tax filing without earned income.....

[kaneohe]

To be clear, I wasn't suggesting using AGI, I was suggesting that total income (Form 1040, line 22) might be gross income. But given it isn't clear, if I were the OP I would just file a return. You can't get in much trouble if you file a return but didn't need to.

Yes, I kind of misunderstood what you were saying......but that total income on line 22 of the 1040 uses the same definition of "income" as AGI for e.g.
Sch C......it takes the "net" income including expenses into account whereas
the test for filing clearly says not to take expenses into account. It would be nice if IRS would adopt nomenclature like MAGI1, MAGI2, MAGI3,etc and then
use them consistently w/ definitions so that nobody got confused. Same w/
income , total income, gross income, etc.

Agree w/your last sentence tho about filing if in doubt.

 

[Alan]

Yeah, we should get rid of all those human CPAs and replace them with robotic CPAs.

There have been studies done in the past where reporters go to to many cpa's with tax returns, each with identical information, and get different answers.

This year, in December, I started doing the exercises that the IRS issue on their "Link and Learn" site, but when I came to check the answers, I couldn't find them, only to discover that the IRS had taken them down because there were errors in them. If the IRS can't even get the answers right on some basic tax returns that they issue themselves as examples, what chance do the rest of us have?

 

[kaneohe]

then there's this little tidbit........apparently no penalty for failing to file IF no tax due so
if the net rental income after expenses is in fact low enough maybe you can get away with it IRS Failure to File Penalty: Penalties for Not Filing a Tax Return

 

[Nords]

Yeah, we should get rid of all those human CPAs and replace them with robotic CPAs.

We call that "TurboTax".

It's the same thing that Intuit has done with their alleged "customer service center".

 

[Free To Canoe]

Another item for the OP to consider.
You may not have to file THIS year but do you anticipate that it will always be like this? One could lose track of where you are with things like depreciation if you skipped a couple of years.

 

[Free To Canoe]

Unearned income > than $950? Need to file.
Got this from the IRS link on this thread.

 

[kaneohe]

Unearned income > than $950? Need to file.
Got this from the IRS link on this thread.

could you provide the link....there are a number in this thread.
Also are you missing a 0 in that number or are you talking about a dependent? All the numbers provided earlier were much larger....

 

[Nords]

One could lose track of where you are with things like depreciation if you skipped a couple of years.

Yeah, luckily we can count on the IRS to keep track for us.

I'm still holding on to a home sale cap gains rollover tax form from 1989 in case we ever sell the rental property that we purchased with the profits... at this point the plan is to document it during probate.

 

[Free To Canoe]

could you provide the link....there are a number in this thread.
Also are you missing a 0 in that number or are you talking about a dependent? All the numbers provided earlier were much larger....

See the IRS link at the bottom of post #3 in this thread.
At the bottom of the IRS page is this statement.

Do one or more of the preceding situations apply to your filing requirements?

Yes No

I clicked No and followed the questions to the unearned income question.

Was your unearned income over $950? Yes
You need to file a Federal Income Tax return. Even if you do not have to file a return, you should file one to get a refund of any Federal Income Tax withheld.

 

[Alan]

See the IRS link at the bottom of post #3 in this thread.
At the bottom of the IRS page is this statement.

Do one or more of the preceding situations apply to your filing requirements?

Yes No

I clicked No and followed the questions to the unearned income question.

Was your unearned income over $950? Yes
You need to file a Federal Income Tax return. Even if you do not have to file a return, you should file one to get a refund of any Federal Income Tax withheld.

I followed the questions on the link as you suggested but the figure I came to was $9,500.

Single and Younger Than 65
Is your gross income less than $9,500?
Yes | No

 

[kaneohe]

See the IRS link at the bottom of post #3 in this thread.
At the bottom of the IRS page is this statement.

Do one or more of the preceding situations apply to your filing requirements?

Yes No

I clicked No and followed the questions to the unearned income question.

Was your unearned income over $950? Yes
You need to file a Federal Income Tax return. Even if you do not have to file a return, you should file one to get a refund of any Federal Income Tax withheld.

Thanks for the link....didn't know about that slick flow chart. I believe
you must have answered yes to the dependent question to get the $950?

 

[Alan]

Thanks for the link....didn't know about that slick flow chart. I believe
you must have answered yes to the dependent question to get the $950?

