People who file income tax returns every year and cannot really remember not doing so often believe that everyone must file a return. In fact, there are people who do not have to file an income tax return, though everyone who earned any income from self-employment or working for someone else is eligible to file if she or he chooses to do so. There are a few qualifications for requiring people to file income tax returns, however, including earning income above a certain threshold, taking out more than a certain amount in retire, and selling property.
Whether you are self-employed or work for someone else, you may need to file income taxes if you had active income. Active income is money that you made for worked performed, rather than passive income on investments or the sale of property. The thresholds change periodically, but for 2011 if you made more than $400 from self-employment or $600 from wages, then you should file a tax return.
People who earn above a certain gross income from any source need to plan to file income tax returns. Social security is not always included in this amount, but it can be in some circumstances. The exact amount of this gross income point varies based on inflation and IRS regulation. For 2010, the number was $9,350, but the IRS updates the amount each year. Even if you did not make above the threshold to require filing, you may choose to do so. If you employer took out income taxes, then you should file because you likely could get that tax money back as a refund since chances are good that you incurred no tax liability.
Even if you made no money during the year from paid employment or self-employment, you may need to file a tax return if you sold any property. The gain or loss on the sale of real property affects your tax liability, so if you sold your home or land this year, then file a return to report the sale.
The federal government does not enact inheritance taxes, but it does require the payment of estate taxes. If someone died during the year, that person’s legal heirs have an obligation to file income taxes for that person. This filing typically includes all assets that the person owned as well as reporting any income made during the year that the person died.
Even if you do not fit any of these categories, you still could benefit from filing a return. People with children can get a tax refund even without any earned income in some situations. Other people may find that they can qualify for additional tax exemptions and credits that will result in a refund despite the lack of tax liability. If you are in doubt at all about whether or not you should file a return, see a tax preparer or call the IRS helpline for more information.