Tax Return

A tax return is the document by which a taxpayer reports the items the law requires to be reported and determines the tax due on them. Section 6065 of the Internal Revenue Code requires that any such document contain or be verified by a written declaration that it is made under the penalties of perjury, which is what separates a return from a worksheet or an estimate. Who must file one is set by section 6012, captioned "Persons required to make returns of income." The phrase covers a whole class of documents rather than a single form. An individual files Form 1040, an estate or trust with enough income files Form 1041, a corporation files its own return, and a person who makes gifts above the annual exclusion files Form 709. The rules below concern the individual income tax return, which is the one nearly everyone means.

The threshold is measured on gross income, and that is the most frequently missed word in the rule. Section 6012(a)(1)(A) requires a return from an individual whose gross income for the year equals or exceeds the exemption amount, then excuses filers whose gross income is less than the exemption amount plus the basic standard deduction for their category. Because section 151(d)(5)(A) sets the exemption amount at zero for every taxable year beginning after 2017, the practical threshold tracks the standard deduction for the filer's status. Section 6012(a)(1)(B) then raises it by one additional standard deduction for a filer who has reached 65. Note which additional amount that is: the statute points at the deduction for age, not the one for blindness, so a blind filer under 65 gets no increase in the filing threshold even though the same taxpayer gets a larger standard deduction. The current dollar figures move every year and the IRS publishes them in Publication 501 and the Form 1040 instructions.

A special rule that governed 2018 through 2025 has expired, and a great deal of published guidance has not caught up. Section 6012(f) stated the test directly in terms of the standard deduction, and by its own words it applies only to a taxable year beginning after December 31, 2017 and before January 1, 2026. The 2025 tax law did not extend it. So the general rule at section 6012(a)(1) governs again. The arithmetic lands close to where it was, because the exemption amount is zero either way, but the route through the statute is different and any source citing 6012(f) as current law is citing a lapsed provision.

The self-employment threshold is separate, much lower, and easy to trip without noticing. Section 6017 requires a return from every individual with net earnings from self-employment of $400 or more. That figure is statutory and has never been indexed. It attaches to net earnings rather than to net profit, and net earnings are 92.35 percent of profit, so the profit that actually crosses the line is a little over $433. This test is independent of the income-tax threshold: a student with a few hundred dollars of freelance income and no other earnings can be required to file even though no income tax is owed. A person claimed as someone else's dependent is also tested separately, under lower thresholds that treat earned and unearned income differently.

Other returns, other thresholds. Section 6012 also reaches every corporation subject to tax, every estate with gross income of $600 or more, every trust with any taxable income or $600 of gross income, and several categories of organization. Those $600 figures sit in the statute with no indexing provision attached to them, so unlike the individual threshold they do not move with the annual inflation adjustments.

Filing when you do not have to is often the point. Federal income tax withheld from wages or from a retirement distribution is recovered only on a return, and the refundable credits, principally the earned income credit and the refundable part of the child tax credit, exist only as claims made on a return. There is also a quieter reason. Section 6501 gives the IRS a limited period to assess additional tax, and section 6501(c)(3) provides that where no return is filed the tax may be assessed at any time. A year with no return is a year that never closes.

Deciding whether a return is required means running two independent tests and then asking a third, practical question.

1. The gross income test. Add up gross income for the year and compare it with the threshold for your filing status, which tracks the standard deduction and rises for a filer 65 or older. The current figures are published by the IRS at IRS.gov.

2. The self-employment test. Separately, compute net earnings from self-employment. At $400 or more, section 6017 requires a return regardless of how the first test came out.

3. The practical question. Even if neither test is met, was tax withheld during the year, or is a refundable credit available? Either one is recoverable only by filing.

A hypothetical example. Naomi is 24 and single. She earned $9,400 in wages with $610 of federal income tax withheld, and made $520 of net profit walking dogs. Assume her total income is below the gross income threshold published for her filing status that year, so the first test is not met.

Her net earnings from self-employment are 92.35 percent of $520, or $480.22. That is above $400, so a return is required, and the self-employment tax on it is 15.3 percent of $480.22, or $73.47.

The same return that creates the obligation also pays her: her $610 of withholding covers the $73.47 and the balance, $536.53, comes back. Had she concluded that the first test settled the question and skipped filing, she would have left that $536.53 with the government and kept a year open to assessment indefinitely.

Reasons to file even when the law does not require it

• Withheld tax is refunded only on a return, and for a low earner it is frequently the largest single sum they will receive all year.
• Refundable credits are claims, not automatic payments. No return, no claim.
• Filing starts the limited period in which the IRS can assess more tax. Never filing leaves that period open with no end.
• A filed return is the document lenders, colleges and benefit programs ask for, and reconstructing an unfiled year later is far more work.
• A return on file makes it harder for someone else to file a fraudulent one using your Social Security number.

Honest costs and cautions

• It is signed under penalties of perjury, so an unexamined return prepared by someone else is still the filer's legal statement.
• The obligation is measured on gross income, which means a year with large receipts and no profit can still require a return.
• Filing jointly makes both spouses responsible for the whole tax on that return, which is a legal consequence of the filing decision rather than of the underlying income.
• The thresholds change every year and a rule of thumb remembered from a previous year is a common source of a missed filing obligation.