Registered Tax Return Preparer RTRP Practice Exam

A self-employed individual has a filing requirement when their net earnings from self-employment are $400 or more. This threshold is significant because it is the point at which self-employed individuals must pay self-employment tax and report their earnings to the IRS. This tax is applicable not only to the income but also funds Social Security and Medicare programs. If a self-employed individual's net earnings fall below this amount, they typically do not have a federal tax obligation to file a return, but they may still need to file under other circumstances, such as earning other forms of income or qualifying for certain tax credits.

In contrast, options regarding gross income, lower net earnings, and claims of no filing requirements for self-employed individuals do not accurately represent the specific IRS regulations that dictate when self-employed individuals must file. The focus on net earnings specifically captures the tax responsibility associated with self-employment income.