With the second half of tax season here, it’s time to get those gears in motion to start filing. Tax season means getting your paperwork and finances in order. While it may not seem exciting, filing taxes is manageable. Plus you may have a tax refund waiting. An overall understanding of the filing process is a great place to start.
IRS Filing Requirements
If you’re a U.S. citizen or resident alien and you meet filing requirements, you are required to file an income tax return.
According to the IRS, you must check these income requirements to determine if you required to file:
- Gross Income: All your income including wages, tips, capital gains, tips, gambling winnings, and more should be claimed on your taxes if in 2016 it is at least:
- Single: $10,350
- Married (filing separately): $4,050
- Married (filing jointly): $20,700
- Head of Household: $ 13,350
- Qualifying widow(er): $ 16,650
- Filing Status: The five filing statuses are single, married (filing separately), married (filing jointly) , head of household, and qualifying widow(er) with dependent child. Your filing status has a bearing on the deductions and exemptions you can take.
- Age: If you’re 65 or older, you can have a higher gross income before you’re required to file taxes.
- Single: $11,900
- Married (filing jointly) one spouse 65 & older: $21,950
- Married (filing jointly) both spouses 65 & older: $23,200
- Head of Household: $14,900
- Qualifying widow(er): $17,900
What exactly is your adjusted gross income?
Your adjusted gross income is basically your entire gross income minus any allowable tax deductions called above the line deductions. Some of them include:
- Health Savings Account
- Moving Expenses
- Self-employed Health Insurance
- Alimony Paid
- Student Loan Interest
- Tuition and Fees
Your adjusted gross income is not the same as your taxable income.
What’s the difference between your adjusted gross income and taxable income?
After your adjusted gross income has been calculated, you are then allowed to either take a standard deduction or itemized deductions. The standard deduction ($6,300 single, $12,600 married filing jointly) or itemized deductions, whichever one you are eligible for and gives you the lowest tax liability is subtracted from your adjusted gross income.
Even if your income is below the income filing requirements you should still file your taxes if you had federal taxes taken out since you may see your withholding come back in the form of a tax refund especially if you are eligible for a refundable tax credit like the Earned Income Tax Credit. Every year the IRS reports close to $1 billion in unclaimed refunds and the average unclaimed refund is about $700. Also, if you purchased health insurance in the Health Insurance Marketplace, you need to file to report your health insurance status.
Don’t worry about knowing these tax laws and how to make these calculations. TurboTax will ask you simple questions and calculate your taxable income and give you the tax deductions and credits you are eligible for based on your answers.
How are you preparing this tax season?