Does Everyone Need to File an Income Tax Return?

All taxpayers are eligible to claim a standard deduction, and if not the dependent of another taxpayer, then one exemption as well. The standard deduction and exemption amounts are fixed by the government before the tax filing season and generally increase for inflation each year.

Since your income that is equal to or less than the sum of the exemption and standard deduction is not taxable, the IRS doesn't require you to file a return in years your income doesn't exceed that sum. When determining whether you need to file a return, you don't include tax-exempt income, such as Social Security payments in your calculation. In 2012 for example, if you are under age 65 and single, you must file a tax return if you earn $9,750 or more, which is the sum of the 2012 standard deduction for a single taxpayer plus one exemption.

If you are at least 65 years old and receive Social Security income during the year, you are subject to the same filing requirements as any other taxpayer. However, because your Social Security is exempt from tax, you can receive more income during the year than other taxpayers before having to file a tax return. An exception is if you are married but file a separate tax return from your spouse who you lived with during the year. In this case, you must include your Social Security income when evaluating whether your gross income exceeds the standard deduction plus one exemption. In addition, if the IRS requires you to pay tax on a portion of your Social Security income because your other income is too high, then you must include that taxable portion in your calculation as well, regardless of your filing or marital status.

All taxpayers who are claimed as a dependent on someone's tax return are subject to different IRS filing requirements, regardless of whether they are children or adults. Since a dependent is unable to claim their own exemption, a tax return is necessary when their earned income is more than the standard deduction for a single taxpayer, which in 2012 is $5,950. However, the threshold decreases to more than $950 when the dependent's income is unearned, such as from dividends and interest.

There are years when you are not required to file a tax return but may want to. If you have federal taxes withheld from you paycheck, the only way you can receive a refund when excessive amounts are withheld is if you file a tax return. For example, if you are a single taxpayer who earns $2,500 during the year, with $300 withheld for federal tax, then you are entitled to a refund for the entire $300 since you earned less than the standard deduction plus one exemption. The IRS does not automatically issue refunds without a tax return being filed.