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Question: I made a little money this year in my BuyandHold account, but because my work hours were reduced, my income is a lot lower than last year. Will I have to pay taxes?

A BuyandHolder

Answer:

Dear BuyandHolder,

It's a good question - because, as hard as it is to believe, some people are not required to pay income taxes. Whether you need to file or not is based on three things: your income, your filing status and your age.

For tax year 2006, if you are under 65 you must file if your gross income was at least:

$8,450 and you file as a single
$10,850 and you file as head of household
$16,900 and you file a joint return.

Note: If you file jointly, then both you and your spouse must meet the under age 65 requirement.

If you're 65 or older, you get a slight break. You must file if your gross income was at least $9,700 for single filers, $12,100 for head of household, $17,900 for married couples filing jointly if one of you is 65 or older and $18,900 if you're married filing jointly and both of you are 65 or older.

Tip: Curiously, married couples who file separate returns must turn in a 1040 if their income is at least $3,300, regardless of their age.

Unusual Circumstances For Non-Filers

If you fall into any of the following categories, check with your accountant.

If you're a widow or widower under 65 and you are caring for a dependent child, then your income can be up to $13,600 without being required to file.
If you are a widow or widower 65 or older and caring for a dependent child, then your income can be up to $14,600 and you won't be required to file.

I gather you're not a dependent...but for those who are or if you have children...different rules apply.

A child (or unmarried dependent under 65 who has unearned income (interest and dividend income, capital gains) over $850, must file. And, any dependent who has earned income (salary, wages, tips, freelance and consulting income) that is more than $5,150 must also file.

More Information

Naturally, the IRS has a rash of additional rules, regulations and exceptions surrounding the question of who must file. For a complete rundown, read chapter 4 in IRS Publication #17 at: www.irs.gov.

Additional information is available on the IRS Web site in Tax Topic #351, "Who Must File?"

Good luck!

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