You may think filing a tax return when you only made $700 isn’t worth the trouble, and it may not be. An annual income of $700 is too low to meet the threshold to mandate a return absent other factors. However, the Internal Revenue Service filing rules aren’t based just on your gross income, so you might have to send in a return anyway. Besides, if an employer deducted from paychecks or you qualify for a tax credit, you may be due a refund, and filing might put some extra cash in your pocket.
Gross Income for Filing
If you only earned $700 from a job and didn’t have other income such as interest or investment profits, you may not have to file a tax return. As of publication, the IRS requires filing when a single person’s gross income tops $10,000. If you were claimed as a dependent, the threshold is $1,000 in unearned income or $6,100 in total income. The cutoff for a married couple filing a joint return is $20,000. With a joint return, you count both spouses’ earnings. If your spouse made enough, you might have to file even though your income was way under the limit.
Other Tax Liabilities
If you owe Uncle Sam any current or back taxes, the IRS usually requires a return regardless of how much money you made. For example, you must file if you owe alternative minimum tax, taxes on money taken out of retirement plans such as individual retirement accounts or unpaid Social Security and Medicare taxes on unreported tips. If you got a deduction or tax credit in the past and it turns out you aren’t entitled to it, you must file a return to report and repay the tax you owe as a result.
When you make $400 or more from self-employment, you will owe self-employment tax even if you don’t owe any federal income tax. The IRS uses “self-employment tax” to mean the Social Security and Medicare taxes due on self-employment income. Normally, employers and workers each pay part of these taxes. Since there’s no employer, a self-employed taxpayer has to ante up both shares. As of publication, the self-employment Social Security tax rate was 12.4 percent of your net earnings. The Medicare tax rate was 2.9 percent.
Taxable Jobless Benefits
You may qualify for unemployment benefits if you lose your job. You might not think of unemployment compensation as income, but the IRS does. If you made $700 and also received unemployment, you may have enough income to make filing a return and paying income tax necessary. You have the option of having taxes deducted from the unemployment check each week. This won’t get you out of filing a return, but it will prevent building up a fat tax bill to pay when tax time rolls around.
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