Tax Questions? We Have Direct Answers.
The most common U.S. tax questions, answered clearly without jargon.
What is the deadline to file my federal tax return?
The standard federal income tax filing deadline is April 15. If that date falls on a weekend or holiday, the deadline shifts to the next business day. You can file Form 4868 by April 15 to get an automatic six-month extension to October 15 for filing, but this does not extend the deadline to pay taxes owed. Late payment penalties begin accruing after April 15 regardless of any extension you file.
How much income do I need to earn before I have to file taxes?
For tax year 2024, single filers under 65 must file if their gross income exceeds $14,600. Married filing jointly thresholds are $29,200 for both spouses under 65. Self-employed individuals must file if net self-employment income is $400 or more, regardless of other income. Even if you are not required to file, you should do so if taxes were withheld from your paycheck since you may be owed a refund.
What is the standard deduction for 2024?
The 2024 standard deduction is $14,600 for single filers, $29,200 for married filing jointly, and $21,900 for head of household. These figures are adjusted annually for inflation. About 90 percent of taxpayers take the standard deduction because it is larger than their itemized deductions. You should only itemize if your total deductible expenses – mortgage interest, state taxes, charitable contributions, and medical costs – exceed the standard deduction for your filing status.
How does freelance income get taxed differently than W-2 income?
Freelancers and self-employed individuals pay both the employee and employer portions of Social Security and Medicare taxes, totaling 15.3 percent on net earnings (called self-employment tax). W-2 employees only pay half of this because employers cover the other half. The good news: self-employed workers can deduct half of self-employment tax from their gross income. You also must make quarterly estimated tax payments since no employer is withholding taxes from your earnings throughout the year.
What is the home office deduction and who qualifies?
The home office deduction allows self-employed individuals to deduct a portion of home expenses based on the square footage used exclusively and regularly for business. W-2 employees no longer qualify for this deduction after the 2017 Tax Cuts and Jobs Act. For self-employed people, the simplified method allows $5 per square foot up to 300 square feet ($1,500 max). The regular method calculates actual home expenses proportionally and often yields a larger deduction but requires more record-keeping.
What should I do if I receive an IRS notice or letter?
Do not ignore an IRS notice. Read it carefully to understand what the IRS is asking or proposing. Most notices request additional information, propose a change to your return, or inform you of a balance owed – they are not audit summons. Note the response deadline, gather any relevant documentation, and respond in writing if required. If you agree with the IRS assessment, follow the payment instructions. If you disagree, respond by the deadline explaining your position. Never call the IRS without reading the notice first.
How long should I keep my tax records?
The IRS recommends keeping tax records for at least three years from the filing date, which is the general statute of limitations for audits. Keep records for six years if you underreported income by more than 25 percent. Keep records indefinitely if you filed a fraudulent return or never filed at all. Employment tax records should be kept for at least four years. Property records – including cost basis documents – should be kept for as long as you own the property plus three to seven years after you sell it.
Do I have to pay taxes on cryptocurrency gains?
Yes. The IRS treats cryptocurrency as property, not currency. This means every taxable event – selling crypto, trading one coin for another, or using crypto to purchase goods – triggers a capital gain or loss that must be reported. Short-term gains on crypto held less than one year are taxed as ordinary income. Long-term gains on crypto held over a year qualify for lower capital gains rates of 0, 15, or 20 percent depending on your income. Receiving crypto as payment for work is treated as ordinary income equal to its market value at the time of receipt.
What is an Offer in Compromise and do I qualify?
An Offer in Compromise (OIC) is an IRS program that allows qualifying taxpayers to settle their tax debt for less than the full amount owed. The IRS evaluates your ability to pay based on your income, expenses, and asset equity. You generally qualify if your reasonable collection potential (what the IRS could collect over the remaining collection period) is less than what you owe. The IRS accepts roughly 40 percent of OIC applications. You must be current on all filing requirements and not be in an active bankruptcy proceeding to apply.
What is the best way to reduce my taxable income legally?
The most powerful legal strategies include maximizing pre-tax retirement contributions to a 401(k) or IRA, contributing to an HSA if you have a high-deductible health plan, deferring income into the next tax year when possible, accelerating deductible expenses into the current year, and if self-employed, structuring your business to take full advantage of the QBI deduction. Business owners can also use depreciation strategies like Section 179 to deduct large equipment purchases immediately rather than over several years.
Can I deduct my vehicle expenses for business use?
Yes, if you use your personal vehicle for business purposes you can deduct those expenses using either the standard mileage rate (67 cents per mile in 2024) or the actual expense method, which deducts a proportional share of insurance, fuel, depreciation, and maintenance. You cannot deduct commuting miles between your home and regular workplace. You must track business miles with a mileage log that records the date, destination, business purpose, and miles driven for each trip. The standard mileage rate is simpler; actual expenses often yield a larger deduction for high-value vehicles.
What is tax-loss harvesting and should I use it?
Tax-loss harvesting is the practice of selling investments at a loss to offset capital gains realized elsewhere in your portfolio, reducing your taxable income. You can offset capital gains dollar-for-dollar with capital losses, and if losses exceed gains, you can deduct up to $3,000 against ordinary income per year, carrying forward any remaining losses to future years. Be aware of the wash-sale rule, which prohibits buying the same or a substantially identical security within 30 days before or after the sale or the deduction is disallowed.
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