Who Has to File a Tax Return?

By Sam Slabyk
February 5, 2021
Chime is a financial technology company. Banking services provided by The Bancorp Bank or Stride Bank, N.A.; Members FDIC

Filing taxes is something that most people are familiar with, but maybe not quite to such an extent that they are 100% confident with the process. As a result, thousands if not millions of U.S. citizens are left not even knowing if they need to file a tax return, let alone what to and not to include.  

The Federal Government changes the classification of the tax return threshold every year dependent on inflation, but that’s not to say that it’s anyone’s guess as to what’s required to meet the threshold. So who has to file a tax return in the US? Some of the details in order to answer that question include the amount of tax withheld, as well as filing status.  We’ll answer this question in more detail in the article below.

Generally: taxable income above $12,400

Generally speaking, anyone who has a taxable income above $12,400 (2020) is required to legally file their tax return. That is for people that are single and under 65 years of age at least, as the rules are different when out of these classifications. The same goes for if self-employed since this income is required to be filed at practically any income.

Filing tax returns when married

The rules do change for those that are married — and this is very often beneficial. Whether you choose to file your taxes under the Married Filing Separately or the Married Filing Jointly category does affect the extent of these benefits, which is useful information to learn. It’s mandatory to file as one of these if married by the end of the tax year and if the couple is not exempt or earning under the new combined threshold of $24,800. Married Filing Jointly typically has the most benefits in what can be deducted, but filing separately for unique cases may still have better benefits if an individual has a high number of itemized deductions, allowing the other to claim the standard deduction.

It’s also important to note here, however, that the tax bracket, when married, is likely to change due to a combined annual income. This is also where the tax marriage penalties or benefits can occur.

Qualifying widowers

In the tragic case of the death of a spouse, a qualifying widower who is living with a dependent and covering over 50% of the household running costs is also eligible to gain much of the same benefits as a married couple who are filing their taxes as the married filing jointly category. This only remains in place while these criteria are met, however, and if a remarriage takes place, this will also end the classification.

Social security

For any money that comes from social security, it’s highly unlikely that this income will be taxable. As a result, those on social security will very likely not have to file a tax return at all. That does change, however, if the individual claiming social security is married, and subsequently filing their taxes as Married Filing Separately. Instead, it will usually be the case that some of this social security income will need to be declared in order to get a clearer picture of the overall income of the household.

 Head of household

In cases for those unmarried but with dependents, the taxable income threshold to be required for a mandatory tax return is different. The tax deduction for those who are classed as a head of household is $18,650. The head of household is an individual who is unmarried with at least one dependent, and therefore the head of the household. This also means that the head of household also has to be paying over 50% of the running costs of the household to qualify.

Over 65s

The standard deduction for people aged over 65 years is higher than the typical standard deduction for singles, and this deduction is also reflected upon marriage, too. For singles over the age of 65, the standard deduction is $14,050, and for married over 65s, that becomes $26,100 or $27,400, depending on if one or both people in the marriage are over the age class.

Optional tax returns

Although not everyone is required to file a tax return depending on their financial situation and their classification in relation to the applicable standard tax reduction, that isn’t to say that there is no need to even consider a tax return at all. In many cases, for individuals who are not required to submit, the tax has still been paid to the IRA in some shape or form. A tax return is the easiest way possible to access and ultimately receive these funds back from the IRA should you be owed it. If the tax return is not filed, the IRA will almost definitely simply keep the money with no benefit to yourself.

What happens if you don’t submit a tax return?

If an individual fails to file their taxes when legally required to do so, the IRA poses several sanctions which may cause you more issues than the initial fee. Generally, the initial response is that you will be charged an additional 5% of your tax debt for every month that you fail to do so, up to a maximum of 25% in additional fees. For context, if you file and fail to pay rather than fail to file at all, the fine is only 0.5% of your fee rather than 5%. That makes a very big difference!

If you continue not to file your taxes and the IRA chooses to take action against you, then even worse consequences may come into play. This is where you are likely to experience sanctions like property seizing, and in extreme cases, even passport hold and potential charges of tax evasion. With the option of payment plans and manageable tax payments, filing is very often the most logical decision.

This page is for informational purposes only. Chime does not provide financial, legal, or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for financial, legal or accounting advice. You should consult your own financial, legal and accounting advisors before engaging in any transaction.

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Sam Slabyk is a Digital Content Specialist. Sam loves to write about banking, budgeting, and tips on how to save money.

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