To File or Not To File

A frequent question asked is whether or not an individual needs to file a tax return.  There are two issues associated with this question:

• Is there is a requirement to file?

• Should the taxpayer file even when there isn’t a requirement to file?

The answers to these two questions are quite different. You must file a tax return if your income is above a certain level. The amount varies depending on filing status, age and the type of income you receive. Different filing thresholds may apply for federal and state purposes.

For example, for 2009, a married couple both under age 65 generally is not required to file a federal return until their joint income reaches $18,700. However, self-employed individuals generally must file a tax return if their net income from self-employment was at least $400. There are special rules for children or other individuals who are, or could be, claimed as a dependent by someone else.

Even if you don’t have to file a federal return, here are six reasons why you may want to file:

• Federal Income Tax Withheld. If you are not required to file, you should file to get money back if Federal Income Tax was withheld from your pay, if you made estimated tax payments, or had a prior year overpayment applied to this year's tax.

• Earned Income Tax Credit. You may qualify for the Earned Income Tax Credit, or EITC, if you worked, but did not earn a lot of money.  EITC is a refundable tax credit meaning you could qualify for a tax refund.

• Additional Child Tax Credit. This credit may be available to you if you have at least one qualifying child and you did not get the full amount of the Child Tax Credit.

• First-Time Homebuyer Credit. If you purchased a main home during 2009 and did not own a main home during the prior 3 years, you may be able to take this refundable credit.  You may also qualify for a refundable credit if you are a long-time resident (owned the same principal residence for any 5 consecutive years during the 8-year period ending on the date of purchase of a subsequent principal residence) and purchased a main home after November 6, 2009. 

• American Opportunity Credit. The new American Opportunity Credit allows an education credit for the first four years of post-secondary education expenses. 40% of that credit is refundable even when you have no tax liability.

• Making Work Pay Credit. This is a new credit for 2009 and provides a refundable credit of up to $400 ($800 for a joint return). 

If in doubt, please call this office to see if you are required or should file a tax return for 2009. 

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