According to Penny McCall, surprisingly, not everyone has to file an Income Tax Return every year, and it’s possible under some circumstances that you can skip your taxes, provided you earned well this year. The Internal Revenue Service won’t penalize you or send you emails, but the thing is that not everyone can do this.
Everything depends on your gross income — that is, money earned via a job, self-employed income, investment income, retirement income, or any other source that is not exempt from paying taxes. This information will be discussed in detail below. In addition, there are some tips on why you should file your taxes, even if you’re exempt, described by Penny McCall.
Considering the standard deduction is the key, according to Penny McCall
Do you know every tax filing status has a standard deduction, which is nothing but a pre-set dollar amount that everyone writes off with the tax filing status, in case he or she hasn’t opted for itemized deductions? Here is the tabular representation of the 2019 standard deductions tax filing status:
Explaining everything in simple words:
Penny McCall said, suppose you are earning independently, and your gross income was $40,000, then you would find the difference of your gross income and the $12,200 standard deduction for your tax filing status and get $27,800. This will be the amount that you would owe income tax on unless you have other tax-deductible income that can reduce the payable income tax value.
In case you are independent, and your gross income was $12,000 for the year, you are eligible to skip paying taxes because the standard deduction is more than your gross income. Logically speaking, if your gross income is less than the standard deduction and you find the difference between the two, then there would be no money left to pay to the government.
According to Penny McCall, 65+ adults can add another $1,300 to their standard deduction if they are married and filing income tax jointly, or $1,650 in case of other tax filing statuses. If married and filing jointly and both partners are over 65, then they may add another $2,600 to their standard deduction. Blind individuals add $1,300 to their standard deduction if married and filing return jointly, or $1,650 in case of other tax filing statuses.
Blind adults and over 65 can claim in both cases and add $2,600 if married and filing return jointly or $3,300 in case of another tax filing status.
You need to keep these points in mind when wondering if you should file the income tax return or not.
Why should you file a federal tax return anyway?
In case you are legally exempted from paying returns, you must file an income tax return if you are involved in a job where your taxes are automatically deducted from your income. In that case, filing income tax is the best way to get your funds back that you have already paid, and the government won’t chase you to pay your taxes.
It makes sense for many people to file a tax return if they qualify for tax credits that are refundable, like the Child Tax Credit or the Earned Income Tax Credit. Now, what exactly is a tax credit? Tax credits refer to reducing your tax bill dollar-for-dollar. Refundable tax credits are important because if your tax liability is less than zero, then the government will refund you extra money. So, if your income is less than the standard deduction and you qualify for a $1,000 refundable tax credit when filing a tax return (even if you can skip), it would be a smart move.
Understanding state taxes
According to Penny McCall, Laws driving taxes may differ from state to state, so don’t forget to check with your Department of Revenue to see if you need to file a state tax return or not. It is best to check rather than making assumptions and skipping taxes. Just like we said for federal taxes, it is a smart decision to file a return even if you are not required to according to your income.
Some people find skipping taxes attractive rather than doing all that paperwork. But in many cases, it comes back to haunt you, so make your decision carefully. Whenever you feel any doubt, it is always a better idea to file taxes to be on the safe side.
