Deciding to file your own taxes can seem daunting.
From credits and deductions to joint filings, there are a number of factors that can complicate your tax filing process. Fortunately, TaxAct has the tools to make filing a breeze – and lift a little weight off your shoulders this tax season.
With features like their $100k Accuracy Guarantee and Maximum Refund Guarantee as well as free access to CPAs and other tax experts with Xpert Assist , TaxAct’s products and resources can help you get every dollar you deserve. After all, you’ve earned it.
We’ve compiled the most frequently asked questions TaxAct gets every year, with answers straight from their experts.
The most frequently asked tax questions,
Filing your own taxes doesn’t mean you have to go it alone. This year, get a little help from TaxAct.
answered by experts
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Deductions + Refunds
Child Tax Credit
Deductions, Refunds and Payments
Child Tax Credit
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1 TaxAct's Deduction Maximizer guides you step by step through the process of completing your return in a way that helps you uncover additional tax advantages and helps you maximize your deductions by checking dozens of additional deductions we know from experience folks don't think to look for. Each deduction you claim may reduce the amount of tax you owe, resulting in a lower IRS bill overall.
2 Offer for Free TaxAct Xpert Assist may expire at any time without notice. Xpert Assist is available as an added service to certain users of TaxAct’s online, consumer 1040 product. Service hours limited to designated scheduling times and by expert availability. Some tax topics or situations may not be included as part of this service. Return review is broad, does not extend to source documents and not intended to be comprehensive; Xpert Assist is available to address specific questions raised by the customer. View full TaxAct Xpert Assist Terms and Conditions.
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I work in a different state than I reside.
What does that mean for my taxes?
Working across state lines can mean you need to file two state returns. But don’t worry - that doesn’t mean you are taxed twice.
In some cases, you can take advantage of state income tax reciprocity, which exempts income earned by nonresidents of neighboring states. In other cases, you can receive a credit for taxes paid to another state.
Are my expenses from working from home tax deductible?
If you’re an employee working from home because of the pandemic - or for any other reason - you can’t deduct your expenses on your return. You are considered an “employee” if someone pays you for your work and deducts taxes, Medicare, and Social Security from your paycheck.
In the event that you’re an independent contractor or freelancer, you have options to deduct expenses related to working from home because the IRS categorizes you as a business owner.
Can I deduct my home office?
If you use part of your home to run your business, you can deduct expenses for the business use of your home under the home office deduction. That deduction is available to homeowners, renters, and applies to all types of homes.
As a traditional employee, however, you cannot deduct expenses related to your home office. You are traditional employee if your employer pays you for work and deducts taxes, Medicare, and Social Security from your paycheck.
Do I need to report my tip income?
Yes, if your tips each month are $20 or more, they’re considered taxable income that you must report on your return. They’re also subject to Social Security and Medicare tax withholding.
I work a side-gig. What tax forms do I need to file?
If you're a gig economy worker and received payments totaling more than $600 from any one of your jobs during the tax year, the individual or company that paid you generally must send you Form 1099-NEC for nonemployee compensation.
You’ll then need to complete Schedule C, Profit or Loss From Business and transfer the net earnings that appear on that schedule to Form 1040.
When should I file a Schedule C?
If you are self-employed – either as an independent contractor, freelancer or other business owner - it’s likely you need to complete Schedule C to report how much money you made or lost in your business. This form is titled "Profit or Loss From Business (Sole Proprietorship)" and must be included with your income tax return if you had self-employment income.
How do I report my unemployment income?
Unemployment compensation is reported on Schedule 1 of your federal tax return in the Additional Income section. The amount is then carried to the main Form 1040. Make sure to keep all of your forms, including any 1099-G forms you receive, with your tax records. State unemployment divisions issue a Form 1099-G to people who receive unemployment payments during the year.
Why is my unemployment income from 2021 taxed when it wasn’t in 2020?
In 2020, the American Rescue Plan increased the value of unemployment benefits and handed out a significant tax break on that money to recipients. Individuals who received unemployment payments could exempt up to $10,200 of their total payments from being taxed.
