Not sure you are required to file a tax return in 2015?

Tax season starts today on 1/20/2015, for filing 2014 tax returns. The Internal Revenue Service expects to process nearly 150 million individual tax returns by the time tax season wraps. Will you be filing one of those returns? And more important, do you need to?

For the 2015 tax season, you’ll report the income that you received in 2014. That includes pay received in 2014 but not pay you receive in 2015 for services performed in 2014 (you’ll report that income next year).

Not every person who received income in 2014 has to file a federal income tax return. There are a number of factors that affect whether you have to file including how much you earned – and the source of that income – as well as your filing status and your age. For most folks, this is pretty straightforward.

Using the chart below, choose your filing status, your age and your gross income for the year. If your gross income is above the threshold for your age and filing status, you should file a federal income tax return. These rules apply if no other person claims you on their federal income tax return.

Anyone who applied for health insurance/coverage with ACA (Affordable Care Act/ObamaCare) whether it was a Federal or State Exchange, MUST FILE, regardless of income. The health insurance exchange is based on your current year income of the year you received a subsidy. 50% of people who received subsidies for health insurance will OWE money this filing year, because the exchange over estimated most people incomes. Basically the government wasn’t ready for the roll out, so they just made up an income for you and people received a larger discount than was intended.

For most taxpayers, the quick “cheat sheet” formula is this: find your standard deduction and add your personal exemption to that number (Remember to consider the increased standard deduction for those over age 65). You can find those numbers below here.

If you can be claimed as a dependent on someone else’s return, the rules are a little bit different. Here are some basic guidelines:

• For single dependents who are under the age of 65 and not blind, you generally must file a federal income tax return if your unearned income (such as from dividends or interest) was more than $1,000 or if your earned income (such as from wages or salary) was more than $6,200.
• For single dependents who are over 65 or blind, you generally must file a federal income tax return if your unearned income was more than $2,550 or if your earned income was over $7,750.
• For single dependents who are over 65 and blind, you generally must file a federal income tax return if your unearned income was more than $4,100 or if your earned income was over $9,300.
• For married dependents when either of you are under the age of 65 and not blind, you generally must file a federal income tax return if your unearned income was more than $1,000; if your earned income was over $6,200; or if your gross income was at least $5 and your spouse files a separate return and itemizes deductions.
• For married dependents when either of you are over 65 or blind, you generally must file a federal income tax return if your unearned income was more than $2,200; your earned income was over $7,400; and your gross income was at least $5 and your spouse files a separate return and itemizes deductions.
• For married dependents when either of you are over 65 and blind, you generally must file a federal income tax return if your unearned income was more than $3,400; your earned income was over $8,600; and your gross income was at least $5 and your spouse files a separate return and itemizes deductions.

Keep in mind that these rules apply to dependents who are also married, not just simply married taxpayers. For tax purposes, your spouse is never considered your dependent.

You may also have to file for other reasons. The most frequent reason for filing a federal income tax return even when you don’t meet the basic income criteria is for self-employed persons: those who are self-employed must file a federal income tax return if net earnings are at least $400. Other reasons to file include owing special taxes like a recapture tax (such as the homebuyer’s credit), alternative minimum tax (AMT), write-in taxes (including uncollected social security, Medicare, or railroad retirement tax on tips you reported to your employer or on group-term life insurance and additional tax on health savings accounts), household employment taxes, taxes on tips you did not report to your employer or on wages from an employer who did not withhold those taxes. You also need to file if you had wages of $108.28 or more from a church or qualified church-controlled organization exempt from payroll taxes. And, of course, you may have to file if advance payments of the premium tax credit were made for you, your spouse, or a dependent who enrolled in coverage through the Health Insurance Marketplace.

Don’t forget those tax-favored accounts. You need to file a return if you received HSA, Archer MSA, or Medicare Advantage MSA distributions during 2014. If you took an early distribution from a qualified plan or one in excess of the appropriate amount from a qualified retirement plan, or if you made excess contributions to your IRA or MSA, you’ll need to file. If you didn’t take your minimum required distribution – and you were supposed to – you’ll also need to file.

Even if you don’t need to file a federal income tax return this year, you may still want to take advantage of tax breaks and credits which might be available: popular credits include the additional child credit and the American Opportunity credit. You might also be entitled to a refund for excess withholdings or a refundable credit such as the earned income tax credit (EITC).

