Please note: This is an archived article. It does not apply to current-year tax preparation. Please see our current article to read up-to-date tax information.
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Do I need to file a tax return?
Whether you need to file depends on your income, your filing status and your age. However, if you are a low-income worker or wage-earner, it is a good idea to file because you may be eligible for exemptions, deductions and credits which may create a refund for you. You are not entitled to a refund unless you file a return.
The following IRS chart, from IRS Form 1040, sets forth the general rules for determining if you must file:
IF your filing status is . . .
AND at the end of 2007 you were* . . .
THEN file a return if your gross income** was at least . . .
Married filing jointly***
under 65 (both spouses)
Married filing separately
Head of household
Qualifying widow(er) with dependent child
* If you were born on January 1, 1943, you are considered to be age 65 at the end of 2007.
** Gross incomemeans all income you received in the form of money, goods, property, and services that is not exempt from tax, including any income from sources outside the United States (even if you can exclude part or all of it). Do not include social security benefits unless you are married filing a separate return and you lived with your spouse at any time in 2007.
*** If you did not live with your spouse at the end of 2007 (or on the date your spouse died) and your gross income was at least $3,400, you must file a return regardless of your age.
You must file if you had advance earned income credits withheld from your pay.
What if I do not have the money to pay my taxes?
First and foremost, FILE YOUR RETURN, even if you do not have the money to submit to the IRS. Filing your return on time will prevent the possibility of penalties that the IRS can legally impose for a delinquently filed tax return.
Next, there are several options. When you submit your return, you should pay as much as you possibly can toward your tax bill. A partial payment will lower interest owed to the IRS for the late payment. Any unpaid balance is subject to interest and a monthly late payment penalty, so it is in your best interest to pay your tax liability to the greatest extent possible.
The IRS offers several payment options. The first is an installment agreement. An installment agreement is one in which the payment amount is based on your ability to pay and should be an amount that can be maintained over the lifetime of the installment agreement. The installment agreement can be set up in three ways: direct debits made from your bank accounts to the IRS, payroll deductions from your employer to the IRS, or a regular installment agreement wherein you are responsible for submitting a monthly check to the IRS. To apply for an installment agreement, either submit a Form 9465, Installment Agreement Request, or write your own request for an installment agreement and attach the request to the front of your tax return. On your request, include the amount you can pay each month and the date in each month that you wish to make your payment. If you desire to use direct debit, provide your checking account number and bank routing number. You may also attach a voided check to the request. For a payroll deduction, attach a Form 2159, Payroll Deduction Agreement, completed by your employer. The IRS will usually respond within 30 days, either approving or disapproving your request. If your request is accepted, you will be charged a one-time fee of $43. If your request is denied, the IRS will generally request additional information. Remember, penalties and interest will be added to the balance, even if the installment agreement is approved. For more information on this option, go to the IRS website and enter the keyword “installment agreement.”
If you file your return but do not pay the tax due and you do not request an installment agreement, it is likely that you will receive notices from the IRS. Do not ignore the notices. If you ignore the notices and do not make arrangements to pay your taxes, the IRS may file a Notice of Federal Tax Lien and will be able to take collection action, which could include a Notice of Levy or offsetting any possible tax refunds you may be entitled to in the future.
Your rights are protected throughout the collection process, and the IRS is willing to work with people to find solutions when they cannot pay their taxes. For more information on this, you can obtain Publication 594, The IRS Collection Process, and Publication 1, Your Rights as a Taxpayer. Also, you can contact the IRS at 800-829-1040. Before you call, have your financial information with you, such as pay stubs; payments being made on homes, cars, and credit cards; medical information; child care payments; and student loan payments.
What money is taxable?
If you work and earn wages, your income is generally taxable income. Many times, your employer has already withheld taxes for you and submitted these taxes to the federal and state governments. Often, the amounts withheld are too high and, when you file a tax return, the government will return the excess amount to you in a refund. If you received wages during 2007, your employer is obligated to send you a Form W-2 with the wages and taxes paid by January 31, 2008.
Is money I receive from public benefits taxable?
Generally, you do not have to pay taxes on benefits that you receive from a public welfare fund. This includes benefits like TANF, GA or SSI, child care grants, workers’ compensation, and housing assistance payments. Also, you do not need to include most benefits paid by the Veteran’s Administration.
Are Social Security retirement benefits and disability benefits taxable?
If you receive Social Security retirement benefits or disability benefits, your income is not taxable if it is the only income you received throughout the year. If you had other sources of income, from work or investments, some of your Social Security or disability benefits may be taxable. About one-third of people who get Social Security have to pay income taxes on their benefits. Generally,
At the end of each year, you will receive a Social Security Benefit Statement (Form SSA-1099) showing the amount of benefits you received. You can use this statement when you complete your federal income tax return to find out if you have to pay taxes on your benefits.
Is military pay taxable?
Some types of military compensation are included in gross income and are therefore subject to tax, while other military pay is not taxable. Pay while serving in a designated combat zone or qualified hazardous duty are not taxable, but basic pay and pay while training are taxable. Allowances such as basic housing allowance and moving allowance are not taxable.
