How much money do you have to earn to have to file an income tax return? Like most things in the tax world, it depends.
If you're self-employed, the rule is simple. You must file a tax return if your net earnings from self-employment are at least $400. Net earnings mean your total earnings from self-employment minus your business expenses, such as mileage. You can figure this out by completing IRS Schedule C or using accounting software. But, even if you earned less than $400, or had a loss, you should still file a return. This is especially true if you had a loss. You can use business losses to reduce your taxes in future years when you earn profits. You have to file a return for your losing year to do this.
If you're not self-employed, whether you need to file a tax return usually depends on your filing status and your gross income. The chart below shows the tax filing income thresholds for 2018. Choose your filing status, your age and your gross income for 2018. If your gross income is above the threshold for your age and filing status, you should file a federal income tax return. Gross income is not dirty or disgusting income. It means all the income you received during the year that was not exempt from tax. This includes:
For example, if you're single and under 65, you should file a return if your gross income for 2018 was $12,000 or more. If your gross income was less than $12,000, you aren't required to file, subject to a couple of exceptions noted below. You're 65 for the 2018 tax year if you were born any time before January 1, 1954. [table id=43 /]
You also need to file an income tax return if any of the following apply.
Just because you are not legally required to file a tax return, that doesn't mean that you shouldn't. You should file if one of the following applies.
What happens if you fail to report income this year? You won't get arrested. The IRS doesn't have any tax police out looking for non-filers. But, eventually, bad things will likely happen and get worse over time. Sooner or later, the IRS will probably discover you should have filed a return. This usually happens because third parties reported to the IRS payments they made to you. This could be any of the following:
IRS computers will check and see if you reported this income on your timely filed tax return. If there is no return on file, the IRS will send you a notice called Notice CP 59, First Notice Request for Your Tax Return. This form demands that you file a tax return and pay any tax due. In addition to the taxes you should have paid, you'll owe interest and penalties. These can be severe. As much as 25 percent of your unpaid taxes.