2019 Update: Do I Have to File Taxes?

Around this time of year we get lots of questions about filing taxes.  To be clear from the beginning, a disclaimer:  while Elder Law of East Tennessee assists clients with many legal issues related to finances, but we do not practice tax law and are not CPAs.  If you have questions related to your taxes or other financial issues, we recommend that you speak with a qualified financial advisor or tax professional.

That said, here is some basic information about filing made available through the IRS and SSA which may help to answer your questions and get you started on the right path:

General Filing Rules

If your filing status is… AND at the end of 2018 you were…* THEN file a return if your gross income was at least…**
Single Under 65 $12,000
65 or older $13,600
Head of household Under 65 $18,000
65 or older $19,600
Married, filing jointly*** Under 65 (both spouses) $24,000
65 or older (one spouse) $25,300
65 or older (both spouses) $26,600
Married, filing separately Any age $5
Qualifying widow(er) with dependent child Under 65 $24,000
65 or older $25,300

* If you were born before January 2, 1954, for social security purposes you are considered to be 65 or older at the end of 2018.

** Gross income means all income received in the form of money, goods, property, and services that is not exempt from tax.  This includes income from sources outside the US or from the sale of your primary residence (even if you can exclude part or all of it).  Gross income does NOT include social security benefits unless

(a) you are married filing a separate return and you lived with your spouse at any time during 2018, or

(b) one-half of your social security benefits plus your other gross income and any tax-exempt interest is more than $25,000 ($32,000 if married filing jointly).

If (a) or (b) applies, use the Form 1040 instructions to calculate the taxable part of social security benefits to include in your gross income.

Gross income also includes gains, but not losses, reported on Form 8949 or Schedule D.  You may not reduce your income by any losses from business means reported on Schedule C or F.

*** If you did not live with your spouse at the end of 2018 (or on the date your spouse died) and your gross income was at least $5, you must file a return regardless of your age.

Filing Rules for Dependents

If you are… AND you are… THEN you must file a return if in 2018…
Single Under age 65 and not blind Your unearned income was more than $1,050.
Your earned income was more than $12,000.
Your gross income was more than the larger of

(a) $1,050 or

(b) your earned income (up to $11,650) plus $350.

Over age 65 or blind Your unearned income was more than $2,650 ($4,250 if both blind AND age 65 or older).
Your earned income was more than $13,600 ($15,200 if both blind AND age 65 or older).
Your gross income was more than the larger of

(a) $2,650 ($4,250 if both blind AND age 65 or older), or

(b) your earned income (up to $11,650) plus $1,950 ($3,550 if both blind AND age 65 or older).

Married Under age 65 and not blind Your gross income was at least $5 and your spouse files a separate return and itemizes deductions.
Your unearned income was more than $1,050.
Your earned income was more than $12,000.
Your gross income was more than the larger of

(a) $1,050 or

(b) your earned income (up to $11,650) plus $350.

Over age 65 or blind Your gross income was at least $5 and your spouse files a separate return and itemizes deductions.
Your unearned income was more than $2,500 ($3,650 if both blind AND age 65 or older).
Your earned income was more than $13,300 ($14,600 if both blind AND age 65 or older).
Your gross income was more than the larger of

(a) $2,350 ($3,650 if both blind AND age 65 or older), or

(b) your earned income (up to $11,650) plus $1,650 ($2,950 if both blind AND age 65 or older).

Filing Rules After Someone Dies

When someone passes away, there are up to three types of taxes which may have to be filed.  These are federal income tax, federal estate tax, and Tennessee Hall tax. The Tennessee inheritance tax was phased out in 2016, so for the estate of anyone who passed away after 2016, it is unnecessary to file Tennessee inheritance tax.

     Federal Income Tax

Federal income tax may be owed for the income earned by the person before he or she passed away during the calendar year up to the date of death.  The tax return is prepared as usual, but “deceased” should be written at the top of the return before filing.

Federal income tax also may be owed on the decedent’s estate if the estate generated more than $600 during the calendar year following the date of death.  It also may be prudent to file a federal income tax return when major transactions involving estate property have occurred during the year, such as selling real estate.  The personal representative of the estate should consult an accountant or CPA for assistance completing the 1041 federal estate income tax return or for help determining whether the gross income of the estate is sufficient to merit filing.

     Federal Estate Tax

Depending on the size of the estate, federal estate tax may be owed.  If the value of a decedent’s estate, before any deductions or claims against it, exceeded $11.18 million in 2018, a U.S. Estate Tax Return (Form 706) must be filed.  The personal representative of the estate is responsible for filing this return, which generally is due nine months after the date of death.

     Tennessee Hall Tax

Tennessee Hall tax is a tax on interest from bonds and notes and dividends from stock.  This tax may be owed on a decedent’s estate if the estate earns more than $1,250 on interest or dividends prior to being distributed to beneficiaries. This will be repealed entirely by 2021.

Conclusion

Filing taxes can be a complicated process, especially if you are acting as a fiduciary and filing on behalf of someone else.  Trusts and probate situations can add additional complexity to a tax situation.  If you are unsure about whether or not to file or have questions about completing tax forms, we recommend that you seek help from a qualified financial or tax advisor.  Getting sound advice from someone who is reliably knowledgeable about the ins and outs of tax laws may provide peace of mind and save you time and money in the long run.

 

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