Are unemployment benefits taxable?
If you receive unemployment compensation, you will receive a Form 1099-G showing the total amount you received in 2007. Unless you have elected to have taxes withheld from your weekly checks, you are responsible for reporting the income and paying income tax on the amount received.
Is child support or foster care payments taxable?
Money you receive for child support is not taxable. Money you receive from a state or other licensed foster care placement agency for the care of a foster child in you home is generally not taxable.
Is alimony taxable?
Money you receive as alimony is taxable and should be included on your return. Conversely, if you pay an ex-spouse alimony, you can deduct that amount on your return.
What is a filing status? What are the definitions of each status?
Generally, your marital status on the last day of the year determines your filing status for the whole year. For example, if you were married on December 31, 2007, you are considered married for the entire year. If you are divorced on December 31, 2007, you are considered unmarried for the whole year.
There are five filing statuses: single, married filing jointly, married filing separately, head of household, and qualifying widow(er) with dependent child. Here are the some important guidelines about filing status:
It is important to select the correct filing status, since it affects your exemptions, standard deductions, and other credits. Here are further facts about filing status:
IF the person is
your . . .
AND . . .
THEN that person
is . . .
qualifying child (such as a son, daughter, or grandchild who lived with you more than half the year and meets certain other tests)
he or she is single
a qualifying person, whether or not you can claim an exemption for the person.
he or she is married and you can claim an exemption for him or her
a qualifying person.
he or she is married and you cannot claim an exemption for him or her
not a qualifying person.
qualifying relative who is your father or mother
you can claim an exemption for him or her
a qualifying person.
you cannot claim an exemption for him or her
not a qualifying person.
qualifying relative other than your father or mother (such as a grandparent, brother, or sister who meets certain tests)
he or she lived with you more than half the year, and you can claim an exemption for him or her
a qualifying person.
he or she did not live with you more than half the year
not a qualifying person.
you cannot claim an exemption for him or her
not a qualifying person.
What is the standard deduction?
The standard deduction is a dollar amount that reduces the amount of income on which you are taxed. You cannot take the standard deduction if you claim itemized deductions.
In some cases, your standard deduction can consist of two parts: the basic standard deduction and additional standard deduction amount, for age, or blindness, or both.
In general, the basic standard deduction is adjusted each year for inflation and varies according to your filing status. The basic standard deduction of an individual who can be claimed as a dependent on another person's tax return is the greater of:
The additional standard deduction amount for age, or blindness, or both is specified by law and varies based on your filing status. If you file a separate return and can claim an exemption for your spouse, you will be allowed any additional amounts that apply to you or your spouse.
The additional amount for age will be allowed if you are age 65 or older at the end of the tax year. You are considered to be 65 on the day before your 65th birthday.
The additional amount for blindness will be allowed if you are blind on the last day of the tax year.
For example, a single taxpayer who is age 65 and legally blind would be entitled to a basic standard deduction and additional standard deductions for age and blindness.
If you or your spouse were 65 or older or blind at the end of the year, be sure to claim the additional standard deduction amounts by checking the appropriate boxes on Form 1040A or Form 1040. The additional standard deduction amounts cannot be claimed on Form 1040EZ.
Certain individuals are not entitled to the standard deduction. They are:
Married Filing Jointly $10,700
Head of household $7,850
Married Filing Separately $5,350
For more information, refer to IRS Publication 501, Exemptions, Standard Deduction, and Filing Information.
What are itemized deductions?
Whether to itemize deductions on your tax return depends on how much you spent on certain expenses last year. Money paid for medical care, mortgage interest, taxes, charitable contributions, casualty losses and miscellaneous deductions can reduce your taxes. If the total amount spent on those categories is more than the standard deduction, you can usually benefit by itemizing.
What are exemptions? What information do I need to know before I claim an exemption?
Exemptions reduce your taxable income. For the year 2007, you can deduct $3,400 for each exemption you claim. You are generally allowed one exemption for yourself, one for your spouse, and one for each of your dependents. If you are a nonresident alien (other than a resident of Canada or Mexico), you can only use an exemption for yourself. You are not allowed to claim exemptions for dependents. If you can be claimed as a dependent by another person, you cannot take a personal exemption, even if the other person does not actually claim you as a dependent. Your spouse is never considered your dependent.
A dependent is a “qualifying child” or a “qualifying relative.” The following chart, from IRS Publication 501, provides guidance.
Tests To Be a Qualifying Child Tests
Tests To Be a Qualifying Relative
* There is an exception for certain adopted children.
** There are exceptions for temporary absences, children who were born or died during the year, children of divorced or separated parents, and kidnapped children.
*** There is an exception if the person is disabled and has income from a sheltered workshop.
**** There are exceptions for multiple support agreements, children of divorced or separated parents, and kidnapped children.
If you can claim an exemption for your dependent, the dependent cannot claim his or her own exemption if he or she files a tax return. You cannot claim a married person as a dependent if he or she files a joint tax return.
