US tax filing requirement

[MaxGhenis]

Background

PolicyEngine does not currently determine whether a taxpayer must file a federal return, but the Internal Revenue Code (IRC) and corresponding regulations outline specific rules for individuals.

• 26 U.S.C. § 6012 sets out gross‐income thresholds (varying by filing status, age, etc.) above which an individual must file.
• 26 CFR 1.6012‑1 elaborates on these thresholds and exceptions (e.g., married filing jointly, nonresident aliens, etc.).

26 U.S.C. § 6011(a) states that if “required by regulations prescribed by the Secretary,” a person made liable for a tax must file—so we look to 26 CFR Part 1 (especially 1.6012‑1) to see how and when individuals are required to file. There is no specific language in § 6011 or 1.6011–1 that says “if your net tax calculation is > $0, you must file.” Instead, the regulations implement the requirement primarily through gross‐income thresholds and certain special circumstances (like being a nonresident alien engaged in a U.S. trade or business).

In practice, the IRS also uses its Form 1040 Instructions to clarify that you must file if you owe specific special taxes—even when below standard thresholds. But the Code and CFR sections themselves focus on gross income definitions, certain types of income (e.g., from outside the U.S.), and filing status rules.

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What We Need to Implement

1. Base Filing Thresholds

   • Pull in the current (2023, etc.) gross‐income thresholds from § 6012 (and 26 CFR 1.6012‑1) for each filing status.
   • If the taxpayer’s gross income exceeds that threshold, they must file.

2. Special Cases from Regulations

   • For nonresident aliens, partial‐year residents, and others, the CFR lays out additional triggers that often require filing even below typical thresholds.
   • E.g., “every nonresident alien individual…engaged in trade or business in the U.S.” in 26 CFR 1.6012‑1(b)(1).

3. Implementation

   • Add a variable like meets_federal_filing_requirement that is true if any of the regulatory triggers occur.
   • At minimum, implement the gross‐income thresholds from § 6012; add logic for the special cases from 1.6012–1 as needed.

4. No Explicit “If You Owe Any Tax, You Must File” in Code/Regs

   • The statutes and regs revolve around gross income and certain specific conditions (e.g., nonresident alien rules).
   • While the IRS instructions say you must file if you owe certain special taxes (like AMT, household employment tax, recapture, etc.), that requirement is a matter of IRS guidance interpreting multiple Code provisions.
   • We can reflect that guidance if desired, but the direct text of § 6012 and CFR 1.6012–1 focuses primarily on income amounts and specific statuses.

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Proposed Implementation Steps

1. Define the federal_filing_threshold based on filing status, age, and any other relevant parameters for the given tax year (matching the Code/CFR/IRS annual updates).
2. Compare the tax unit’s computed “gross income” with the threshold.
3. Set meets_federal_filing_requirement = true if gross income ≥ threshold or if they meet any special conditions in the CFR (e.g., nonresident alien engaged in U.S. business).
4. Optionally, to align with IRS instructions (though not spelled out in these specific sections of the Code/CFR):
   • Mark meets_federal_filing_requirement = true if the household would owe certain taxes (such as AMT or recapture).
   • However, this goes beyond the literal text of §§ 6011 and 6012, which do not explicitly say “Calculate your net tax, and if it’s above $0, you must file.” Instead, that approach is primarily from the instructions that incorporate multiple sections of the IRC.

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Sample Tests

Below are some YAML examples. Adjust naming/fields as needed:

- name: Single exactly at threshold
  period: 2023
  input:
    filing_status: SINGLE
    fed_agi: 13_850  # Example threshold
  output:
    meets_federal_filing_requirement: true

- name: Single below threshold, no special conditions
  period: 2023
  input:
    filing_status: SINGLE
    fed_agi: 10_000
  output:
    meets_federal_filing_requirement: false

- name: Nonresident alien with US business
  period: 2023
  input:
    filing_status: SINGLE
    fed_agi: 500  # Could be any amount
    # Nonresident alien scenario in which 1.6012-1(b)(1) triggers
  output:
    meets_federal_filing_requirement: true

- name: Married joint above threshold
  period: 2023
  input:
    filing_status: JOINT
    fed_agi: 30_000
  output:
    meets_federal_filing_requirement: true

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Next Steps

• Implement the threshold logic for each filing status in line with §§ 6012 and 26 CFR 1.6012–1.
• Add special checks for the core cases spelled out in the CFR (nonresident aliens, etc.).
• Optionally incorporate the IRS Instructions approach for special taxes if we want to match how the IRS instructs filers—though that guidance is not explicitly enumerated in the statutory or CFR text above.