Tax Frequently asked questions
How can I file taxes free of charge or get tax help for free?
Many online tax-filing firms have partnered with the IRS to offer tax-filing services for free through the Free File program. This program is available for taxpayers earning less than ,000 per year. Many tax software companies offer programs that don't depend on income. TurboTax, for example, offers a free edition to people who have a 1040 return and don't need to file additional schedules for itemized deductions and self-employment income.
The IRS offers free personalized tax assistance through its Volunteer Income Tax Assistance (VITA), and Tax Counseling for the Elderly programs. VITA offers tax assistance for those with limited English and people earning less than ,000. The IRS offers a tool called Get Free Tax Prep Help that allows you to find a tax-filing assistance program near you.
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Are there tax incentives for the year following Dec? 31?
Yes. Yes. You still have time to make tax-advantaged contributions for several types of accounts up to the tax deadline.
If you're 50 years old or younger, you can contribute up to ,000 to your IRA for 2021. Based on your income and any retirement plans at work, contributions could be tax-deductible. You can also contribute to a Roth IRA. This is non-tax-deductible, but it grows tax-free if you are single and have earned less than 0,000 by 2021. If you are married filing jointly, you will get 8,000.
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You can contribute tax-deductible to a simplified employee pension or a solo plan 401(k) if you were self-employed.
If your 2021 health insurance policy had a minimum ,400 deductible for self-only coverage and ,800 for family coverage, you may be eligible to make tax-deductible contributions. HSA contributions can be tax-deductible. The money grows tax-deferred and can be withdrawn tax-free for any health care expenses.
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My children can contribute to a Roth IRA.
Yes, if they earn any income in 2021, they can contribute to a Roth IRA until April 18, 2022. This is a great way for them to save tax-free and have the option to tap into their savings earlier. After age 59 1/2, they can withdraw their earnings tax-free. They can also take any amount at any time, without penalty or taxes, which could help with a down payment on a house, a car purchase, or an emergency fund.
They can contribute as much as they earn from work for the year. The maximum contribution is ,000 in 2021. To help their children get started, parents often match their children’s contributions.
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It all depends on how and when you filed your tax returns. If you file electronically, the refund will be deposited directly into your bank account. You will get the money faster - typically within 21 days. For a direct deposit to multiple accounts, you can include the routing number of your bank and your account number in your Form 1040. You can also submit Form 8888 along with your tax return.
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If you file a paper form return, it can take longer. It usually takes about two months and may take longer if you request a paper check.
The IRS's Where's My Rebate? The tool allows you to check the status of your refund. tool. Enter your Social Security number and your filing status. Also, enter the dollar amount of your refund from your tax returns. The status of your refund can be checked 24 hours after you file electronically or 4 weeks after your mail a paper return.
What happens to me if I miss the deadline for tax filing?
You must file for an extension before the tax-filing deadline. If you miss the deadline and owe money, you may be subject to a late filing penalty of up to 25% of your unpaid balance each month and a monthly penalty of 0.5% for failing to pay taxes on time. You won't get your refund if you miss the deadline.
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You must submit Form 4868 before April 18, 2022, to request an extension for 2021. The extension will be granted for up to 17 days. The IRS doesn't require you to explain why you are asking for an extension. However, you will need to calculate your tax liability and pay the amount you believe you owe. The extension is only for filing purposes. Late-payment penalties will not be assessed if you have paid 90% of your tax liability before the deadline.
This year, I have been working remotely. Is it possible to deduct the home office deduction?
Only if you are self-employed. Employees who work for an employer cannot deduct home office expenses after a 2018 tax law change. This applies even if they worked remotely.
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If they use a portion of their home for business purposes, self-employed individuals can deduct the home office expenses. You don't need a separate space for your home office, but it must be somewhere you do not use any other (such as your kitchen table). You can deduct part of your rent, mortgage interest, utilities, and homeowners/renters' insurance if you are eligible. This is based on how much of your home you use for your home office. You can also opt for the simplified option. This is per square footage of your home office up to 300 sq. feet. A maximum ,500 deduction.
