1. What is the difference between a tax credit and a tax deduction?
A tax credit directly reduces your tax owed, while a tax deduction reduces your taxable income, which can lower the overall tax you owe.
2. When should I expect my tax refund?
Most refunds are issued within 21 days if filed electronically and with direct deposit, though it may take longer during peak seasons or if there are issues with your return.
3. Can I file taxes for free?
Yes, many taxpayers qualify for free filing through the IRS Free File program or via other providers if they meet specific income limits.
4. What are estimated taxes, and who needs to pay them?
Estimated taxes are quarterly tax payments for income not subject to withholding, such as self-employment or investment income. People with significant non-wage income generally need to pay these.
5. How do tax brackets work?
Tax brackets determine the rate you pay on each portion of your income. As income increases, portions are taxed at higher rates, but only the amount within each bracket is taxed at that rate.
6. How do I know if I qualify as Head of Household?
To qualify, you must be unmarried, pay more than half the household expenses, and have a qualifying dependent living with you for more than half the year.
7. Can I claim my child as a dependent?
Generally, if your child is under 19 (or 24 if a full-time student), lived with you for over half the year, and you provided more than half of their support, you can claim them.
8. What is a W-2 form?
A W-2 form reports your annual wages and the amount of taxes withheld by your employer. It’s essential for filing your tax return.
9. What is an IRS audit?
An IRS audit is a review of your tax return and financial information to ensure accuracy and compliance. It can be conducted by mail or in person.
10. How can I reduce my tax liability?
You can reduce tax liability by claiming eligible deductions, credits, contributing to retirement accounts, and investing in tax-advantaged accounts like HSAs.
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