Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: MONDAY, February 1, 1993 TAG: 9301300021
SECTION: BUSINESS PAGE: A7 EDITION: METRO
SOURCE: JIM LUTHER ASSOCIATED PRESS
DATELINE: WASHINGTON LENGTH: Long
HOW TO KNOW IF YOU NEED TO FILE AN INCOME TAX RETURN
For millions of Americans, the toughest part of the federal income tax may be figuring out whether they have to file a return.If you must file, the next step is to pick the best form for your situation.
The general rule is that a person must file if 1992 income exceeded the sum of the personal exemption and the standard deduction.
Thus, a single person under 65 must file if income was $5,900 or more. A couple under 65 could have earned as much as $10,599 without having to file. Although additional exemptions are available for dependents, they are not considered in the requirements about who must file a return.
In many cases, a person should file even though it is not required. For example, you must file to get a refund of any taxes that were withheld from your paychecks, even though your income is under the minimum filing amounts. If you qualify for the earned-income credit, it can't be claimed unless a return is filed.
Regardless of the level of your income, you must file if you netted at least $400 from self-employment last year; if you owe any special tax, such as tax on a premature withdrawal from an Individual Retirement Account, or if you received advanced earned-income-credit payments from your employer.
Here are the basic filing thresholds for each type of return:
SINGLE TAXPAYER. A person who was under 65 at year end must file if gross income was $5,900 or more. For a person 65 or older, the threshold is $6,800.
MARRIED COUPLES, FILING JOINTLY. For two spouses under 65 and living together at year end, a return must be filed if income was $10,600 or more. If one spouse is 65 or older, the threshold is $11,300; if both are at least 65, it is $12,000. To qualify for a joint return, the couple must have been living together at year end and neither may be claimed as a dependent by another person.
MARRIED COUPLES, FILING SEPARATELY. Such persons must file if income was $2,300 or more.
HEAD OF HOUSEHOLD. If you were under 65 at year end, you must file if income was at least $7,550. If you were older, the threshold is $8,450.
A head of household pays a lower tax rate than a single person. To qualify, you must have been unmarried on Dec. 31, 1992, and paid more than half the cost of maintaining the principal home of a qualified relative for more than half the year. That includes a child, grandchild, parent, grandparent, aunt, uncle, niece, nephew or an in-law but not a cousin. Your parent need not live with you; any other relative must.
QUALIFYING WIDOW OR WIDOWER. File if you were under 65 at year end and income was $8,300 or more. If you were 65 or older, the threshold is $9,000. This filing status allows you to save money by using a joint return. If your spouse died in 1990 or 1991 and you had not remarried by the end of 1992, you may file as a qualifying widow if:
You paid over half the cost of maintaining for all of 1992 the principal home for a child you were eligible to claim as a dependent, and
You were entitled to file a joint return the year your spouse died.
You may file a joint return if your spouse died in 1992 and you did not remarry during the year. The same is true if your spouse died in 1993 before filing a return.
DEPENDENTS. The rules change considerably if you, the taxpayer, can be claimed as a dependent by a parent, a relative or anyone else. In this case, you must file if:
Under 65, earnings - wages, tips and the like - exceeded $3,600 ($3,000 if married), and unearned income, such as interest and dividends, was zero.
Under 65, married or single, total income was over $600 and you had at least $1 of unearned income.
Single and 65 or older, earned income exceeded $4,500, OR unearned income exceeded $1,500. A third test can get mind-boggling - add $900 plus whichever is larger, $600 or your earned income (up to $3,600). You must file if total income is bigger than that sum.
For example, you earned $2,800 in wages and tips in 1992. Your pension of $7,000 ran your total income to $9,800. Adding $900 to your earned income results in a $3,700 figure. Since your $9,800 total income exceeded $3,700, you must file a return.
Married and under 65, earned income exceeded $3,000, OR if gross income was more than $600 and you had $1 or more unearned income.
Married and 65 or older and had earned income over $3,700, OR unearned income exceeded $1,300. A third test: Add $700 and whichever is larger: $600 OR your earned income (up to $3,000). File if total income exceeds that sum.
There are more than 75 different federal tax forms, but everybody who has to file must pick one of three: the long Form 1040, the shorter 1040A or the almost-easy 1040EZ.
If you itemize deductions or have taxable income of $50,000 or more, you must use the more complicated 1040. But any tax adviser will tell you to use 1040, regardless of the complexity, if you have enough deductions.
Here are the rules, assuming you don't itemize:
Form 1040EZ. You must be single, under 65, not blind, and claim no dependents or tax credits. Your 1992 income - after subtracting your personal exemption and standard deduction - must have been less than $50,000. You may have had up to $400 of taxable interest, but the rest of your income had to be from wages, tips and taxable scholarships.
If no one else can claim you as a dependent - you must indicate yes or no on 1040EZ - write $5,900 on Line 4 as the total of your exemption and standard deduction. This is subtracted from total income to determine how much is taxable.
Can you be claimed by a parent or someone else? Then you lose your personal exemption. The back of 1040EZ has a worksheet on which you calculate the figure for Line 4.
There is one new restriction this year: You may not use 1040EZ if you had more than one employer and your total wages exceeded $55,500 in 1992.
Form 1040A. This form works for any filing status - single, joint return, married filing separately or head of household - so long as taxable income was under $50,000. Income is restricted to wages, tips, scholarships, interest, dividends, unemployment compensation, pensions, Social Security benefits and payouts from an Individual Retirement Account.
You may use 1040A and still write off qualifying contributions you made to an IRA last year, or claim the earned-income credit or child-care credit. But you may not use 1040A if you claim an adjustment for alimony paid or for self-employment health insurance premiums.
Form 1040. Any type of income that may not be reported on 1040A will require the filing of the long Form 1040. This includes capital gains, whether from the sale of investments or your principal home; dividends; barter income; earnings from self-employment; taxable state and local income tax refunds; prizes, and farm income.
Form 1040EZ is self-contained - there are no schedules or supplemental forms to file.
You have a choice of four schedules if you file 1040A: Schedule 1 for interest or dividends; Schedule 2 for the child-care credit or employer-paid dependent care; Schedule 3 for the credit for the elderly or disabled, and Schedule EIC for the earned-income credit.