For the home office deduction to be claimed, fill out Form 8829 Expenses of Business Use of Your House and submit it with your self-employed income.
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Are my unemployment benefits taxable?
The most difficult aspect of tax filing in 2020 was the unemployment benefits. These benefits are not usually taxable, but Congress temporarily modified the rules after tens to millions of Americans lost jobs due to the pandemic. They filed for unemployment benefits. The American Rescue Plan Act of 2020 was passed into law on March 11, 2021. It exempted up to ,200 from tax form 2020.
This exemption does not apply to 2021 unemployment benefits. These benefits are subject to Medicare and Social Security taxes, but they are treated as normal income (just like wages).
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Is it possible to get a deduction on my taxes for charitable donations?
To get a tax deduction for charitable contributions, you will usually have to itemize your deductions. This benefit is still available to itemizers. For 2021, those who take the standard deduction will still be eligible for a tax break for charitable contributions. Taxpayers can deduct 0 in charitable contributions under the Coronavirus Aid, Relief and Economic Security Act in 2020, regardless of whether they itemize. The deduction was extended to 2021 and increased to 0 for married couples filing jointly. You must make a gift in cash, and not appreciated stock, to qualify for this deduction. Your donation must also have gone directly towards the charity, not a donor-advised account.
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What tax breaks are most often overlooked?
The tax credit for savers can be worth up ,000 per person (or ,000 for couples). You must contribute to a 401(k), IRA, or other retirement savings plan. To qualify for the credit, you must also meet income limits - in 2021 you must have earned less than ,000 if you are married filing jointly, 500 if you file as the head of household, and ,000 if you are single.
In 2021, the child and dependent care tax credits were increased. The maximum credit for 2020 was 35% of childcare expenses up to ,000 for one child, and ,000 for two or more children. The maximum credit for 2021 was 50% of eligible expenses up to ,000 per child, and ,000 for any two children. For the tax year 2021, the credit is also refundable. You must have children younger than 13 years old or other qualifying dependents, and you must pay for their care while your spouse works or looks for work. Credit is available for daycare, preschool, or day camp غير مجاز مي باشدts.
What should I do if I find out that I have missed deductions after filing my tax return?
If you forget something or make a mistake, you have three years to file an amended tax return. You must file Form 1040X along with any changes. You can claim additional credits or deductions and get an extra refund.
You could file an amended tax return only on paper in the past. However, an amended return can be filed electronically for 2019, 2020, and 2021 returns that were originally submitted electronically (2018 amended returns must still have to be on paper). The IRS' Where's my Amended Return? The tool allows you to check the status of your amended returns and request a refund. tool.
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What tax records should I keep and what can be tossed?
It is a good idea for tax returns to be kept forever (or a digital copy). Keep records that show your income, expenses, and deductions for at most three years from the tax filing deadline. This is generally the time it takes the IRS to begin an audit. If you are self-employed and have income from multiple sources, you may want to keep your records for at most six years. This is the time the IRS must initiate an audit. Audits can be conducted by different states at different times.
Keep some records for longer. Keep track of any stock or mutual fund purchases made in a taxable account. Also, keep records of significant home improvements that you make until you sell your house. Keep track of all non-deductible IRA contributions until the account is closed.
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What red flags can be used to trigger a tax audit
If you haven't reported all your income, the IRS may contact you. If your W-2 or 1099 forms report income, the IRS will request copies. They may also ask you about discrepancies. The IRS may also contact you if your company has reported unusually high expenses or business losses. You will need to submit a letter from the charity confirming your donation if you are donating 0 or more to charity. There are additional requirements for larger gifts.
