Many taxpayers assume that earning a small amount of income means they do not need to file a tax return. While income thresholds do exist, filing requirements are more complex than most people realize. Whether you must file depends not only on how much you earned, but also on how you earned it, your filing status, and your age.
For wage earners, filing thresholds vary based on filing status such as single, married filing jointly, or head of household. Age can also matter, particularly for older taxpayers. However, these thresholds only apply to certain types of income. Self employment income is treated very differently under tax law.
If you earned income through freelance work, contract work, side gigs, or cash payments, filing may be required even if total income appears low. This is because self employment income is subject to self employment tax in addition to income tax. Even modest net earnings from self employment can trigger a filing requirement.
Filing can also be beneficial even when it is not required. Many taxpayers qualify for refundable tax credits that are only available if a return is filed. These credits can result in refunds even if no taxes were owed. Filing also allows you to recover taxes that were withheld from paychecks during the year.
Another important consideration is record history. Filing tax returns establishes a documented income record that can be useful for housing applications, loans, financial aid, and government benefits. Not filing can limit access to these opportunities later.
BD Tax LLC helps individuals evaluate whether filing is required and whether filing could provide a financial benefit even when income is low.