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Frequently Asked Questions
When will I get my refund?
According to the IRS, most refunds are issued within 21 days for taxpayers who e-filed and who are having their refund directly deposited. Refunds take up to six weeks if you submitted paper returns. Claiming certain credits or deductions might delay your refund. You can check the status of your refund on the IRS “Where’s My Refund” website.
Should I itemize or claim the standard deduction?
Before the tax reform in 2018, you may have wondered whether you should itemize your deductions or simply claim the standard deduction. That decision got a lot easier after the 2017 Tax Cuts and Jobs Act passed. You typically don't itemize if the standard deduction saves you more on your tax bill.
The standard deduction nearly doubled from 2017 to 2018, making it harder to justify itemizing your deductions. In 2020, the standard deduction comes to $12,400 for single taxpayers and $24,800 for married taxpayers filing jointly. In 2021, these amounts increase to $12,550 and $25,100 respectively. Even so, you should calculate your itemized deductions and compare them to the standard deduction each year to get the most out of the tax savings available to you.
What kind of deductions do I qualify for?
Almost everyone qualifies for the standard deduction or itemized deductions that reduce your taxable income. These are often the largest deductions available to you. Refer to item 6 below for information on which one might be best for you.
Self-employed workers and business owners may have more opportunities to save on their tax bills, but employees still have plenty of savings opportunities available. As an employee, you can deduct contributions made to IRAs, HSAs and FSAs when preparing your Form 1040.
For employees, contributions made to your 401(k) or other employer-sponsored retirement plan during the year will not need to be deducted on your tax return. Instead, these dollars have already been taken out of your wages as shown on your Form W-2.
Further, you can deduct student loan interest if you meet certain income criteria as well as home mortgage interest, state and local taxes and more.
If you have a side hustle, work as an independent contractor, or own a small business, you can deduct a lot of the costs related to running and maintaining your business. You have access to deductions for your home office, self-employment taxes, supplies, equipment, depreciation, health and business insurance, utilities and much more.
Do I need to pay taxes on the money I received from the stimulus checks?
No. None of the 2020 stimulus checks are taxable. The IRS has records of the stimulus checks in their system, so you don’t have to take any action. Just make sure you don’t accidentally list your checks as income, or you may end up paying more in taxes when filing your return and will eventually need to receive a refund from the IRS.
What if I worked or lived in multiple states last year?
Every state has its own policies surrounding taxes, and things can get complicated if there is a conflict with the policies from another state you worked from remotely. It’s important to know the rules of each state where you worked, because depending on where you went and where you came from, you could be required to pay taxes to two states on the same income.
The best way to do this is to visit your city or state’s tax department website. In most states, this is called the “Department of Revenue,” but some places may dub it the “Department of Taxation.” Look for the section on Covid-19 information; most of the sites have a prominent banner up top. Be on the lookout for references to “non-residents telecommuting” or language relating to remote work.
Do I need to pay taxes on my bitcoin?
Because bitcoin is treated like property by the IRS, any profit is subject to capital gains taxes. But you only owe taxes when those gains are recognized — meaning that you only owe taxes if you sold your crypto for a profit in 2020. If you bought bitcoin or Ethereum but didn’t sell, you don’t owe any taxes yet.
I got into day trading in 2021. What does that mean for my taxes?
If you made money by selling stocks you held for less than a year, then you will pay the short-term capital gains rate, which is the same as your ordinary tax rate and can be up to 37%.
Gains made on stocks held for more than a year, meanwhile, will incur the long-term capital gains tax, which maxes out at 20% but is usually no higher than 15% for most.
I have another question that is not any of the above questions...
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