Do You Really Need to File a Tax Return? Here's the Deal

While it is true that not everyone is required to file a tax return, it is essential to file when required in order to avoid financial and legal consequences. Whether or not an individual needs to file a tax return depends on various factors. In some cases, it may even be beneficial to file even when not required, especially if tax credits or other benefits are available.

Factors Affecting Filing Status

U.S. citizens and resident aliens can determine their filing status by examining the following factors described on the Internal Revenue Service (IRS) website

Gross Income
Filing Status
Age
Whether you are a dependent

For instance, the 2021 filing requirements for most taxpayers state that a single person under the age of 65 must file if their gross income was at least $12,550. That figure increases to $14,250 if they are 65 or older. Income thresholds increase for the other types of filing status (except for married, filing separately), but age is also a factor.

Dependants

If an individual has a gross income of $4,300 or more, they usually cannot be claimed as a dependent unless they are a qualifying child. Otherwise, dependents must determine filing status by considering the following:

whether they are single or married
aged 65 or older or blind
if they meet the unearned income amount, earned income amount, or gross income amount

Special Circumstances

There are a variety of special circumstances in which an individual may still need to file a return. These include, but are not limited to:

Special taxes are owed.
The individual (or their spouse, if filing jointly) received Archer MSA, Medicare Advantage MSA, or health savings account distributions.
Self-employment net earnings were at least $400
Church or qualified church-controlled organization wages that were exempt from social security and Medicare taxes were at least $108.28

What Happens If You Don't File A Tax Return?

Not filing a tax return, or paying your taxes late, can come with consequences. The IRS may take a variety of actions, including:

assessing penalties, fines, and interest
enforcing tax liens
pursing civil or criminal litigation
Even if you do not owe taxes, you should still file by each year’s deadline if you are required to do so.

Filing a Tax Return If it Is Not Required

In some situations filing a tax return may not be required due to income level, but an individual should file a tax return anyway. Filing may be of benefit if it leads to a refund. The following examples may lead to a tax refund:

Income tax was withheld from pay
Estimated tax payments were made
The individual qualified for the earned income credit
The individual qualified for the refundable child tax credit or additional child tax credit
The individual qualified for the health coverage tax credit
The individual qualified for the refundable American opportunity credit
The individual qualified for sick and family leave
The individual qualified for the premium tax credit
The individual qualified for the recovery rebate credit
The individual qualified for the credit for child and dependent care expenses

Do You Need to File a Tax Return?

Understanding when to file a tax return can be confusing and complicated. However, the IRS has a tool to help navigate this question. Individuals can complete the "Do I Need to File a Tax Return?" with the Interactive Tax Assistant. The user must provide their filing status, the federal income tax amount that was withheld, and basic information to determine gross income. The interactive tool takes approximately 12 minutes to complete. By answering the questions, the user should have a better understanding of whether they are required to file a federal tax return or if they should file in order to receive a refund.