Before you file, double-check that your Social Security number has been included, that you have signed the return, and that there are no math errors. Keep track of your deductions and expenses for at least three years after your tax deadline to ensure you are ready to present your case to the IRS.
Do I need to file a tax return as a college student?
It all depends on what your income is and whether taxes were withheld from your paychecks. Single students who earned more than the standard ,550 deduction in 2021 must file an income tax return. Earned income (from a job), and unearned income (such as from investments) are both included in the ,550. If their unearned income, such as interest, dividends, unemployment compensation, or interest, exceeds ,100, they must file a return.
If income taxes were withheld from your paychecks, you may be able to file a tax return to get your money back.
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How do I avoid tax fraud?
Do not respond to any calls or emails that claim to be from IRS. If it has any questions or concerns about your return, the agency will send you an email. Be careful when choosing a tax preparer - your income tax return could be a gold mine for ID thieves. The IRS Preparer Tax Identification number must be used by tax preparers to sign your tax return. Never sign a tax return that is not filled out. The IRS Directory of Federal tax return preparers can help you find qualified tax preparers near you. If you have any questions, find out how to reach the preparer following the tax deadline.
For more information on how to protect yourself against the latest tax scams, see the IRS' Tax Scams/Consumer alerts.
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Should you itemize or take the standard deduction.
The standard deduction is now taken by most people. It is significantly higher than in the past. The standard deduction for individuals under 65 years old is ,550 for single filers, ,800 per head of household, and ,100 per married filing jointly. Taxpayers 65 years and older, can claim an additional ,350 deduction, or ,700 if filing under the single or head-of-household filing status.
The itemized deductions are calculated based on specific expenses such as charitable contributions and mortgage interest up to ,000 per annum, as well medical expenses exceeding 7.5% of your adjusted income. If your itemized deductions exceed your standard deduction, you will file Schedule A to report them.
Most common tax questions:
- How can I get tax help or file taxes free of charge?
- Is there a way to get additional tax breaks for the year following Dec. 31?
- My children can contribute to a Roth IRA.
- When will my tax refund arrive?
- What happens if I miss the tax-filing deadline?
- This year, I have been working remotely. Can I deduct the home office deduction?
- Are my unemployment benefits taxable?
- Do I itemize or should I take the standard deduction?
- Can I claim a tax deduction on charitable donations?
- What are the most overlooked tax benefits?
- What should I do if I find out that I have not claimed certain deductions when I file my tax return?
- What tax records should I keep and what tax records can I throw out?
- What are the red flags that could trigger a tax audit and why?
- Do college students need to file tax returns?
- How can I avoid tax fraud?
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What can I do to reduce my tax bill?
There are many ways to reduce your tax bill using deductions or credits. You can reduce your taxable income by using tax deductions, while tax credits will directly lower your tax liability.
You can reduce your taxable income if you earn income from a job. Your employer may offer a high-deductible health plan with access to a flexible spending account (FSA) and a health savings account.
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These accounts let you contribute pretax dollars to save or invest, or to pay for specific expenses. These contributions reduce your taxable income and can help you save money on your taxes.
You may be eligible for the child credit if you have dependents. This credit is partially refundable and was created in 2020 to help lower the غير مجاز مي باشدt of raising children. This credit is worth up to ,000 in 2020 and lowers your tax bill dollar-for-dollar.
The American Rescue Plan has increased the per-child credit for your 2021 tax returns, increasing it to ,600, or ,000 depending upon the age of your child. For 2021, the credit is fully refundable. The IRS will send advance payments for the 2021 Child Credit to families to get it into their hands faster. This is expected to begin in July 2021. Please visit our 2021 Children Tax Credit blog post for more updates.
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What type of deductions am I eligible for?
Nearly everyone is eligible for either the standard deduction or the itemized deductions which reduce your taxable income. These are the most significant deductions you have. For more information, see item 6 below.
While self-employed workers and business owners might have more options to reduce their taxes, employees still have many savings opportunities. When preparing Form 1040, employees can deduct contributions to IRAs and HSAs.