In 2021, however, that tax break is no longer available, which means the total amount of a person’s unemployment payments are considered taxable income.
Do I need to file a state tax return?
Seven states do not have an income tax, therefore, if you live or work in one of those states you won’t need to file a state tax return for that state:
• South Dakota
Whether you must file state taxes depends on a few factors. Many states require you to file state taxes if you’re also required to file federal taxes. But in some cases, you may not have to file a state tax return if you only lived in the state a short time or if your income is below a certain level. Each state has its own rules, so it’s best to review the requirements for where you live and work.
Can I report my child’s Form W-2 on my tax return, or should they file separately?
No, you cannot include your child’s Form W-2 information on your tax return.
Instead, you should simply claim them on your return as a dependent, and as if they have no W-2 form. Then, file a separate return for your child, but make sure to check that he or she will not be claimed as dependent by someone else.
Who can I claim as a dependent on my tax return?
A dependent is classified by the IRS as someone you financially support during the year by providing food, shelter, clothing, etc.
All qualifying dependents must also:
• be a U.S. citizen, U.S. national, U.S. resident alien, or a resident of Canada or Mexico AND
• have a Social Security Number (SSN), Individual Taxpayer Identification Number (ITIN), or Adoption Taxpayer Identification Number (ATIN) AND
• not file Married Filing Jointly unless it’s only to claim a refund of taxes paid
What filing status should I choose?
Choosing the right filing status is important as it affects the amount of tax you owe for the year. Sometimes more than one filing status can apply to you, but if that happens, you should choose the one that allows you to pay the least amount of tax. Additionally, your marital status on Dec. 31 is your status for the whole year, so keep that in mind when choosing the filing status that best fits your situation.
1. Single - applies if you aren’t married or if you are divorced or legally separated under state law
2. Married filing jointly – applies if you’re married. Additionally, if your spouse died in the current year, you can often still file a joint return for that year.
3. Married filing separately – applies to married couples who have determined filing separately will result in less tax owed than if they filed a joint tax return. You can also use it if you want to be responsible only for your own tax.
4. Head of household - applies if you are not married and you have paid more than half the cost of keeping up a home for yourself and a qualifying person. (Be sure to check all of the rules on this status so you don’t choose it by mistake.)
5. Qualifying widow(er) with dependent child - applies to you if your spouse died during the year and you have a dependent child. Other factors also apply.
I’m married. Should we file jointly or separately?
The IRS encourages couples to file joint returns as there are several tax breaks for those who file together. Typically, it's best for married couples to file jointly, but there are a few instances when it's filing separate returns might be more beneficial.
For instance, if you or your spouse have a large amount of out-of-pocket medical expenses, it can be difficult to claim most of those expenses on your return if one of you has a high AGI since the IRS only allows you to deduct costs that exceed 7.5% of your AGI. In that scenario, it then may be better to file separate returns to take full advantage of the available deduction.
Are my student loans considered taxable income?
No, you do not report student loans as income on your tax return and you don’t have to pay taxes on certain types of financial aid.
Should I claim the standard deduction or itemize my deductions?
If your standard deduction is less than your itemized deductions, you should itemize. If your standard deduction is more than your itemized deductions, it’s likely worth it to save time and take the standard deduction.
The standard deductions for each filing status in 2021 are:
• Single: $12,550
• Married filing jointly: $25,100
• Married filing separately: $12,550
• Head of household: $18,800
TaxAct’s proprietary Deduction Maximizer tool works in your favor to uncover certain qualifying deductions and credits many filers don't realize are available.
How long will it take to receive my refund?
The IRS typically processes an accurate return and issues refunds within six to eight weeks from the date they receive the return. If the return is filed electronically, the filer’s refund should be issued in less than three weeks, even faster if they choose direct deposit.
How do I find my prior year AGI?
You can find your AGI on the form you used to file your last year's return. That’s Line 11 on Form 1040 and 1040-SR for 2020 returns.
The IRS has several self-service tools available in the event you don’t have your prior year return.
How do I pay my tax bill?
