 Welcome to the session in which we will discuss who must file a tax return and when. Well, starting with individuals. When it comes to individuals, it depends on three factors. It determines when you should file. The first one is your filing status. What is your filing status? Is it a single? Is it married filing jointly? Is it married filing separately? Is it head of a household? Is it a surviving spouse? That matters because based on your filing status, it's going to determine something called your standard deduction. Even if you don't know what the filing status now, just don't worry about it. I'm going to show you an example on the next slide because your filing status will determine your standard deduction. Also depending on your income. Also what's related to your income is your standard deduction and you're going to see why. So depending on your filing status, depending on your income and depending on your age, how old are you? And you're going to see there is an exception or there is an additional deduction for the age. Now, bear in mind that all what it boils down to is it's your standard deduction plus additional deductions. What are the additional deductions? The additional deduction is your age. That's basically what it boils down to. Because your filing status and your income, those two will kind of basically tell us if you are more or less than the standard deduction. In addition to the standard deduction, you add what's called an additional deduction and the only additional deduction you can add is the age deduction. Now bear in mind you might have additional standard deduction for blindness. The blindness additional standard deduction does not apply in this determination. It does not apply. In other words, you cannot use the blindness additional deduction. So if someone is blind, the government will give them additional deduction. This additional deduction, you cannot add it to the standard deduction in order to determine whether you should file or not. Just bear that in mind because sometimes they might trick you. Yes, there is an additional deduction, but you don't use it. Before we proceed any further, I have a public announcement about my company farhatlectures.com. Farhat Accounting Lectures is a supplemental educational tool that's going to help you with your CPA exam preparation as well as your accounting courses. My CPA material is aligned with your CPA review course such as Becker, Roger, Wiley, Gleam, Miles. My accounting courses are aligned with your accounting courses broken down by chapter and topics. My resources consist of lectures, multiple choice questions, true-false questions as well as exercises. Go ahead, start your free trial today. No obligation, no credit card required. Now what happens if you are self-employed? In other words, you don't get a W2. Well, if that's the case, you are required to file if your net earnings. Net earnings is your net profit exceeds a certain amount. Now it happens to be 400, but this amount could change subject to inflation. Now I'm going to show you the figures for the requirement for the filing based on these rules for individuals, but those figures, any number I give you, it might change from year to year. It's subject to inflation, but the rules are the same. What happened if you are a dependent on another return? So what happened if you file a tax return, but you are not, in quote, independent? Somebody already claimed you, but you still have to file. Well, if you are filing as a dependent, what is your standard deduction? Well, because you should have a standard deduction. The standard deduction will be the greater of 1,100 or your earned income plus 350 not to exceed the single standard deduction. I know I'm throwing a lot of terms on you, just everything's going to be clarified on the next slide with figures, but basically what you are saying here, why would you file if you are already a dependent? You would file because you want to get a refund or you might have to file because you have unearned income. So you have to file even if you are a dependent. Well, your standard deduction, the greater of 1,100 or 350, which is given by the IRS, earned income, earned income plus 350, whatever you earned plus 350 not to exceed the standard deduction, whatever, whatever, whatever that single standard deduction happens to be, which we'll see a sample on the next page. Those are the general rules for individuals. For corporations, regardless of the amount of taxable income, they must file an annual tax return. So it doesn't matter. A state and trust, basically similar to net earnings. You have to have a gross income, not net earnings, gross income of 600. So this is the gross income of 600. Remember for the individual employed, it's net profit or net earnings. Okay, your net profit, your profit is revenues minus expenses. Now, let's take a look at actual numbers to make sense of all of this. It's pretty straightforward. So for the sake of illustration, I'm going to be using the year 2022. But remember year 2022 could be different from year 2023, 2024, but the rules are the same. For example, single. If your gross income, when should you file? If your gross income exceeds 12,950, you might be asking why? Here's why. Because if you made, let's assume you