Age, income, filing status and type of employment play a role in who must file annual income taxes and who is exempt. Though filing a federal income tax return is not necessary for some taxpayers, there are instances where they may want to do it anyway to get certain tax credits.
Children claimed on another tax return may be exempt from paying federal income tax. As of 2014, a child that earned more than $6,200 or has more than $1,000 in unearned income must file taxes. Unearned income can include taxable interest, distributions from a trust and ordinary dividends. A child that isn't claimed on another taxpayer's return may have to file, but does get the standard deduction of $6,200 and the $3,950 exemption for one taxpayer.
Some elderly taxpayers are exempt from paying federal taxes based on income. For example, single taxpayers age 65 or older don't pay if their gross income is $11,699 or less. Married taxpayers filing jointly are exempt if their combined income does not exceed $22,699. The income figures don't include Social Security benefits and retirement income, which are treated differently.
The source of their income determines if retirees are exempt. For example, a certain amount of Social Security benefits could be exempt from federal taxes, especially if it's the taxpayer's only income source. As of 2014, the cap was $25,000 for single taxpayers and $32,000 for married taxpayers filing jointly.To determine that, complete Form 1040 and list the total benefits received on Line 20A and the taxable amount on Line 20B.
Even if you are exempt from paying federal taxes, you may need to file a return to get refunds. In addition, many taxpayers in lower income brackets are eligible for the earned income credit. For example, parents and guardians of dependent children may be eligible for child tax credits. Certain students can claim credits for the cost of education. Check your eligibility for all available tax credits to decide whether to file.
State and Local Requirements
Many states have their own criteria for who must pay taxes. Some follow federal guidelines and others have separate requirements. Check with your state revenue agency to see what applies to your filing status.