It’s also important to consider that these are the federal rules. The rules for your state might be very different. In my own state of Pennsylvania, for example, we have no personal exemption and thus, taxpayers are subject to tax at the first dollar. It is possible that you might have to file a state (or local) income tax return even if you are exempt from federal income tax so don’t assume otherwise.

If, after all of this, you’re still confused, call us, ask your tax professional or give the IRS a call (1.800.829.1040).

2014 Tax Brackets, Standard Deduction Amounts And More

The information below outlines the rates for the 2014 tax year – the numbers you’ll use to prepare your 2014 tax returns in 2015.

These are the applicable numbers for the tax year 2014. These numbers and rates are those you’ll use to prepare your 2014 tax returns in 2015. Got it? Good. Onto the highlights:

Tax Brackets. Here’s what’s on tap for 2014:

Single Taxpayers:

Married Filing Jointly and Surviving Spouses:

Head of Household:

Married Filing Separately:

Standard Deductions. The standard deduction rises to $6,200 for single taxpayers and married taxpayers filing separately. The standard deduction is $12,400 for married couples filing jointly and $9,100 for heads of household. Here’s how those rates compare to 2013:

Itemized Deductions. The limitation for itemized deductions – the Pease limitations, named after former Rep. Don Pease (D-OH) – claimed on individual returns for tax year 2014 will begin with incomes of $254,200 or more ($305,050 for married couples filing jointly). The Pease limitations were slated to be reduced beginning in 2006 and eliminated in 2010; as with the other tax cuts, the elimination was extended through the end of 2012. The limitations were brought back in 2013 at the original thresholds, indexed for inflation. The result of those changes is basically an increase in the top marginal tax rates.

Personal Exemptions. The personal exemption amount is $3,950 in 2014, up from $3,900 in 2013. Phase-outs for personal exemption amounts (sometimes called “PEP”) begin with adjusted gross incomes (AGI) of $254,200 for individuals and $305,050 for married couples filing jointly; the personal exemptions phase out completely at $376,700 for individual taxpayers ($427,550 for married couples filing jointly.)

Alternative Minimum Tax (AMT) Exemptions. The AMT exemption amount for tax year 2014 is $52,800 for individuals and $82,100 for married couples filing jointly. That compares to $51,900 and $80,800, respectively for 2013. In years past, the AMT was subject to a last minute scramble by Congress to “patch” the exemption but as part of the American Taxpayer Relief Act of 2012 (ATRA), the AMT is permanently adjusted for inflation – that’s why you see it in this list.

Earned Income Tax Credit (EITC). For 2014, the maximum EITC amount available is $3,304 for taxpayers filing jointly with one child; $5,460 for two children; $6,143 for three or more children and $496 for no children.

Child Tax Credit. For taxable years beginning in 2014, the value used to determine the amount of credit that may be refundable is $3,000 (the credit amount has not changed).

Kiddie Tax. For 2014, the threshold for the kiddie tax – meaning the amount a child can take home without paying any federal income tax – remains at $1,000.

Adoption Credit. For taxable years beginning in 2014, the credit allowed for an adoption of a child with special needs is $13,190; the maximum credit allowed for other adoptions is the amount of qualified adoption expenses up to $13,190. Phase outs do apply beginning with MAGI in excess of $197,880.

Hope Scholarship Credit. In 2014, the Hope Scholarship Credit cannot exceed $2,500. The amount you can claim is equal to 100% of qualified tuition and related expenses not in excess of $2,000 plus 25% of those expenses in excess of $2,000 but not to exceed $4,000.

Flexible Spending Accounts. The annual dollar limit on employee contributions to employer-sponsored healthcare flexible spending accounts (FSA) remains at $2,500 for 2014.

Individual Retirement Account Contributions. The $5,500 limit on IRA contributions remains the same in 2014.

Federal Estate Tax Exemption. The exclusion amount for estates of decedents who die in 2014 is $5,340,000, up from a total of $5,250,000 in 2013.

Federal Gift Tax Exclusion. The annual exclusion for gifts remains at $14,000 for 2014.

All together, the IRS posted more than 40 updates. You can read more about them at Revenue Procedure 2013-35 (downloads as a pdf).