made 12,950 exactly, an income. That's your earnings per year. Then the government's going to give you a standard deduction. I'm going to abbreviate as the of 12,950. It's just basically a deduction. Think of it as a fake deduction, a standard deduction. Basically, everyone gets their single. So if you generated 12,950, your standard deduction will wipe out your income. Therefore, you're not responsible for anything. Okay, so that's why the minimum is your standard deduction. If you make less than the standard deduction, you don't have to file. Would you file? You might want to file to get a refund, but you don't have to file. Why? Because your income is less than your standard deduction. Let's assume you are single, but you are 65 or older. Well, now you have your minimum is 14,700. Why? Remember what I told you on the previous slide? It's your standard deduction plus additional deduction. Well, there's an additional deduction for age. If you are 65 or older and single, the government will give you an additional deduction of 17,750. Therefore, as long as you have earnings less than that, what's going to happen, your standard deduction and additional deduction will wipe it out. And that's why you don't have to, you are not required to file. Married filing jointly, they get a standard deduction of 25,900. So if you are married filing jointly, the amount is 25,900. If married filing jointly, again, if married filing jointly, with one spouse over 65, what's going to happen is you're going to get your standard deduction plus 1,400. Plus 1,400. That's the additional standard deduction for the age, which is over 65. Married filing jointly and over 65. Well, both over 65. Now you're going to get the 25,900 plus 2,800, 1,400 for each individual because we have both of them over 65. Therefore, 28,700. Married filing separate return, anything above $5. And you're going to learn throughout the course that married filing separately, they're always penalized. The government don't like this filing status. Therefore, if you have more than $5, you have to file. If you have more than $5 in income, you have to file. Head of a household, the standard deduction is 19,400. If you are a head of a household. Now, if you're a head of a household and you are 65 or older, you're now, the threshold goes up to 21,150 because it's your standard deduction plus the additional deduction, which is like a single 1750. Surviving spouse with a dependent child, 25,900. So notice what I want to show you here. I want to make sure you notice that surviving child with a dependent child is the same thing as married filing jointly. Surviving spouse 65 or older with a dependent child is 27,300. Again, just like married filing jointly with one spouse over 60, over 65. Now, you might be saying, when do I file as a single? When do I file as a married filing jointly? When do I file head of a household? So on and so forth. When do I file married filing separately? We're going to learn about all these rules when we discuss the filing status. All we're looking here is when do you have to file? Now, the requirement to file, remember, is based on the gross income, not whether you have a refund or not because some people said, well, I have a refund. I don't have to file. Well, yes, you still have to file depending on your gross income, but also you want to file if you have a refund. Why? Because you want to get your money back. Now, the government don't want you to file because they don't want to give you the money, but you want to file. Now, you are not prohibited if your gross income falls below the threshold, you're not. You can file and you should file and you should always file. I'll tell you why, because sometimes the government might have some sort of a tax incentive or some sort of a stimulus payment. And if you did not file, you don't exist on the record. You may not get it. So you always should file whether you are required or not, but especially if you have a refund. So in fact, taxpayer who are owed a refund should file a tax return in order to receive the refund or claim a refundable credit for future years if they are not otherwise required to file. Now, when do you have to file? That's the other questions. When do you have to file for individuals? Hopefully we know the date. It's April 15th, but the rule is it's 15 day of the fourth month following the year. So it becomes April 15th. April 15th for assuming the calendar year, you are using the calendar year. So what's the calendar year? It's January 1st till December 31st. When do you have to file? You go four months, January, February, March, April, this is the fourth month, the 15th day, the 15th day of the fourth month, April 15th. Now, do date that falls on a Saturday, Sunday, or a holiday? Let's assume April 15th is any of these dates. It's automatic extension to the next day that's not Saturday, Sunday, or holiday, which is the next business day. So if April 15th is a holiday, the due date will become April 16th. If April 15th is a Saturday, then you're gonna go Sunday, it will, then the due date will not be, Sunday will be the 16th, the due date will be on the 17th. So the next business day. For corporations, and here what we're talking about, C corporation, C as in Charlie. Also, 15 day of the