Posted by The TaxAdvocate Group, LLC

Do I Have To Pay Tax On Such Little Earning?

Do I Have To Pay Tax On Such Little Earning?

Every year, many self-employed citizens and part-time workers feel they might not have to pay tax on their earnings. However, there is no specific rule that specifies the minimum one needs to make before paying taxes. The employment status and age determine if one will file taxes. It is, however, easy to decide on which rule might apply to a specific taxpayer.


How the IRS Defines Earnings

According to Uncle Sam, "earnings" can be defined as wages, tips, or salaries that an individual gets from an employer or themselves (self-employed) due to services rendered. According to the IRS, other payment can also be classified as earnings:

  • Benefits from a union strike

  • Royalties

  • Prepaid income

  • Rents paid on properties.

Factors like employment status, the individual's gross income, dependency status, etc., affect the IRS minimum income status. 

Besides, every state has its unique tax rules and what they define as income. Similarly, there are no income taxes in some states. Your local tax office will guide you on the rules that apply to you. 


Self-Employed People

People that are self-employed, including freelancers with a net earning of over $400 a year, have to file tax. 


Wage Earners 

The filing status determines the minimum income for wage earners. Anyone earning the amount specified below will have to file taxes 

Status 

Income

Single

$10,350

Head of household

$13,350

Widowed

$16,650

Married couples filing jointly 

$20,700

Married filing separately

$4,050

Source: Internal Revenue Service



Retired Citizens 

Retirees enjoy a higher taxable income level. This means that they can earn slightly more than non retired citizens without bothering about taxes. The following reveals the minimum earning by status for retiree

Status

Above 65

Under 65

Single

$11,900 or more

$10,350 or more

Head of Household

$14,900 or more

$13,350 or more

Widow and dependent children

$17,900 or more

$16,650 or more

Retirees filing Jointly (Married, one 65+)

$21,950 or more

$21,950 or more

Retirees filing Jointly (Married, both 65+)

$23,200 or more

$23,200 or more

A married and separate filing

$4,050 + (each)

$4,050+ (each)



Considerations for Social Securities 

The following rules apply to people that qualify for social security benefits.

  • People whose joint earnings fall in the range of 25,000 and 34,000 USD might be taxed on 50% of their social security earnings.

  • People with joint earnings of more than $34,000  might be taxed on 85% of their social security earnings.

  • People who file jointly with a total earning in the range of 32,000 and 44,000 will be taxed on  50% of their Social security earnings.

  • People filing jointly with a total earning of more than 44,000 USD will be taxed on 85% of their social security earnings.



Dependents

Here are the conditions for a dependent to submit a tax. The person must have earned 

  • More than $6,300 in wages over the years

  • More than $400 as self-employment income

  • $950 and above as interest income

As long as the combined earned wage alongside the interest income is more than $1,050, they must file taxes.


Earned Income Tax Credit

Uncle Sam allows low-income earners to have an earned income tax credit (EITC) on their account. With this credit, people that qualify can retain a larger part of their income. Only the following group of people can enjoy the credit:

  • Singles without children with earning below $14,880

  • People with a single qualifying child earning below $39,296

  • People with two qualifying children earning below $44,648

  • People with three children, and more, with income below $47,955

Other limits will bound married taxpayers who are filing jointly. For such, their annual income must be below:

  • $20,430 for people not claiming any child

  • $44,846 for one child claimed

  • $50,198 for claiming two qualified children

  • $53,505 for claiming three qualified children or more

Alongside these income limits, taxpayers earning over $3,400 in dividend income or interest does not qualify for EITC. Taxpayers need to submit their tax return to claim the credit. Citizens can estimate the credit value using the IRS EITC assistant tool.


FOR MORE INFORMATION OR TO INQUIRE AS TO HOW WE CAN BEST HELP YOU WITH YOUR TAX FILING NEEDS, PLEASE CONTACT US AT The TaxAdvocate Group, LLC, BY CLICKING THE BLUE TAB ON THIS PAGE.


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