The first thing to understand is that most people don’t need to file, ever. The only people who have to file are those with earnings over a certain amount. So the first thing you have to do is find out what that amount is. If your income was below the threshold, you don’t have to file a return this year or ever unless you have other reason to file, like self-employment income or foreign income. So start by looking at the instructions for Form 1040-EZ . That tells you what the filing threshold is.
If your adjusted gross income was below that threshold, then you don’t need to file anything now. You can just throw away this tax booklet and never worry about it again. The IRS will still know how much money you made; they will just know it on the basis of returns filed by banks and employers who pay you.
If your AGI was above the threshold but your total tax liability (all taxes owed, including self-employment tax) was below the threshold, then you don’t need to file anything now either; you can just throw away the tax booklet and never worry about it again.
The most important reason a lot of people don’t have to file a return is that their income is below the filing threshold. In 2015, single people under 65 can earn up to $10,300 without having to file a return; for married couples, the cutoff is $20,600.
Income from interest or dividends is normally reported on 1099s and not on W-2s. The threshold for reporting those forms is higher – $1,500 – but if you don’t have any other income it doesn’t matter. If your interest and dividend income is below the filing threshold and you don’t own a business or have a rental property, then you don’t have to file a return.
But what about deductions? If you’re not going to take the standard deduction, should you bother to file at all?
Well, if your deductions are going to be more than your standard deduction, you do need to figure out if they will put you over the threshold. But if your deductions are less than or equal to your standard deduction – or if they are going to push you below the filing threshold – it’s better just not to file at all.
There are two filing statuses: married filing jointly (MFJ), and everyone else. Your status determines which forms you must file, and what schedules to fill out.
The easiest way to find your filing status is to look at the last line of Schedule 1; if it says “You are not required to file a tax return,” you don’t need to file anything at all. If it says “You are required to file a tax return,” you need to fill out everything through Line 63 on page 2 of 1040, and possibly some schedules as well.
If you’re self employed and expect to owe $1,000 or more after subtracting withholdings and credits, you must file a return. If you’re not self employed but had income that needs to be reported on a return — wages, interest, dividends, unemployment compensation — you must file if your gross income (that is, before subtracting deductions and exemptions) was more than $5,350.
If your income was less than those amounts, you don’t have to file or pay. But you may want to file even if it’s not required; here’s why:
You can get refunds for some taxes withheld from your paychecks. And if you qualify for the earned income credit (EIC), it will be much larger if you claim it on a return than if you claim it on the tax form that accompanies your W-2.
Other reasons to file: You might be due a refund from the IRS. You might have overpaid your taxes during the year and can receive a refund by filing a return. You might have investment income that qualifies for the saver’s credit.
When tax day comes, you probably want to put it off as long as possible. But filing is not the only way to do your taxes. You may be eligible for free help.
The IRS offers free help to people with very simple tax situations. And if you make $54,000 or less (excluding any Social Security benefits), you can pay for help through the Volunteer Income Tax Assistance program (VITA). Most VITA sites offer free electronic filing.
There are also people who charge money for preparing your taxes, but there are also people who offer free tax help from their own homes. The IRS website has a list of all the tax preparers who have offered to provide free services in the past.
If you file a return, the Personal Income Tax and Benefit Return form gives you a chance to give money back to the government. The CRA calls it “your balance owing.”
If your refundable credits are more than your tax payable, then not only won’t you have a balance owing, you’ll get a cheque from the government. It’s complicated to explain why, but it has to do with how much tax was withheld from your paycheques all year. If you had too much withheld, then you will get money. For most people that is unlikely.
Personal tax accounts are one of the best things about doing your own taxes. With a personal tax account, you can file online and get your refund in as little as eight days. And, if you do your taxes with H&R Block at home, you can even get your refund in as few as three days with direct deposit.