If a person's 2011 income fell below a prescribed level in 2011, he or she does not need to bother with filing a federal income tax return -- on Form 1040, 1040A, or 1040EZ. This consideration is most likely to apply to younger individuals who have little or no income like teenage and college-age kids, seniors who receive most of their income from federal-income-tax-free Social Security benefits, and individuals who were out of work last year.
A requirement to file a tax return depends on filing status, age and the type of income received during the year. Individuals who are age 65 or older are allowed to have more income than younger taxpayers before they are required to file.
However, as we'll explain below, even if an individual isn't required to file, it may be a good idea anyway. But first, here is what you need to know to determine if a loved one can be excused from the 2011 federal income tax filing chore.
The General Rules
The following table shows the maximum amount of gross income a person can generally have for 2011 without being required to file a Form 1040 with the IRS. These thresholds are based on the 2011 standard deduction and personal exemption amounts.
| Filing Status | Age on December 31, 2011 | Gross Income Threshold* |
| Single | Under 65 | $ 9,499 |
| 65 or older | $10,949 | |
| Head of household | Under 65 | $12,199 |
| 65 or older | $13,649 | |
| Married joint filer** | Under 65 | $18,999 |
| 65 or older (one spouse) | $20,149 | |
| 65 or older (both spouses) | $21,299 | |
| Married filing separately | Any age | $ 3,699 |
| Qualifying widow(er) with dependent child*** | Under 65 | $15,299 |
| 65 or older | $16,449 |
* For this purpose, gross income basically means potentially taxable income from all sources, including income from outside the U.S. (even if the tax rules allow all or part of that income to be excluded). Don't include Social Security benefits in gross income unless a taxpayer uses married filing separate status and lives with a spouse at any time during the year. However, if a taxpayer received Social Security benefits, a separate calculation needs to be done to see if any benefits are taxable. If they are, the individual generally must file a return.
** If a taxpayer files jointly but was not living with a spouse as of December 31, 2011 (or on the date a spouse died, if applicable), the individual must file a return (regardless of age) if gross income exceeds $3,699.
*** If a taxpayer's spouse died in 2009 or 2010, and he or she has at least one dependent child, the individual can potentially file as a qualifying widow or widower. Qualified taxpayers are allowed to calculate a federal income tax bill using the more-favorable standard deduction amount and tax bracket amounts for married joint filers.
Lower Thresholds for Dependents on Another Tax Return
Reduced gross income thresholds apply if a person is claimed as a dependent on another taxpayer's Form 1040 for 2011. Once again, these income thresholds are based on the 2011 standard deduction and personal exemption amounts, and they depend on which of the following four scenarios the person fits into.
Scenario 1: If an individual was UNMARRIED and NOT 65 as of December 31, 2011 and NOT blind, he or she must file if he or she had:
- More than $950 of unearned income (typically from investments).
- More than $5,800 of earned income (typically from a job or self-employment activity).
- income in excess of the larger of: $950 or his or her earned income amount (limited to $5,500) plus $300.
Scenario 2: If an individual was UNMARRIED and 65 or older as of December 31, 2011 or BLIND, he or she must file if he or she had:
- More than $2,400 of unearned income (or more than $3,850 if you were 65 or older and blind).
- More than $7,250 of earned income (or more than $8,700 if you were 65 or older and blind).
- Gross income in excess of the larger of: (1) $2,400 (or $3,850 if he or she was 65 or older and blind) or (2) an earned income amount (limited to $5,500) plus $1,750 (or $3,200 if he or she was 65 or older and blind).
Scenario 3: If an individual was MARRIED and NOT 65 as of December 31, 2011 and NOT blind, he or she must file if he or she had:
- More than $950 of unearned income.
- More than $5,800 of earned income.
- Gross income of at least $5 and a spouse files a separate return and itemizes deductions.
- Gross income in excess of the larger of: $950 or an earned income amount (limited to $5,500) plus $300.
Scenario 4: If an individual was MARRIED and 65 or older as of December 31, 2011 or BLIND, he or she must file if he or she had:
- More than $2,100 of unearned income (or more than $3,250 if 65 or older and blind).
- More than $6,950 of earned income (or more than $8,100 if 65 or older and blind).
- Gross income of at least $5 and a spouse who files a separate return and itemizes deductions.
- Gross income in excess of the larger of: (1) $2,100 (or $3,250 if 65 or older and blind) or (2) an earned income amount (limited to $5,500) plus $1,450 (or $2,600 if he or she was 65 or older and blind).
Other Situations Filing Is Required Regardless of Income
Regardless of gross income, a person must file a 2011 return if he or she finds themselves in any of the following situations.
- The person owes any "special taxes" such as the alternative minimum tax, federal employment taxes for a household employee, or taxes related to an IRA or qualified retirement plan account (such as the 10 percent penalty tax on retirement account distributions received before age 59 1/2). Note: This is not an exhaustive list of "special taxes."
- The person had net earnings from self-employment of $400 or more.
- A person sold a vacation home for a profit.
- The person had wages of $108.28 or more from a church or qualified church-controlled organization that is exempt from Social Security and Medicare taxes.
- The person or his or her spouse (if filing jointly) received a distribution from a Health Savings Account (HSA), Archer Medical Savings Account (MSA), or Medicare Advantage MSA.
It May Pay to File Even When Not Required
Let's say a person's 2011 gross income is low enough that he or she is not required to file this year. It obviously would be a good idea to file to collect a refund of taxes withheld from working part time, as is often the case with teenage children working after-school jobs. But it can also be a good idea to file for these reasons:
- The person may be due a refund for 2011, for example because of the refundable earned income tax credit or the refundable dependent child tax credit.
- Until a 2011 return is filed, the general three-year statute of limitations period for the commencement of an IRS audit won't start. The IRS can go back additional years if a substantial error is identified. So the IRS could decide to audit a person's 2011 tax situation five years (or more) from now, and hit him or her with a tax bill plus interest and penalties. By that late date, the person could have a very tough time proving he or she actually didn't owe anything for 2011. In contrast, if a person files a 2011 return showing zero federal income tax liability, the IRS generally must begin any audit of his or her 2011 tax year within three years of the filing date. Once that three-year window closes, 2011 generally becomes history.
- If a person had an overall capital loss for 2011 caused by investment losses, he or she can carry that loss forward to future tax years and offset otherwise taxable capital gains in those years. However, until a person files a 2011 return, the IRS will have no way of knowing that he or she generated a tax-saving capital loss carryover in 2011.
- If a person had an overall net operating loss (NOL) for 2011 caused by business losses, he or she can carry the NOL back to the 2009 tax year and possibly claim a refund. Alternatively, he or she can choose to carry the NOL forward to future tax years and offset otherwise taxable income earned in those years. But again, until a person files a 2011 return, the IRS will have no way of knowing that he or she generated a tax-saving NOL in 2011.