How much money do you have to earn to have to file an income tax return? Like most things in the tax world, it depends.

Filing rules for the self-employed

If you’re self-employed, the rule is simple. You must file a tax return if your net earnings from self-employment are at least $400. Net earnings mean your total earnings from self-employment minus your business expenses, such as mileage. You can figure this out by completing IRS Schedule C or using accounting software.

But, even if you earned less than $400, or had a loss, you should still file a return. This is especially true if you had a loss. You can use business losses to reduce your taxes in future years when you earn profits. You have to file a return for your losing year to do this.

Filing rules for everyone else

If you’re not self-employed, whether you need to file a tax return usually depends on your filing status and your gross income. The chart below shows the tax filing income thresholds for 2018. Choose your filing status, your age and your gross income for 2018. If your gross income is above the threshold for your age and filing status, you should file a federal income tax return.

“Gross income” is not dirty or disgusting income. It means all the income you received during the year that was not exempt from tax. This includes:

  • Income from sources outside the United States
  • Income from the sale of your main home even if you can exclude part or all of it from tax
  • Gains, but not losses, from sales of stock and other securities, and
  • Business income reported on IRS Schedule C or Schedule F (not including losses)

For example, if you’re single and under 65, you should file a return if your gross income for 2018 was $12,000 or more. If your gross income was less than $12,000, you aren’t required to file, subject to a couple of exceptions noted below.

You’re 65 for the 2018 tax year if you were born any time before January 1, 1954.

2018 Income Tax Filing Thresholds

Filing StatusGross Income
Single and under 65$12,000
Single and 65 or older$13,600
Married filing jointly, under 65 (both spouses)$24,000
Married filing jointly, under 65 (one spouse)$25,300
Married filing jointly, 65 or older (both spouses)$26,600
Married filing separately, any age$0
Head of household, under 65$18,000
Head of household, 65 or older$19,600
Surviving spouse with dependent child, under 65$12,000
Surviving spouse with dependent child, 65 or older$13,600

Other reasons you need to file a return

You also need to file an income tax return if any of the following apply.

  • You received Obamacare tax credits to help pay for your health insurance during 2018. Which means you must file a tax return no matter what your income was. If you don’t file a return, you might have to repay your credits.
  • Wages earned from a church or qualified church-controlled organization exempt from payroll taxes were of $108.28 or more.
  • You or your spouse received distributions from a health savings account.
  • Any special taxes you owe, such as the alternative minimum tax.
  • You owe social security or Medicare tax on tips you didn’t report to your employer.

When to file a return even if not required

Just because you are not legally required to file a tax return, that doesn’t mean that you shouldn’t. You should file if one of the following applies.

  • Income tax was withheld from your pay
  • You made estimated tax payments for the year
  • You had any part of a tax overpayment for last year applied to this year’s estimated tax
  • Qualified for the earned income tax credit
  • Qualified for the child tax credit
  • Eligible for the refundable American opportunity education credit

What happens if you don’t file a return?

What happens if you fail to report income this year? You won’t get arrested. The IRS doesn’t have any tax police out looking for nonfilers. But, eventually, bad things will likely happen and get worse over time.

Sooner or later, the IRS will probably discover you should have filed a return. This usually happens because third parties reported to the IRS payments they made to you.  This could be any of the following:

  • Salary an employer reports on Form W-2,
  • Income you earned as an independent contractor reported by your clients on Form 1099-MISC, or
  • Interest income reported by a bank or other financial institution on Form 1099-INT

IRS computers will check and see if you reported this income on your timely filed tax return. If there is no return on file, the IRS will send you a notice called Notice CP 59, First Notice Request for Your Tax Return.

This form demands that you file a tax return and pay any tax due. In addition to the taxes you should have paid, you’ll owe interest and penalties. These can be severe–as much as 25 percent of your unpaid taxes.

Stephen Fishman

Stephen Fishman

Stephen Fishman is a self-employed tax expert and regular contributor to MileIQ. He has dedicated his career as an attorney and author to writing useful, authoritative and recognized guides on taxes and business law for entrepreneurs, independent contractors, freelancers and other self-employed people. He is the author of over 20 books and hundreds of articles, and has been quoted in The New York Times, Wall Street Journal, Chicago Tribune, and many other publications. Visit Fishman Law and Tax Files for more information on his work.
Stephen Fishman