You must pay any taxes owed by the tax filing deadline. All payments can be made by cash, check, money order, and wire transfer as well as through using electronic funds withdrawal, a debit or credit card, Direct Pay or the IRS’ Electronic Federal Tax Payment System.
Do I qualify for the earned income tax credit?
In 2021, the general eligibility rules for the EITC are:
•Taxpayers must file as individuals or married filing jointly.
• If married, you, your spouse and your qualifying children must have valid Social Security numbers.
• You must also be at least 19 or older with no upper age limit. However, if you are at least a part-time student then you must be at least 24 years old. Qualifying former foster children and homeless youth must be at least 18 years old.
How did the Child Tax Credit change from 2020?
As many families know, the Child Tax Credit is not new. The American Rescue Plan revamped it for 2021, however. In 2020, the maximum annual credit was $2,000 per child under age 17. In 2021, the maximum annual credit increased to $3,000 per child age six to 17 or $3,600 per child age five or younger.
Another change is in the refund-ability of the credit. In 2020, the Child Tax Credit was partially refundable. If your tax liability was $0, and you claimed the credit, you could get $1,400 of it as a tax refund. In 2021, all of the Child Tax Credit is refundable. Therefore, you’ll get the full amount you qualify for as a refund if your tax liability is $0.
Additionally, in prior years a filer needed at least $2,500 in earned income to claim the credit. In tax year 2021, there is no longer that earned income limitation. You do not need any earned income to receive the Child Tax Credit. Anyone eligible to receive the credit, however, will be required to file a 2021 tax return next year.
Are the Child Tax Credit payments taxable?
No; similar to the stimulus payments, this money is not considered income and, therefore, is not taxable on your return. The Child Tax Credit payments are advance payments of your tax year 2021 Child Tax Credit.
That said, the Child Tax Credit payments you receive during 2021 are based on the IRS’ estimate of your 2021 Child Tax Credit eligibility from your 2020 return. If you end up receiving more than what you, ultimately, qualify to receive when you file your 2021 tax return, you may have to pay back some of the money.
Will I still be getting a Child Tax Credit payment when I file my taxes?
Yes. Under the American Rescue Plan enacted by President Biden in March, eligible families are receiving half of their Child Tax Credit (CTC) paid out in six monthly installments from July through December. These families will then claim the rest of their CTC when they file their taxes next year, as opposed to claiming it all in one lump sum.
Will I receive the Child Tax Credit monthly payments every year?
Currently, the monthly payments are only scheduled to occur in 2021. They are an advance of the Child Tax Credit that qualifying families will claim on their 2021 tax returns. The increased value is also only currently valid for 2021 tax year 2021, but there is a high likelihood that it will extend to 2022.
How do the Child Tax Credit payments work if I have shared custody of my child/ren?
The payments will go to the parent who last claimed the child(ren) as a dependent on their 2020 tax return. If that same parent is not planning to claim the child(ren) on their 2021 return, the last parent to claim them must use the Child Tax Credit Update tool to opt out of the monthly payments and allow the other parent to receive the credit money when they file their return.
If you do not receive Child Tax Credit monthly payments for your qualifying child(ren), you can claim the full amount of your allowable Child Tax Credit when you file your 2021 tax return.
ProTip: Easily switch to TaxAct from another online tax software provider by simply uploading a PDF of your previous year's return. In just a few clicks, you can import your tax history all while reducing errors and saving you the time it takes to manually key that information in.
ProTip: File with confidence by connecting with TaxAct’s team of CPAs and other tax experts who are ready to tackle your questions at no additional charge. With Xpert Assist, you can get help in the moment or schedule a callback time. Have a lot of questions? No worries, TaxAct experts are available to help as often as you need. You can talk over a phone or even share your screen for easier guidance.
ProTip: With their $100k Accuracy Guarantee and Maximum Refund Guarantee, TaxAct guarantees its software is 100% accurate and gets you your maximum refund. If not, they’ll refund your software costs and pay any difference in your lower refund or higher tax liability, plus cover any legal or audit costs up to $100,000.