Tax season kicked off on Monday, January 28, 2019, and the Internal Revenue Service (IRS) expects to process more than 150 million individual tax returns for the 2018 tax year. According to the agency, “through mid-day Monday, the IRS had already received several million tax returns during the busy opening hours.” But not everyone is rushing to file, and you may not need to file. Here’s what you need to know about whether you need to file a tax return in 2019.
For the 2019 tax filing season, you’ll report the income and corresponding deductions for the tax year 2018. That includes pay received in 2018 but not pay that you receive in 2019 for services performed in 2018 (you’ll report that income next year).
Just because you received income in 2018, however, doesn’t necessarily mean that you have to file a federal income tax return. For most taxpayers, you can figure whether you have to file by checking the chart below. Choose your filing status, your age and your gross income for the year; if your gross income is above the threshold for your age and filing status, you should file a federal income tax return.
And no, that’s not a typo: The threshold for married filing separately really is $5. And if you file as married filing jointly but you didn’t live with your spouse at the end of 2018 (or on the date your spouse died) and your gross income was at least $5, you also must file a tax return (it doesn’t matter how old you are).
And yes, you have seen those numbers before: They are equal to the standard deduction amounts under the Tax Cuts and Jobs Act (TCJA). That means that the old “cheat sheet” formula—the one where you add your personal exemption to your standard deduction to determine the threshold—still works. The trick? The personal exemption is suspended under the TCJA, making it zero. The result is that the standard deduction is effectively the filing threshold for most taxpayers; just remember to consider the increased standard deduction for those who are over age 65 and/or blind. You can check the standard deduction numbers for 2018 here (the 2019 numbers are here).
When figuring gross income, consider all income you received that isn’t exempt from tax, including:
- Any income from sources outside the United States;
- Income from the sale of your main home even if you can exclude part or all of it from tax;
- Gains, but not losses, reported on form 8949 or Schedule D; and
- Business income reported on Schedule C, line 7, or Schedule F, line 9 (not including losses)
However, don’t include any Social Security benefits unless you are married filing a separate return and you lived with your spouse at any time in 2018 or if 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).
You can use the chart if no other person claims you on their federal income tax return. If you can be claimed as a dependent on someone else’s tax return, the rules are a little bit different. Here are some basic guidelines:
- For single dependents who are under the age of 65 and not blind, you generally must file a federal income tax return if your unearned income (such as from ordinary dividends or taxable interest) was more than $1,050 or if your earned income (such as from wages or salary) was more than $12,000.
- For single dependents who are over 65 or blind, you generally must file a federal income tax return if your unearned income was more than $2,650 or if your earned income was over $13,600.
- For single dependents who are over 65 and blind, you generally must file a federal income tax return if your unearned income was more than $4,250 or if your earned income was over $15,200.
- For married dependents when either of you are under the age of 65 and not blind, you generally must file a federal income tax return if your unearned income was more than $1,050; if your earned income was over $12,000; or if your gross income was at least $5 and your spouse files a separate return and itemizes deductions.
- For married dependents when either of you is over 65 or blind, you generally must file a federal income tax return if your unearned income was more than $2,350; your earned income was over $13,300; and your gross income was at least $5 and your spouse files a separate return and itemizes deductions.
- For married dependents when either of you is over 65 and blind, you generally must file a federal income tax return if your unearned income was more than $3,650; your earned income was over $14,600; and your gross income was at least $5 and your spouse files a separate return and itemizes deductions.
- These rules apply to dependents who are also married, not merely married taxpayers. For tax purposes, your spouse is never considered your dependent.
Even if you don’t have to file according to the chart, there may be other reasons that you may have to file a tax return, including:
- Self-employed taxpayers must file a federal income tax return if net earnings are at least $400, including non-employee income reported on form 1099-MISC.
- Taxpayers who owe special taxes like a recapture tax (such as the homebuyer’s credit), alternative minimum tax (AMT), write-in taxes (like uncollected social security, Medicare, or railroad retirement tax on tips you reported to your employer or on group-term life insurance and additional tax on health savings accounts), household employment taxes, taxes on tips you did not report to your employer or on wages from an employer who did not withhold those taxes.
- Taxpayers who received wages of $108.28 or more from a church or qualified church-controlled organization exempt from payroll taxes.
- Taxpayers who took HSA, Archer MSA, or Medicare Advantage MSA distributions.
- Taxpayers who took an early distribution from a qualified plan or retirement plan, like an IRA.
- Taxpayers who made excess contributions to an IRA or MSA.
- Taxpayers who didn’t take required minimum distributions (RMD) but were supposed to do so.
Finally, remember that the health care law is still applicable for 2018: The new tax law does repeal the mandate, but not until the 2019 tax year. If you are not required to file a tax return in 2019, you are considered exempt from the mandate (shared responsibility payment), and you do not need to file a tax return to claim the coverage exemption. However, you may have to file if advance payments of the premium tax credit were made for you, your spouse, or a dependent who enrolled in coverage through the Marketplace.
Even if you don’t need to file a federal income tax return this year, you may still want to take advantage of tax breaks and credits. For example, you might be entitled to a refund for excess withholdings or a refundable credit such as the earned income tax credit (EITC).
One more thing: These rules apply to federal income tax returns, but the rules for your state or township might be different. In my state of Pennsylvania, for example, there is no personal exemption for individuals, which means that taxpayers may be subject to tax on the first dollar. It’s possible that you might have to file a state or local tax return even if you do not have to file a federal tax return.
If you’re still not sure whether you need to file a tax return, please contact the tax professionals at Potter & LaMarca by clicking here.