by the OP ultimately referred them back to the same source: the IRS (you and I with direct links, and ally with reference to a street article that itself got it's data from the IRS, even if it was from the previous tax year) rather than give "opinions"

While you don't want opinions I'm going to give you mine anyway: In my opinion, you need to get over yourself. when some one asks a question they neither need nor want your puffery about opinions. You have an answer and/or other relevant information to give then give them the answer and/or relevant information. You have a problem with a specific answer someone else gave, by all means engage them civilly on it. Leave your high opinion of your own answers/low opinion of everyone else's answers out of it.
Sylvia
  |     |   257 posts since 2012
Anyone who makes a good faith attempt to answer questions posed by strangers need not be subject to personal attacks. alan1 has always been generous with not only the volume of questions he takes on, but also the clarity and precision with which he delivers the answers. It’s regulars like him, all volunteers, by the way, who make this site a destination for many on financial matters.
Reader1
  |     |   18 posts since 2018
Well said, Sylvia!
CuriousDave
  |     |   45 posts since 2018
In the tax world, words and phrases usually have very specific and legal meanings, and sometimes those are counterintuitive. "Taxable income" is not income that is exempt from taxes. Taxable income is the final amount on which income tax is computed, after excluding exempt and excluded income, and after subtracting all allowed deductions. alan1's analysis above appears to be accurate -- in the humble opinion of a retired CPA. As for "gross income" (referred to be tax people as GY) the instructions for filing form 1040 are clear - if the only income consists of Social Security benefits of $25,000 or less for a single filer, it is excluded from GY and there is no requirement to file.
Ally6770
  |     |   2,987 posts since 2010
Posted in the USA Today answering questions on the stimulus
check.
If my W-2 is blank because you are exempt from tax do I have to send it to the IRS?

Yes, you must report all income regardless of exemptions or credits.

— Josh Rivera
paoli2
  |     |   2,636 posts since 2011
Ally: Your reply above about reporting all income confuses me. I was told that if a person is disabled and only gets the SSDI check each month and when they do the figures it is not over $25,000.00, they do not have to file taxes. Seems to me one would have to report all income if it is over the $25,000.00 shown on the form.
paoli2
  |     |   2,636 posts since 2011
Note: I checked with my tax accountant etc. and that "you must report all income" can be very misleading. If you only get social security income and it is "not" taxable for certain people after doing the figures, you do not have to file taxes unless you have other taxable income you must report. It is the "other" income that makes the difference in the example I am referring to. So there are people who do not have to file taxes according to their special situation.
alan1
  |     |   569 posts since 2015
Understanding the difference between "gross income" and "taxable income" is critical for determining whether the IRS says one is required to file an income tax return.

Let's use taxpayer Jane Smith's 2020 Form 1040 as an example. Ms. Smith files a single return, is under age 65 and is not blind. Her entire income in 2020 consisted of taxable interest of $20,000. She has no adjustments to income and no itemized deductions. Form 1040 is at https://www.irs.gov/pub/irs-pdf/f1040.pdf

1. On line 2b, she enters her interest -- 20,000
2. On line 9, she enters her total income -- 20,000
3. On line 10c, she enters her total adjustments to income -- 0
4. On line 11, she enters her adjusted gross income -- 20,000
5. On line 12, she enters her standard deduction amount -- 12,400 -- see https://www.irs.gov/newsroom/irs-provides-tax-inflation-adjustments-for-tax-year-2020
5. On line 14, she again enters her standard deduction amount -- 12,400
6. On line 15 she enters her taxable income, by subtracting line 14 (12,400) from line 11 (20,000), resulting in a taxable income of $7600.

Now if taxable income determines whether someone is required to file an income tax return, Jane Smith's taxable income is below the filing threshold of $12,400. But, in the opinion of the Internal Revenue Service, it's "gross income", not taxable income, that is determinative. See p. 9 of PDF at https://www.irs.gov/pub/irs-pdf/i1040gi.pdf

And, according to the IRS, her gross income is over $12,400. 
But Ms. Smith can certainly choose to refrain from filing a return, based on the interpretation that taxable income is what matters. That's her business.
paoli2
  |     |   2,636 posts since 2011
Excuse me if I dare to intervene and give my own opinion of what Alan 1 has posted. My entire question made it clear I was referring to the person "only" having social security which was determined "not" to be income for her by the worksheet. She owes no taxes on it so there by how can she put it down as "income". In Alan's example, he, imo, is correct, if the person has interest income or any other source of "income". If you had focused on my main point of it being "only" SSDI, I may have gotten some helpful replies without posters resorting to name calling and turning an innocent question into a fighting match.