Nice detective work. I assumed the OP, a retired disabled Vet, would not have said that he could be claimed as a dependent by someone else.

 

[Texas Proud]

See the IRS link at the bottom of post #3 in this thread.
At the bottom of the IRS page is this statement.

Do one or more of the preceding situations apply to your filing requirements?

Yes No

I clicked No and followed the questions to the unearned income question.

Was your unearned income over $950? Yes
You need to file a Federal Income Tax return. Even if you do not have to file a return, you should file one to get a refund of any Federal Income Tax withheld.

The problem is this:

"Single and Younger Than 65
Is your gross income less than $9,500?"

This is where the OP is having problems... from what I remember, he has a rental property that has a net loss... and he is saying his gross is a loss so he answers this 'NO' and does not have to file. I say he has to look at only his rental income to answer this question. It it is over $9,500 he has to answer this question "YES" and has to file...


I think that the problem people are having is the definition of income. One thing that most people do not consider is that you can not net your numbers to come up with income. IOW, you have income and expenses. The income is taxable... now you are claiming expenses that will reduce that income to a lowere level, but you have to actually claim those on a return. If you do not put them down on a return you are not claiming them.

 

[kaneohe]

TP....you may very well be right about the rental situation but I have not seen an IRS link that says that. Here's a quote from Pub 4012 p. A1
about the gross income test:
*******************************************************
Gross income includes gains, but not losses, reported on Form 8949. Gross income from a business means, for example, the amount on Schedule C, line 7, or
Schedule F, line 9. But, in figuring gross income, do not reduce your income by any losses, including any loss
on Schedule C, line 7, or Schedule F, line 9.
**************************************************************
This quote seems to lean both ways:
1) for capital gains (F8949), it says to include gains but not losses. That suggests to me that if I sell A for 10K and B for 5K, I don't use 15K as a gross income test but I need to see the individual transactions. Suppose I bought
A for 1K and B for 10K. Then I have a gain of 9K for A and a loss of 5K for B. I then use 9K for the gross income test. Therefore I'm not doing
a "net net" of +9-5 = 4K but an intermediate "net" of 9K by not including the loss.

2) for business (sch C), however, it points to using line 7 on sch C (if a gain). Line 7 subtracts cost of goods sold from gross revenues but does
not subtract "expenses" so again it is not the "net net" but an intermediate
"net" that is used for the gross income test

3) rentals....I have not seen any explicit explanation of what is used for the gross income test so I am not sure what the right answer is. Find me a link and I will be a believer.

 

[Texas Proud]

TP....you may very well be right about the rental situation but I have not seen an IRS link that says that. Here's a quote from Pub 4012 p. A1
about the gross income test:
*******************************************************
Gross income includes gains, but not losses, reported on Form 8949. Gross income from a business means, for example, the amount on Schedule C, line 7, or
Schedule F, line 9. But, in figuring gross income, do not reduce your income by any losses, including any loss
on Schedule C, line 7, or Schedule F, line 9.
**************************************************************
This quote seems to lean both ways:
1) for capital gains (F8949), it says to include gains but not losses. That suggests to me that if I sell A for 10K and B for 5K, I don't use 15K as a gross income test but I need to see the individual transactions. Suppose I bought
A for 1K and B for 10K. Then I have a gain of 9K for A and a loss of 5K for B. I then use 9K for the gross income test. Therefore I'm not doing
a "net net" of +9-5 = 4K but an intermediate "net" of 9K by not including the loss.

2) for business (sch C), however, it points to using line 7 on sch C (if a gain). Line 7 subtracts cost of goods sold from gross revenues but does
not subtract "expenses" so again it is not the "net net" but an intermediate
"net" that is used for the gross income test

3) rentals....I have not seen any explicit explanation of what is used for the gross income test so I am not sure what the right answer is. Find me a link and I will be a believer.

You can believe what you want.... I have not dog in this hunt...

But look at Sch E.... your income is at the top and expenses below... if you compare to sch C or F, you would take line 4...

I will ask you... why would you think that you could take line 26 or even 41? You already know that looking at the first page of the 1040 is not correct per the quote you gave. So you have to go to the actual schedule. Comparing the places to look for the various schedules given indicates line 4...

 

[Texas Proud]

Heck, after looking, it is in the first sentence...

