The Answers to Top Questions During Tax Season
Paying taxes is a tall enough order during the best of years, and 2020 was hardly the best of years. In terms of taxes, it was a year like no other. The government was forced to borrow record amounts of money to distribute to taxpayers in the form of emergency cash payments. That cash, however, was not counted as part of those taxpayers’ taxable income from 2020.
Find Out: What Are the 2020-2021 Federal Tax Brackets and Tax Rates?
The IRS also did something that was almost unprecedented during — it postponed Tax Day, pushing the filing deadline back from April 15 to July 15, 2020. And this year, it’s been postponed again; although only until May 17.
Needless to say, if you’ve got tax questions, you are not alone. The following is a summary of some of the most common tax questions complete with the most up-to-date and accurate answers and information. Tax Day will be here before you know it, and while you don’t have to pay just yet, it’s never too early to find answers to your most pressing tax questions.
Last updated: April 12, 2021
How Do I Know If I Have To File a Tax Return?
Factors like your age, income and filing status all determine whether or not you have to file an income tax return. For example, if you’re under the age of 65, you’re single, you earned less than the standard deduction ($12,400 for 2020) and you don’t have self-employment income or some other special circumstance, you don’t have to file a return.The IRS offers a simple questionnaire called “Do I Need to File a Tax Return?” Anyone can complete it in about 12 minutes.Read More: 8 New or Improved Tax Credits and Breaks for Your 2020 Return
What Filing Status Should I Choose?
Your filing status determines your tax liability. Everyone falls into one of five filing status categories and each comes with its own tax bracket. There are two options for married people and three for unmarried people, including:Single
Married filing jointly
Married filing separately
Head of household
If you’re not sure which to choose, use the IRS’ free tool “What is My Filing Status?” It takes about five minutes to complete. Find Out: Top 10 Most Expensive States To File Taxes
Do I Have Any Dependents?
The IRS classifies dependents either as “qualifying children” or “qualifying relatives.” That can include biological children, foster children, stepchildren and any of their descendants. Other relatives can qualify as dependents, even if they don’t live in the household in some cases. The IRS’ “Who May I Claim as a Dependent?” tool will help you figure it out if you’re not sure. See: The Major Tax Changes for 2021 You Need To Know About
How Do I Know My Tax Bracket and Tax Rate?
The IRS releases updated tax brackets and tax rates every year. For tax year 2020, to be filed in 2021, the brackets and rates are:12% for incomes over $9,875 ($19,750 for married couples filing jointly)
22% for incomes over $40,125 ($80,250 for married couples filing jointly)
24% for incomes over $85,525 ($171,050 for married couples filing jointly)
32% for incomes over $163,300 ($326,600 for married couples filing jointly)
35% for incomes over $207,350 ($414,700 for married couples filing jointly)
37% for incomes over $518,400 ($622,050 for married couples filing jointly)
Read More: Tax Year Deadline Dates You Need To Know
Should I Take the Standard Deduction or Itemize?
For tax year 2020, the standard deduction is $12,400 for single filers or $24,800 for married couples filing jointly. With no limitations on itemized deductions, you can literally write off every expense that can legally be deducted from your taxable income. If you have enough of those expenses to add up to more than $12,400 or $24,800, you should itemize. If not, take the standard deduction.Did You Know: This Is Where Your Tax Dollars Actually Go
What’s the Difference Between a Tax Credit and a Tax Deduction?
Tax credits, which can be either refundable or nonrefundable, are applied to the amount of tax you owe to lower your bill or increase your refund. Tax deductions, on the other hand, are items that reduce the amount of your income that can be taxed.New Homeowners: Here’s What You Need To Know for Your Taxes
When Are Taxes Due?
All tax returns for tax year 2020 must be filed by May 17, 2021, which is also the deadline for all payments owed to the IRS unless an extension has been granted. It’s important to note that this date has been extended from the typical April 15 deadline — similar to what the IRS did last year.Find Out: What Does Biden’s Win Mean for Your Taxes?
How Do I File a Tax Return?
You can file a federal tax return at no cost directly through the IRS’ Free File system. You can also use the IRS Tax Counseling for the Elderly (TCE) and Volunteer Income Tax Assistance (VITA) programs to get help filing for free if you qualify. There are also many commercial software options, including big names like TurboTax, TaxSlayer and Credit Karma. Many offer both free and paid versions of their services. Finally, there’s always the option of hiring a professional who is an authorized e-file provider. Read: 9 Tax Tips Every Married Couple Must Know
When Will I Get My Refund?
The IRS generally starts accepting returns and processing refunds in late January. Nine out of 10 refunds arrive within 21 days, with one big caveat. About 80% of all filers receive refunds through direct deposit. Those who still rely on the mail should expect delays. The IRS urges everyone to sign up for direct deposit, and if 21 days pass with no refund, use the IRS’ “Where’s my Refund?” tool.Find Out: Get These 12 Tax Moves Done To Increase Your Tax Refund
What If I Can’t Afford To Pay the Tax I Owe?
Always file a tax return by the deadline whether you can afford to pay your tax bill or not. When you do file, pay whatever you can to reduce your bill. Rest assured, the IRS will contact you about the rest. When they do, you’ll be able to work out a payment plan in most cases, and that can help you stretch your bill out into agreed-upon monthly installments. More From GOBankingRatesDon’t Miss Out on Nominating Your Favorite Small Business To Be Featured on GOBankingRates — Ends May 31
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This article originally appeared on GOBankingRates.com: The Answers to Top Questions During Tax Season
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