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Employees will not be required to deduct contributions to their 401(k), or other employer-sponsored retirement plans during the year. These dollars are already taken from your wages, as indicated on your Form W-2.
You can also deduct student loan interest when you meet certain income requirements, as well as home mortgage and state and local taxes.
You can deduct some of the غير مجاز مي باشدts associated with running your business, whether you are a side hustler, an independent contractor, or a small business owner. You can deduct your home office, self-employment taxes, supplies, equipment, and depreciation.
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What's the difference between effective and marginal tax rates?
The United States has a progressive tax system. This means that as your income increases, you will fall into a higher marginal bracket. The U.S. has seven marginal brackets for 2020 and 2021. The lowest starting at 10% on taxable earnings above , and the highest at 37% for taxable income over 8,401 (3,601 for 2021), for single filers, and 2,051 (8,301 for 2021), for married couples filing jointly. Your marginal tax rate refers to the tax bracket in which your last taxed dollars fell. If your taxable income is 5,000 in 2021, your marginal tax rate will be 37% since this amount falls within the 37% bracket.
The effective tax rate is the percentage of your taxable income going toward income taxes. The easiest way to calculate your effective rate of tax is to first determine your taxable income, then calculate your total tax bill. To calculate your effective tax rate, divide your total tax by your tax-free income.
What is better, tax credit or a tax deduction?
A tax credit is usually better than a tax deduction, all things being equal. Tax credits lower your tax liability dollar-for-dollar, while tax deductions lower your taxable income. If you have ,000 in taxes to prepare, a ,000 tax credit will reduce that amount.
Your income tax liability would not decrease if you earned ,000 in taxable income and had a ,000 tax deduction. Your taxable income would increase to ,000 instead. This means that depending on your tax bracket, you could save <~PostContent~> to 0 compared to ,000 with a tax credit.
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How can I deduct medical expenses?
If they exceed 7.5% of your adjusted income (AGI), the IRS allows you each year to deduct unreimbursed medical expenses. These expenses can be derived from:
- Preventative care
- Medical treatments
- Surgeries
- Vision and dental care
- Visits by psychiatrists and psychologists
- Prescription medication
- Prescription appliances (glasses, contacts, false teeth, hearing aids, etc.
- To receive this medical treatment, travel expenses (mileage, bus fare, and parking fees) are paid.
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The amount you can deduct will depend on how much income you have and whether you itemize. If your AGI is 0,000, and you itemize all your deductions, any unreimbursed medical expense over 7.5% or ,500 (7.5% off 0,000) can be deducted. You can deduct ,500 (,000-,500) if you have ,000 in qualifying unreimbursed expenses
Do I need to itemize or claim the standard deduction?
You may have wondered before the 2018 tax reform whether it was better to itemize deductions than just claim the standard deduction. The 2017 Tax Cuts and Jobs Act made it much easier to make that decision. If the standard deduction is lower than your tax bill, you don't usually itemize.
It is now more difficult to justify itemizing deductions because the standard deduction almost doubled between 2017 and 2018. The standard deduction for single taxpayers will increase to ,400 in 2020 and ,800 for married taxpayers who file jointly. These amounts will rise to ,550 in 2021 and ,100 in 2021. To get the best tax savings, calculate your itemized deductions each year and compare them with the standard deduction.
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How do I keep up to date with tax laws and any changes?
The tax years 2020 and 2021 saw a lot of changes in tax law. It might seem difficult to keep up with all the updates. TurboTax keeps you informed about the most recent tax law changes each year. It also provides tax tips for the new tax year, so that you feel confident when filing.
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Are you looking for expert tax advice? TurboTax Live allows you to speak with real experts who can assist or do your taxes for free. You can get unlimited advice while you prepare your taxes, or you can have it done for you from start to finish. Find out more about TurboTax Live.
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