Do You Need to File a Tax Return If You Have No Income?
Taxes on personal income in the United States have been in existence since the Civil War. Today, we are required to file a federal income tax return to pay taxes on the income we have made during the previous year. According to the Internal Revenue Service, many people file a federal income tax return even though it is not required.
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Defining Income
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The IRS requires that your tax return must include "all income you receive in the form of money, property, and services unless the tax law states that you do not include them." Thus, you may be receiving income even though you are not working for an employer and receiving a paycheck. For example, if a debt you have incurred is canceled, the amount of canceled debt is considered income for the tax year in which it was canceled. The canceled debt is not income if it was canceled as a gift or bequest. Therefore, it is crucial to determine what is considered income under IRS guidelines.
Who Must File
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Whether or not a person is required to file a federal income tax return usually depends upon the level of income an individual has acquired during the tax year. The IRS provides instructions that explain who must file a tax return. According to the 2008 IRS 1040 form instructions, an individual who is single and under 65 years of age must file a tax return if he has earned income of at least $8,950. A single taxpayer 65 years of age and older must file a tax return if she earns income of at least $10,300. Additionally, individuals who are self-employed and have had net earning of at least $400 must file a tax return.
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Reasons to File Even Though it is Not Required
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While it is not always required to file an income tax return, sometimes it is beneficial. If your employer has withheld taxes from your paycheck, you may be entitled to a refund. You may be eligible for the Earned Income Tax Credit, a reduction of tax liability for taxpayers with low to moderate incomes.
Filing Online for Free
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People eligible for the Earned Income Tax Credit may be eligible to file a federal tax return online for free. Visit the IRS website to find the "Free File" logo. In 2008, individuals with income below $56,000 were eligible for free online filing. The IRS website will direct you though the process of choosing a company that offers free filing. Some of these companies offer state tax filing as well.
Conclusion
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Deciding whether to file a federal income tax return requires careful analysis of your personal financial situation. Carefully calculate your income according to the IRS guidelines, and be sure to determine whether filing is required. If not, be sure to find out if you are entitled to a refund or other benefits.
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