- Most workers incur income tax as a result of working at a job. The money you earn from employment is income and therefore it is subject to income tax. The purpose of a tax return is to reconcile differences between the amount of income you make each year and the amount of tax you pay through tax withholding or estimated taxes. Tax withholding occurs when an employer takes money out of your paycheck and sends it to the IRS. Self-employed workers must send tax payments to the IRS themselves through estimated taxes. If you make zero dollars, your income tax obligation is zero so there is no need to file a return.
- Even if you did not earn any income by working a normal job, running a business or doing contract work, you may still have to file a tax return if you received income from other non-work related sources. For example, you might be required to file if you made money in the form of interest paid on a savings account, dividends paid for investments you hold, capital gains on the sale of assets, gambling winnings or royalties. In other words, you don't have to make money from active work to owe income taxes.
- The IRS states that for 2010 tax returns, you must file a tax return if your gross income was $9,350 or more as a single filer; $18,700 or more as a married person filing a joint return; $3,650 as a married person filing a separate return; and $12,050 as the head of a household. Gross income includes all sources of income and may include a portion of your Social Security benefits.
- Young people like high school students and college students who do not work and have no passive sources of income do not have to file tax returns. People who can be claimed as dependents and do have income face different fling requirements than other workers. The IRS states that a dependent must file a tax return if unearned income is more than $950 or if earned income is more than $5,700.
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