In the future, I will try to control myself from posting my questions on here and find my answers elsewheres. BTW, I know the difference between gross and taxable income. In fact, inspite of how you got it, you did help me figure out for myself what the answer is so I thank you for that.
alan1
  |     |   569 posts since 2015
paoli2 -- I think I may have caused some confusion, for which I apologize. My comment above (re Ms.Smith and the distinction between taxable income and gross income) should have been posted as a reply to a comment by someone (not you) who seemed to conflate taxable income and gross income.
paoli2- your postings on this thread have consistently demonstrated that you recognize the difference. Earlier today (though it's further down in the comments) I had posted a response to you, quoting IRS language re the relationship between social security income, gross income, and tax filing requirements. Again, my apologies for any confusion re the above comment.
Ally6770
  |     |   2,987 posts since 2010
Single: If you are single and under the age of 65, the minimum amount of annual gross income you can make that requires filing a tax return is $12,200. If you're 65 or older and plan on filing single, that minimum goes up to $13,850.
https://www.thestreet.com/
How Much Do You Have to Make to File Taxes?
Not sure if you have to file a tax return this year? Here's everything you need to know.
Steve FiorilloUpdated:Nov 17, 2020
GreenDream
  |     |   92 posts since 2019
that thestreet article must be for 2019 taxes, the 2020 1040s instructions give
under 65 and single: 12,400
65 and over and single: 14,050
see Chart A on Page 9 of  https://www.irs.gov/pub/irs-pdf/i1040gi.pdf
Ally6770
  |     |   2,987 posts since 2010
I assumed because the article was updated on Nov 17, 2020 it would be for 2020 since the filing date for 2019 income is over.
paoli2
  |     |   2,636 posts since 2011
I think we are missing my point. The only income this person has is SSDI (Social Security Disability Income) and every chart I check out uses $25,000.00 to show if it is taxable. The total annual amount she gets is not over $25,000.00 and it comes up "untaxable". So how are you coming up with these other figures for normal income people get? The articles I read keep referring to the "Single and $25,000.00 figure to not have to file taxes.
alan1
  |     |   569 posts since 2015
I will provide information from the IRS; there is no reason for me to express _my_ opinion. The following generally applies to people who are not dependents.

For a single person under age 65, a return is to be filed if "gross income" (a technical term) is at least $12,400. For a single person, age 65 or older, a return is to be filed if "gross income" is at least $14,050.

What is "gross income"?

"Gross income means all income you received in the form of money, goods, property, and services that isn't exempt from tax, including any income from sources outside the United States or from the sale of your main home (even if you can exclude part or all of it). Don’t include any social security benefits unless (a) you are married filing a separate return and you lived with your spouse at any time in 2020, or (b) one-half of your social security benefits plus your other gross income and any tax-exempt interest is more than $25,000 ($32,000 if married filing jointly). If (a) or (b) applies, see the instructions for lines 6a and 6b to figure the taxable part of social security benefits you must include in gross income."
(emphasis added)

see footnotes to Chart A at p.9 of PDF of 2020 Instruction 1040 at
https://www.irs.gov/pub/irs-pdf/i1040gi.pdf
paoli2
  |     |   2,636 posts since 2011
Thank you Alan 1. That is what I was referring to so I guess it is ok that the person has not been filing tax returns since going on Disability etc. Much appreciation.
GreenDream
  |     |   92 posts since 2019
"we" weren't missing the point, you weren't understanding the answers (none of which were expressions of opinions, despite alan1s usually puffery, they were all refences to data that ultimately all came from the IRS, even if some, like the street article Ally6770 referenced, was data for a previous tax year). Whether or not you have to file is dependent on the amount of taxable income you have (IE "gross income" that "isn't exempt from tax" per Chart A that both alan1 and I referenced.).


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