You cannot claim a person as a dependent unless that person is a U.S. citizen, U.S. resident alien, U.S. national, or a resident of Canada or Mexico for some part of the year.
You must list the Social Security number for any dependent for whom you claim an exemption. Without a Social Security number, the exemption may be disallowed and your return will be reduced. If such dependent does not have a Social Security number, you should apply for one by filing a Form SS-5 with the Social Security Administration. If you do not have the Social Security number by the time you need to file your return, you should use Form 4868 to ask the IRS for an automatic extension of time to file the return. If your dependent is not eligible for a Social Security number, your dependent must apply for an individual taxpayer identification number using Form W-7.
What are credits? How do they help me?
Credits may increase your tax refund and lower the amount of tax you owe the IRS. Each credit has different rules and works differently. Some credits simply reduce and possibly eliminate the tax you owe while other credits may actually put money in your pocket. You must file your tax return to claim a credit.
What credits are available?
Rules for eligibility
A qualifying child for the Earned Income Tax Credit is not the same as a qualifying child for purposes of filing status. A qualifying child for the EITC must meet each of the relationship, age, residence, self-support, and citizen/resident tests.
What is an ITIN?
ITINS, or Individual Taxpayer Identification Numbers, should be used to file your return if you cannot legally obtain a Social Security number. ITINS are used for tax reporting purposes only. These are not general identification numbers and will not authorize you to work in the United States or receive Social Security benefits. However, in the future, if you are able to legally obtain a Social Security number, the income that you have reported using the ITIN may be used to establish and increase Social Security benefits.
How do I apply for an ITIN? Where do I get the application? What forms do I use? How long does the process take?
To obtain an ITIN, you need to complete a Form W-7, Application for IRS Individual Taxpayer Identification Number. The form is available at the IRS website or by calling 1-800-TAX-FORM. You must provide certain identification documents which are listed on the application form. Generally, it takes six weeks to receive a letter from the IRS with your ITIN number.
How can my ITIN be used?
The IRS keeps all its return information strictly confidential. That means that if you use an ITIN to file a return because you have worked in the United States but do not have a Social Security number, that information will not be shared with any other federal or state agency, including immigration.
Refund Anticipation Loans
Refund anticipation loans are LOANS. The loan is made to you in amount equal to or less than the amount you will get from the IRS as a tax refund.
Refund anticipation loans have very high interest rates. That means that in addition to paying back the money you have borrowed, you must pay interest, ranging from 50 percent to 700 percent. Instead of keeping your entire refund, you are not only turning over the refund over to the lender, you will have to turn over the refund and the interest to the lender.
If the IRS does not agree with the numbers on your tax return and does not refund the amount of money you anticipated, you will still owe the lender the full amount you borrowed and the interest on that amount.
Refund anticipation loans are not that much quicker than waiting for the refund from the IRS. If you file electronically, the IRS can send your refund to you within 10 to 14 days. Even if you do not file electronically, you should receive your refund in a few weeks. To check on the status of your refund, you can contact the IRS at 1-800-829-1040 or go the IRS website.
What is a notario?
Notarios, in much of Latin America, are attorneys. However, in the United States, a notary public is not a lawyer, an accountant, or a licensed qualified tax preparer and thus cannot give legal advice or prepare tax returns. In the United States, a notary public can only administer oaths and witness signatures.
Unfortunately, scam artists, using the title notario, have preyed on immigrants with limited English skills and little understanding of the American legal system by misrepresenting themselves as lawyers or tax preparers. Therefore, beware of so-called "notarios” who are providing legal services or tax preparation services under the auspices of a state law or city ordinance because they might be involved in the unauthorized practice of law or unauthorized preparation of tax returns.
When you sign your return. . .
ONE LAST POINT – READ AND UNDERSTAND YOUR RETURN BEFORE YOU SIGN AND FILE IT! You are ultimately responsible for everything on your return, whether you had it prepared for you or you prepared it yourself. When you sign and file your return, you are stating that you have reviewed every line of the return and you agree with everything on the return. Be careful! If you do not understand an entry made by a preparer, make sure you ask questions until you understand how and why the preparer completed the return, and only sign the return if you agree with it. If you cannot prepare your return by yourself, go to one of the free sites listed below. The tax laws in the United States are complex and the tax forms are confusing, and that is why there are so many free programs to help you.
Resources for low-income taxpayers
Where can I get assistance with preparing my tax return?
Where can I get assistance if I get a letter from the IRS?
THE TAXPAYER LEGAL ASSISTANCE PROJECT at Legal Services of New Jersey can assist you if you receive any letter or notice from the IRS challenging items on your tax return. The Taxpayer Legal Assistance Project (TLAP) can also assist you with IRS collection matters. TLAP represents low-income individuals in legal disputes with the IRS. TLAP does not prepare tax returns. If you have a tax problem, and to see whether you are eligible for representation, call 1-888-576-5529 and tell the person who answers the telephone that you have a tax problem.
This information last reviewed: Nov 2, 2011