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Tax Season Q & A: Do I Have to File a Tax Return?

by
Delia Mena
on
2/16/2017
Tax Season Q & A: Do I Have to File a Tax Return?

Tax time is here. While some American taxpayers view filing their tax returns as a given, there are others for whom preparing the forms and sending them in is optional. If you are in the former group, you may not have realized that there are some people who have no obligation to file. If you're in the latter group, the deciding factor is often less about your obligation then it is about what's to your best advantage. Let's take a look at where the lines are drawn, who has to file a tax return, and who should file one for the benefits it offers.

Which Taxpayers Have an Absolute Obligation to File a Tax Return

There are certain taxpayers who are obligated to file a tax return. These include:

  • Those whose income is greater than the filing threshold as indicated in the chart below
  • Those who are self-employed and whose net income from self-employment is more than $400. The reason for this is that this income needs to have taxes filed in the same way that they would be if they were earned while working for an employer who would have withheld payroll taxes.
  • Those who received a credit or benefit to which they were not actually entitled and who need to repay the government. This most frequently happens when taxpayers provided the incorrect estimate of their income to the health insurance Marketplace, resulting in them having been given a larger advance premium tax credit than was appropriate for their actual income. No matter whether the taxpayer's income falls above or below the tax filing threshold -- taxpayers are required to file if they need to pay the government back.
  • Those who owe the government for a penalty that have been assessed against them. This might be for failing to take out the minimum required distribution for an IRA, for having withdrawn money from a 401K, or similar early withdrawal penalties. As is true with receiving benefits that need to be paid back, it does not matter whether the taxpayer's income falls above or below the tax filing threshold - taxpayers are required to file a tax return if they need to provide payment to the government for a penalty.

The 2016 tax filing thresholds indicated on the chart below are derived by adding the standard deduction for individuals to the taxpayer's personal exemption - as well as their spouse's if they have one.

Which Taxpayers Have the Option of Filing a Tax Return?

For taxpayers who do not fall into any of the categories that require the filing of a tax return, as listed above, the question is whether completing and filing a return would provide them with a benefit in the form of a tax refund. Here are some of the circumstances that could lead to that outcome:

  • Those who are owed a tax refund because they have overpaid the amount that they owe for the tax year. Examples of why this may be the case including having paid too much previously or having too much money withheld by their employers in payroll taxes based on an overestimate of earnings or underestimate of deductions. The government will not provide taxpayers with a refund unless a tax return has been filed.
  • Those who are owed a refund because they qualify for the EITC, or Earned Income Tax Credit. This refund, which can provide the taxpayer with thousands of dollars, is specifically available for people whose income falls below a certain threshold. It is often available to those who do not need to file a tax return because their earnings fall below the threshold shown in the chart above, but the government will not provide it unless a tax return has been filed.
  • Those who have at least one qualifying child may be eligible for the refundable tax credit known as the Additional Child Tax Credit.
  • Those who pay college tuition or tuition for postsecondary education may qualify for the American Opportunity Credit. This $2,500 per student credit provides up to 40% of its value in a refund for those who have no tax liability.
  • Under the Affordable Care Act, those families whose incomes entitle them to a tax credit to help them pay for health insurance through the government Marketplace may be entitled to a refund if the supplement they were owed is greater than the amount that they received.

If you fall into any of the categories listed immediately above, you may be able to get a refund for credits you were owed in the past, but you have only three years to file for them. That means that if you were owed a refund on last year's taxes but did not file, you need to file a tax return for 2016 by April 15, 2020 (three years after the tax filing deadline of April 2017 for the 2016 tax year) in order to get it. 

If you have questions about your own obligation to file a tax return, or if you believe that you may be entitled to a tax refund from a previous year, call our office today to discuss your situation and learn more about how we can help.

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Delia Mena

Delia Mena

Delia Mena, CPA is a Tampa based tax professional who specializes in accounting and tax preparation. Delia is the founder of her own tax based practice, Delia's Accounting Service, based in Tampa, FL. With over 12 years of experience, Delia's practice is fully equipped to assist clients with any of their financial needs. Delia's Accounting Service provides the perfect mix of independent paralegal's, bookkeepers, and notary public professionals providing high quality services to a wide range of clients. To learn more about Delia and her practice, visit her website.

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