Do I Need to Have Earned Income to File Federal Taxes?
The federal income tax system is based largely on the notion of earned income -- money earned directly as payment for labor or profits earned from an activity. All income isn't earned, however, and unearned income, such as dividends and interest accumulated from investments, also must be tracked, and, in some cases, requires taxpayers with no earned income to file a tax return. Whether you are required to file depends upon several situations.
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Gross Income Levels
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If you have no earned income, yet generate unearned income, such as pensions or child support, you may be required to file a tax return if your gross income -- the combined total of earned income and unearned income -- exceeds $9,350 for tax year 2010 if you're single and under the age of 65. If you're older than 65, your gross income must exceed $10,750 to require you to file a return.
Married couples filing jointly must file if their combined gross income exceeds $18,700 and they're younger than 65; couples with one member above 65 must file if their gross income exceeds $19,800 and married couples with both members older than 65 are required to file when their gross income exceeds $20,900. Married couples who file separately must file if either member's gross income exceeds $3,650 regardless of their age.
Unemployment Benefits
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Unemployment benefits must be claimed as unearned income. Taxpayers who are unemployed for an entire tax year and receive benefits must report their unemployment benefits on a tax return.
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Someone Claims You As a Dependent
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If someone claims you as a dependent, you're required to file a return if your unearned income exceeds $950 or your gross income is greater than $1,250. These gross income limits raise when the dependent is over 65 or blind.
Sold Your Home
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Anyone who sold their home during the tax year is required to file an income tax return, regardless of their earned, unearned or gross income levels. A tax return is required to gauge the possibility of assessing gains taxes on the sale of the property.
Distribution of Retirement Funds
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If you took an early distribution from an IRA or Roth IRA, you will be penalized for the non-qualifying withdrawal. Anyone who prematurely removes funds from a retirement account must file a tax return. Additionally, if you received a distribution greater than $160,000 from a retirement fund, you must file an income tax return no matter what your age.
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