fourth month following, following the corporation calendar year. So simply put, if your calendar year is a, if your year end is a calendar year, and it's April 15th. Now, there's an exception. The exception is for the tax return for C corporation with the June 30th year end, because corporation could have year end other than December 31st, which is the calendar year. Well, under those circumstances, then your due date is three months later, which is September the 15th. Not four months, so it's July, August, September. The September is the third month, three and a half month if your year end is June 30th. Now, if you are a partnership, or an S and an S corporation, notice there's an S and there's a C and you will know the difference later on. Partnership and S corporation are non-taxable corporation. Non-taxable means they don't pay taxes themselves. Hold on a second, what does that mean? It means they don't pay any taxes? No, the shareholders will pay the taxes. The shareholders of the corporations will pay the taxes. So the corporation don't pay the taxes versus a C corporation, this is a taxable corporation. Taxable means it pays corporation. These are non-taxable corporation. So what happened for these type of entities? What's gonna happen is the due date is 15 day of the third month. Well, hold on a second. Assuming year end, we're talking about January, February, March, hold on a second. So by March 15th, you have to file the tax return for this corporation. You might be asking, why? Why do they want it early? Here's why, because remember, who pay taxes on the profit of this corporation? The shareholders, remember, you want to file the return by March the 15th so you can send the paperwork to the individual, to the shareholders so they have a month from March 15th to April 15th to determine their taxes. That's why partnership and S corporation will have to file earlier. Why? Because they have to determine their profit and who's gonna pay taxes on the profit? The individuals and the individual will have a month from March the 15th. Let's assume you finish the return on the due date. You waited and most of the time, this is what happens always. Most of the tax return are done toward March 15th, okay? So you finish the return, then you notify the taxpayer. Now this is what you are responsible for. Now they have a month between March 15th and April 15th to file their tax return. So simply put, in other words, if you are usually, if you own shares in a partnership or an S corporation, what's gonna happen is you have to wait until they finish your corporate return, which is S corporate return in order to file your return. Same thing with a partnership. First, the partnership will have to file so they tell you what you are responsible for. Now, what happened if you cannot file on time? And this happens all the time. You know, CPA firms get busy, you don't submit your paper on time, you haven't figured out your books, so on and so forth, no problem. You can file an extension and the form is 48.68 and I used to file a lot of those, especially toward the end of either March 15th or April 15th. So this is an automatic extension of time. Notice extension of time, not of payment. So I'm gonna focus on few things here. First, it's the who's filing, but notice estimate of total tax liability. For example, you would say my total estimate, notice my total liability, it's going to be $35,000. And I already paid $20,000, now I still owe $15,000, $15,000. You have to pay the $15,000. So notice here, you have to write a check with this extension. You cannot just say I'm filing an extension, I don't have to pay. If you know you have to pay, you still owe money because your tax liability is 35, you already paid 20, you still owe them 15, you have to send a check with this return. I know I'm emphasizing this because many CPA exam questions and many enrolled agent questions, they focus on this. Well, it doesn't mean because you filed an extension of time, it means you have an extension on the payment, no. They give you more time, but they want their money. That's simply what it means. And I'm gonna repeat this here. So individual, partnership and S corporation who are unable, they can file an extension. No, the extension is automatically granted. Once they receive it, you don't have to wait for their permission, it's automatically granted. Now, C corporation can also request an automatic extension, six or seven month extension depending on the corporate year end. There's different corporate year end. Now, an extension to file a return only delays the deadline for filing. It doesn't delay the payment, not for paying taxes. You still have to pay the tax, but it's gonna give you more time to put your paperwork together. Now, of the taxpayer, do not pay the full amount of taxes that are owed by the original due date of the tax return. Well, you're gonna have to pay interest on the unpaid balance, okay, from the due date until the taxes are paid. Also there's interest and penalties for underpayment and non-filers and this is a topic for a separate session to be discussed later. What should you do now? What did we learn here? We learn who should file and when, okay? What should you do now? 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