"Gross income ​

​

​

​

​

means all income you received in the form of money, goods, property, and services that is not exempt from tax, including any income from sources outside the United States or from the sale of your main home (even if you can exclude part or all of it).

It does not say all income received after expenses.... but ALL income..

It goes on to give some examples for you. Just because they did not give real estate as an example does not mean you can forget out it.​

 

[Brat]

IMHO, when in doubt file. The OP may have no tax due but at least there will be no risk of them coming back at him for failure to file. That inevitably happens when the taxpayer is in the weakest position to defend themselves.

One of my former co-workers marred late in life, her husband died soon after and then she learned that he hadn't filed tax returns for several years before their marriage. IRS tied up his estate for several years while she reconstructed the returns he should have filed. He had tossed his records because he didn't think he needed them.

 

[Free To Canoe]

Thanks for the link....didn't know about that slick flow chart. I believe
you must have answered yes to the dependent question to get the $950?

+1 on the nice detective work. The difference in the answers doesn't even make sense (to me). Mistake in the software?

 

[kaneohe]

+1 on the nice detective work. The difference in the answers doesn't even make sense (to me). Mistake in the software?

No mistake.....comes from the chart on p. A2 of pub 4012 part of which says:

Chart B – For Children and Other Dependents
If your parent (or someone else) can claim you as a dependent, use this chart to see if you must file
a return.
In this chart, unearned income includes taxable interest, ordinary dividends, and capital gain
distributions. It also includes unemployment compensation, taxable social security benefits, pensions,
annuities, and distributions of unearned income from a trust. Earned income includes salaries, wages,
tips, professional fees, and taxable scholarship and fellowship grants. Gross income is the total of
your unearned and earned income.
Single dependants. Were you either age 65 or older or blind?
□ No. You must file a return if any of the following apply.
1. Your unearned income was over $950.
2. Your earned income was over $5,800.
3. Your gross income was more than the larger of —
a. $950, or
b. Your earned income (up to $5,500) plus $300.
..............................................

If you had only read the chart on the earlier p. A1, you could easily have
gotten the idea that $9500 was the threshold. I don't believe that chart makes any notes that you need to see the chart on the next pg if you are
a dependent which has a lower threshold for filing.......so sometimes (often?) you can get in trouble by only reading until you think you see the answer. Sometimes (often?) you have continue reading the paragraph/page/section /chapter until you are pretty sure you have the answer since earlier generalizations may be qualified by other conditions.

 

[Free To Canoe]

No mistake.....comes from the chart on p. A2 of pub 4012 part of which says:

Chart B – For Children and Other Dependents
If your parent (or someone else) can claim you as a dependent, use this chart to see if you must file
a return.
In this chart, unearned income includes taxable interest, ordinary dividends, and capital gain
distributions. It also includes unemployment compensation, taxable social security benefits, pensions,
annuities, and distributions of unearned income from a trust. Earned income includes salaries, wages,
tips, professional fees, and taxable scholarship and fellowship grants. Gross income is the total of
your unearned and earned income.
Single dependants. Were you either age 65 or older or blind?
□ No. You must file a return if any of the following apply.
1. Your unearned income was over $950.
2. Your earned income was over $5,800.
3. Your gross income was more than the larger of —
a. $950, or
b. Your earned income (up to $5,500) plus $300.
..............................................

If you had only read the chart on the earlier p. A1, you could easily have
gotten the idea that $9500 was the threshold. I don't believe that chart makes any notes that you need to see the chart on the next pg if you are
a dependent which has a lower threshold for filing.......so sometimes (often?) you can get in trouble by only reading until you think you see the answer. Sometimes (often?) you have continue reading the paragraph/page/section /chapter until you are pretty sure you have the answer since earlier generalizations may be qualified by other conditions.

Thanks!

 

[MuzikLvr]

Hello everyone. Thanks for all the Iinformation. You all are a wealth of knowledge. I am looking to "initiate" doing my taxes first and see how it looks. If it doesn't seem too complicated, I will complete it, if not, I will find some one to do it for me.

Sorry for The delay. I didn't realized I had so many replies.

Last note. I talked to my bank and they opened my heloc again so the first thing I did was pay off the 4 cc's with ugly limits.

I feel so relieved and now I Have:

UNCLE SAM. @7%
Military account @9.99%

Both in good stand and uncle SAM isn't on my credit report and the account is in good standing
Whew!