At the beginning of each year, many self-employed or part-time workers wonder if they have made enough money to merit filing taxes. The rules regarding the minimum amounts of money an individual can earn without needing to file taxes differ depending on age and employment status. Fortunately, it is not difficult to determine which specific rules apply to a taxpayer's situation.
The Internal Revenue Service (IRS) defines "earnings" as any wages, salaries or tips paid to an individual by themselves (as in the case of being self-employed) or by an employer. Other types of payments considered "earnings" include:
- Long-term disability benefits received before the minimum retirement age
- Union strike benefits
- Rent from personal property
- Prepaid income
- Proceeds from the sale of a home
Minimum Income Requirements
The IRS income minimums differ depending on an individual's gross income, filing, employment, age and dependency status. IRS publication 501 contains the agency's filing rules and exemptions.
Each state has different income rules for taxes and definitions of what constitutes income. Additionally, some states do not tax income. Contact your local tax office to identify the rules applicable to your situation.
In 2016, self-employed individuals with net earnings of more than $400 a year must file taxes. Freelancers are considered self-employed.
Income minimums for wage earners vary based on filing status. As of 2016, people who earn at least the amounts specified below must file income tax:
- Single: $10,350
- Head of household: $13,350
- Widowed: $16,650
- Married filing jointly (both spouses): $20,700
- Married filing separately: $4,050
The IRS has established higher taxable earning levels for retirees, generally allowing them to earn a little more than non-retired individuals without needing to file taxes.
Minimum earnings by status for retirees are as follows:
| Status || 65 + || Under 65 |
| Single || $11,900 + || $10,350+ |
| Head of household || $14,900 + || $13,350+ |
| Qualifying widow(er) with dependent children || $17,900 + || $16,650+ |
| Married retirees (one over 65) filing jointly || $21,950 + || $21,950+ |
| Married retirees (both over 65) filing jointly || $23,200 + || $23,200+ |
| Married spouses filing separately || $4,050 + (each) || $4,050+ (each) |
Social Security Considerations
For those receiving Social Security benefits, the following rules apply:
- Individuals with combined earnings between $25,000 and $34,000 may have to remit taxes on up to 50 percent of their Social Security earnings
- Individuals with combined earnings exceeding $34,000 may have to remit taxes on up to 85 percent of their Social Security earnings
- Joint return filers with combined earnings between $32,000 and $44,000 may have to remit taxes on up to 50 percent of their Social Security earnings
- Joint return filers with combined earnings exceeding $44,000 may have to remit taxes on up to 85 percent of their Social Security earnings
A dependent must file a tax return if he or she earned:
- Over $6,300 over the year in wages
- Over $400 in self-employment income
- At least $950 in interest income.
A dependent must also file taxes if his or her combined earned (wages) and interest income exceeds the greater of $1,050 or their earned income plus $350.
Earned Income Tax Credit
The IRS permits moderate to low-income individuals to take an earned income tax credit (EITC) on their taxes. This credit allows these individuals to retain a higher portion of their earnings. This credit is only available to:
- Single individuals with no qualifying children claimed earning less than $14,880
- Individuals with one qualifying child claimed earning less than $39,296
- Individuals with two qualifying children claimed earning less than $44,648
- Individuals with three or more qualifying children claimed earning less than $47,955
These limits change for married taxpayers filing jointly. In this circumstance, yearly income must be less than:
- $20,430 for individuals with no qualifying children claimed
- $44,846 for one qualifying child claimed
- $50,198 for two qualifying children claimed
- $53,505 for three or more qualifying children claimed
In addition to income limits, the EITC is not offered to taxpayers who earned more than $3,400 in interest or dividend income. Individuals must file a tax return to receive this credit. The IRS EITC assistant tool helps taxpayers determine the amount of credit to which they are entitled. However, the annual maximum available depends on the number of dependents:
- An individual with no qualifying children can receive is $506
- An individual with one qualifying child can receive $3,373
- An individual with two qualifying children can receive $5,572
- An individual with three or more qualifying children can receive $6,269
Filing Your Tax Return
Sometimes, even if you did not make enough money, filing a tax return is your best option. After all, likely the IRS response to your filing a return despite having a small income is nothing. Moreover, you may receive tax refunds or other reimbursements if you file a return. Therefore, not filing could lead to your missing out on money you are owed.
Be sure to contact the IRS or speak to a tax professional if you have special income circumstances.