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When to Start Paying Taxes – How Much Do You Have to Earn to File Taxes?
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When to Start Paying Taxes – How Much Do You Have to Earn to File Taxes?
Paying taxes is the best part of living in a country – is something you’ll probably never hear anyone say. When starting your professional career, you’re new to the tax scene, and there’s a lot to learn. If you’ve just started earning wages or a salary, it might be time to get a handle on U.S. tax law and Internal Revenue Service (IRS) regulations.
If this is your first time thinking about taxes, you might have questions like – how much do you have to make to file taxes, what’s the minimum income to file taxes in 2021, and so on.
The IRS has many different requirements that decide if a person is eligible to pay taxes. Your credentials, like age, income bracket, and previous tax filing status influence whether you are required to file a tax return.
Table of contents
Key highlights:...Read more
What are the basic income requirements for filing taxes?...Read more
Impact of standard deduction on the amount of taxes owed...Read more
Income requirements for self-employed individuals...Read more
Income threshold for dependents...Read more
Why should I file a tax return if there’s no need?...Read more
Key highlights:
- You can only take advantage of government assistance and benefits, if you file a tax return
- You don't have to file a tax return unless you make $1,100 or more
- If you’re older than 65, your minimum unearned income should be at least $2,800 for filing taxes
What are the basic income requirements for filing taxes?
If your 2022 income falls below the general gross income requirement threshold, you don’t need to file taxes in 2023. General gross income is your income before taxes and deductions.
The minimum income requirement for single filers below 65 years of age is $12,550 and $14,250 for single filers older than 65. For married couples (filing jointly), the minimum is $25,100, if both spouses are below 65, and $26,800 if one spouse is over 65. The minimum requirement for couples older than 65 is $28,500.
If you are married and decide to file separately to take advantage of itemized deductions or tax credits, for example, the minimum income requirement is just $5. In rare cases, filing jointly might only lower your income to a certain level, which can be a smaller amount than if you file separately.
For the head of household – a person with one or more dependents – it’s $18,800 if you are below 65 years and $20,500 if you are older than 65. For a qualifying widow or widower, it’s slightly more relaxed at $25,100 (<65) and $26,800 (>65).
It’s important to note that these are just requirements to file an income tax return, declaring your income. It doesn’t mean you’ll end up paying taxes.
Impact of standard deduction on the amount of taxes owed
A standard deduction is a fixed amount that lowers your taxable income. Standard deductions vary for every filer, based on income bracket, age or physical disability like blindness. If you are older than 65 and blind, you can have a slightly larger amount as a standard deduction.
Income requirements for self-employed individuals
Taxation is an entirely different story for self-employed individuals, freelancers, independent contractors and 1099 workers. If you are a self-employed individual, you must file taxes if you earn more than $400 a year from your clients.
Even if you are a W-2 employee, while also working part-time as a freelancer and income from your side hustle exceeds $400, you must file self-employment taxes. You’ll have to fill up Schedule SE on your regular 1040 tax return form to report this income.
If you're self-employed, you’ll have to pay quarterly estimated taxes, which include income tax and self-employment taxes. You can use a quarterly estimated tax calculator to find the exact amount.
If you expect to owe $1,000, for example, in tax at the end of the year, you’ll have to pay quarterly estimated taxes of $250 to avoid penalties later. If you overpay on your taxes, the IRS will send you the refund amount once you file your annual return.
It’s important to note that while self-employed individuals pay self-employment taxes quarterly, they only file a tax return once a year. The deadline to use e-filing is April 18, 2023, for the 2022 fiscal year.
Income threshold for dependents
According to the IRS, dependent(s) can be your child(ren) or relative(s). Dependents can’t be spouses, but can be your child, stepchild, brother, sister or parents.
Status
Under 65
Over 65
Over 65 and Blind
Single
- More than $1,100 in unearned income
- More than $12,550 in earned income.
- Gross income is more than $1,100 or earned income (up to $12,200) plus $350.
- More than $2,800 in unearned income
- More than $12,200 in earned income
- Gross income is more than $2,800 or earned income ($12,200) plus $2,050
- More than $4,500 in unearned income
- More than $15,950 in earned income
- Gross income is more than $4,500 or earned income (up to $12,200) plus $3,750
Married
- More than $1,100 in unearned income
- More than $12,550 in earned income
- Gross income is more than $1,100 or earned income (up to $12,200) plus $350
- More than $2,450 in unearned income
- More than $13,900 in earned income
- Gross income is more than $2,450 or earned income ($12,200) plus $1,700
- More than $3,800 in unearned income
- More than $15,250 in earned income
- Gross income is more than $3,800 or earned income (up to $12,250) plus $3,050
Why should I file a tax return if there’s no need?
You might think that since you don’t fall into an IRS category, you’re free from paying taxes. But, there are several reasons why you should file a tax return. Filing an IRS tax return is essential if you want to receive tax credits, such as the recovery rebate credit (if you missed COVID stimulus checks), earned income credit, child tax credit and dependent tax credit.
Filing a tax return every year also puts you in better standing when it comes to applying for loans and banks need to confirm your financial standing. If you’ve just started working as a babysitter, and you barely meet the minimum income requirement, you should still file because it will give you an understanding of how the IRS works. You can also practice filling out the form if you think you are going to file in the next fiscal year.
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