Who Must File (Income Thresholds)

Understanding who must file a federal tax return is fundamental knowledge for the EA exam and tax practice. The requirement to file depends on several factors: gross income, filing status, age, and special circumstances. This section covers the 2024 tax year thresholds that apply to the EA exam.

The Basic Rule

If you are a U.S. citizen or resident of the United States or Puerto Rico and you meet the filing requirements, you must file Form 1040 (or Form 1040-SR for seniors). The filing requirements are primarily based on minimum income thresholds, though some situations require filing regardless of income.

Understanding Income Types

Before examining the thresholds, you must understand how income is categorized:

Gross Income includes all income received in the form of money, goods, property, and services that is not exempt from tax. This includes:

• Income from sources inside and outside the United States
• Taxable portion of Social Security benefits
• Business gross income (but not losses)
• Capital gains (but not capital losses)

Gross income breaks down into two categories:

Earned Income:

• Salaries, wages, tips
• Professional fees
• Business income from self-employment
• Taxable scholarships and grants

Unearned Income:

• Taxable interest and dividends
• Capital gains
• Unemployment compensation
• Taxable Social Security and pensions
• Annuities and trust distributions

2024 Filing Thresholds for Most Taxpayers

The following table shows the minimum gross income required to file a return based on filing status and age for tax year 2024:

Key Insight: These thresholds correspond to the standard deduction amounts. If your income is below your standard deduction, you generally owe no income tax and are not required to file.

Exam Tip: Notice that Married Filing Separately has a threshold of only $5. This effectively means anyone using this status must file a return.

Filing Requirements for Dependents

Individuals who can be claimed as dependents on someone else's return use different thresholds. For single dependents under age 65, a return is required if:

1. Unearned income exceeds $1,300, OR
2. Earned income exceeds $14,600, OR
3. Gross income exceeds the larger of:
   • $1,300, or
   • Earned income + $450

For single dependents age 65 or older or blind, the thresholds increase:

• Unearned income over $3,250
• Earned income over $16,550
• Gross income over the larger of $3,250 or earned income + $2,400

Married dependents follow similar rules, with one critical addition: if gross income is $5 or more AND their spouse files separately with itemized deductions, they must file.

Special Filing Requirements (Regardless of Income)

Certain situations require filing Form 1040 even if gross income is below the normal thresholds:

1. Self-Employment Income ($400 threshold) If net earnings from self-employment are $400 or more, you must file. This is one of the most commonly tested topics on the EA exam.

The calculation: Net Earnings from Self-Employment = Net Self-Employment Income x 0.9235 (92.35%)

2. Special Taxes Owed:

• Alternative Minimum Tax (AMT)
• Additional tax on qualified plan distributions (early withdrawal penalties)
• Household employment taxes (paying domestic employees)
• Unreported Social Security/Medicare tax on tips
• Recapture taxes (such as depreciation recapture)

3. Health-Related Accounts:

• Distributions from a Health Savings Account (HSA)
• Distributions from an Archer MSA or Medicare Advantage MSA

4. Premium Tax Credits:

• Received advance payments of the Premium Tax Credit (health insurance marketplace)

5. Church Employees: Wages of $108.28 or more from a church or church-controlled organization exempt from employer Social Security/Medicare taxes.

Why File Even If Not Required?

Even when not required to file, taxpayers may want to file to:

1. Claim a refund of withheld taxes
2. Claim refundable credits such as:
   • Earned Income Credit (EIC)
   • Additional Child Tax Credit
   • American Opportunity Credit
   • Premium Tax Credit
3. Start the statute of limitations on IRS assessment
4. Document income for loan applications or other purposes

Real-World Application

Example 1: Joey, age 21, is single and not a dependent. He earned $11,000 from a part-time job and had $2,500 in dividends and $1,000 in interest. Total gross income: $14,500.

Result: Joey is NOT required to file because $14,500 is less than the $14,600 threshold for single filers. However, if federal income tax was withheld from his wages, he should file to get a refund.

Example 2: Monica, age 21, is single and not a dependent. She earned $11,000 from her grass-cutting business and had $2,500 in dividends and $1,000 in interest. Total gross income: $14,500.

Result: Monica MUST file because her self-employment net earnings exceed $400. She may not owe income tax, but she will owe self-employment tax.