Taxes can be overwhelming and complicated. Educating yourself on tax matters can help clear the confusion and put you in a more stable place. In this article, we will answer 10 common tax questions.
1. Are There Extra Tax Breaks Available After December 31st?
Up until April 15th you can make tax deductible contributions to tax advantaged accounts. In 2024, you can contribute up to $7,000 a year. You can also take advantage of making contributions to a Health Savings Account.
2. When Will My Tax Refund Arrive?
When your refund will arrive will depend on how you file. If you filed electronically and have the refund direct deposited, you should get your refund within 21 days. If you paper filed and requested a check you could be waiting for two months or more. You care able to track your refund using the IRS’s Where’s My Refund? Tool. To use this tracker, you will need your social security number, filing status, and the exact dollar amount of your refund.
3. What Will Happened If I Can’t Make the April 15th Deadline?
If you do not think you are going to make the April 15th deadline you should apply for an extension. However, if you owe this does not extend the due date of those funds. If you owe and you miss the payment deadline, you are subject to a 5% monthly late filing penalty (up to 25%) and a failure to pay on time monthly penalty of 0.5%. If you think you are going to owe, you should estimate your tax liability when filing your extension. Paying 90% of the tax bill on time you will avoid the late payment penalty.
4. Can I Take the Home Office Deduction?
You can only take a home office deduction if you are self-employed. Those who are W2 employees and work remotely from home do not qualify. If you “regularly and exclusively” use a portion of your home as your office, you can deduct home office expenses. This would include a portion of rent/mortgage, utilities, and homeowner’s/renter’s insurance. You can also take a simplified deduction. This is $5 per square foot (up to 300 feet) with a maximum deduction of $1,500.
5. Are Unemployment Benefits Taxable?
Unemployment benefits are taxable. They are subject to ordinary income tax, but not social security and Medicare taxes. If you do not want a surprise at the end of the tax year fill out Form W4-V to have taxes withheld from your benefits.
6. Should I Take the Standard Deduction or Itemize?
In 2024 the standard deduction for a single person is $14,600 and for a married couple it is $29,200. For it to be worth your while to itemize, your itemized deductions need to be greater than the standard deduction amount. Itemized deductions include charitable contributions, mortgage interest, state and local taxes, and medical expenses that are more than 7.5% of your adjusted gross income.
7. Is There a Deduction for Charitable Contributions?
Deductions for charitable contributions only come into play if you are itemizing your deductions. You can deduct both cash and noncash contributions, like furniture and clothing. If you donate items, you can deduct the fair marked value of the donated items. You also can deduct 14 cents per mile that you drive for volunteering, as well as parking and tolls. If you plan on deducting these you will need to keep a log detailing the date, length, and purpose of the trip.
8. What Should I Do If I File My Return and Missed Deductions?
If you realized you missed deductions or made some kind of other mistake, you can amend your return. This is known as Form 1040X. You have up to 3 years after the filing deadline to make changes to your return.
9. What Documents Should I Keep and What Can I Throw Away?
Tax returns you should always keep. However, the supporting documentation (think W2s, 1099s, receipts) you only need to keep for 3 years. This is the length of time the IRS has to audit you. However, if you are self-employed, you should keep these documents for up to 6 years.
10. Are There Red Flags That Can Trigger an Audit?
One of the biggest audit triggers is having a business that has losses several years in a row or have unusually large expenses. You also may receive an audit if there is a discrepancy between the income you report and what the IRS has on file.
Preparing Your Taxes
Now that we have answered some common tax questions, you are in a better place to prepare your taxes. If you are unsure about certain aspects of your taxes or have a complex situation, meet with a qualified tax preparer to complete your return.
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