Frequently Asked Questions About U.S. Taxes

The IRS (Internal Revenue Service) is the U.S. federal agency responsible for collecting taxes and enforcing tax laws enacted by Congress. It operates under the U.S. Department of the Treasury. The IRS processes over 260 million tax returns each year. For official information, visit irs.gov.

For most individuals, the tax year runs from January 1 to December 31 — a full calendar year. The return you file in 2026 covers income earned during the 2025 tax year (January 1 – December 31, 2025). Businesses may have fiscal tax years that differ from the calendar year.

"Filing taxes" means submitting a formal report (a tax return) to the IRS that details your income, deductions, credits, and taxes paid during the year. The IRS compares what you paid throughout the year to what you actually owe. If you paid too much, you receive a refund. If you paid too little, you owe the difference.

Not everyone must file a return. For 2025, you generally must file if your gross income exceeds the standard deduction for your filing status ($15,750 for single filers under 65). However, you may still want to file even if not required — for example, to claim a refund of withheld taxes or to claim refundable credits like the EITC. See What Are Taxes for more details.

If you are required to file and don't, you may face a failure-to-file penalty of 5% of unpaid taxes per month (up to 25%), plus interest on any taxes owed. In extreme cases of willful evasion, criminal charges are possible. If you are owed a refund and don't file, you simply won't receive your money — but you generally won't be penalized. You have 3 years to claim a refund.

The standard federal income tax filing deadline is April 15 each year. If April 15 falls on a weekend or federal holiday, the deadline shifts to the next business day. For tax year 2025, the deadline is April 15, 2026. See our full deadline guide.

Yes! E-filing is the most common and recommended method. It is faster, more accurate (software catches common errors), and you receive confirmation of receipt. The IRS processes e-filed returns much faster than paper returns, which means faster refunds — typically within 21 days if you choose direct deposit.

IRS Free File is a program that allows taxpayers with adjusted gross income (AGI) of $84,000 or less (2024 threshold) to file their federal return for free using guided tax software. Taxpayers above this threshold can still use Free File Fillable Forms — electronic versions of IRS paper forms. Visit IRS Free File for more details.

File Form 4868 by April 15. This grants you an automatic 6-month extension to file your return (new deadline: October 15). IMPORTANT: An extension gives you more time to FILE, not more time to PAY. If you owe taxes, you must still pay an estimated amount by April 15 to avoid penalties and interest. See our extension guide.

Yes. Use Form 1040-X (Amended U.S. Individual Income Tax Return) to correct errors or make changes to a previously filed return. You generally have 3 years from the original filing date (or 2 years from when you paid the tax) to amend a return. Amended returns must be filed on paper; they cannot be e-filed in all cases.

A refund means your total tax payments (withholding from paychecks + estimated payments) exceeded your actual tax liability for the year. Owing money means you underpaid throughout the year. Neither is inherently better — a large refund simply means you gave the government an interest-free loan. Adjusting your W-4 withholding can help you break even. See our refund guide.

Most e-filed returns with direct deposit are processed within 21 calendar days. Paper returns typically take 6–8 weeks. Returns claiming the EITC or Additional Child Tax Credit may be held until mid-February by law, even if filed in January. Errors or identity verification needs can delay any return.

Use the IRS "Where's My Refund?" tool at irs.gov/refunds or the IRS2Go mobile app. You can check 24 hours after e-filing (or 4 weeks after mailing a paper return). You'll need your Social Security Number, filing status, and the exact refund amount.

No. A refund is simply your own money returned to you — money that was withheld from your paychecks in excess of your actual tax liability. You essentially gave the government an interest-free loan throughout the year. Many financial experts recommend adjusting your withholding to receive a smaller refund (or break even) so your money works for you throughout the year.

From a purely financial standpoint, it's better to adjust your withholding (by updating your Form W-4 with your employer) so you receive as close to breaking even as possible. This way you have access to your money throughout the year. However, some people prefer larger refunds as a form of forced savings. Neither approach is "wrong" — it depends on your personal financial habits.

A deduction reduces your taxable income, so the tax savings depend on your tax bracket. A credit reduces your actual tax bill dollar-for-dollar and is generally more valuable. Example: A $1,000 deduction saves a taxpayer in the 22% bracket $220. A $1,000 credit saves exactly $1,000 regardless of bracket. See our tax credits guide.

Take whichever gives you a larger deduction. For 2025: Standard deduction is $15,750 (single), $31,500 (married filing jointly), $23,625 (head of household). Itemize only if your qualifying expenses (mortgage interest, state taxes, charitable donations, medical expenses) add up to more than your standard deduction. About 90% of taxpayers take the standard deduction. See our standard deduction guide.

Self-employed individuals and business owners can deduct home office expenses if the space is used regularly and exclusively for business. W-2 employees cannot deduct home office expenses since the Tax Cuts and Jobs Act of 2017. For self-employed workers, you can use either the simplified method ($5 per square foot, up to 300 sq ft) or the actual expense method. See our self-employed guide.

Yes, but only if you itemize deductions and donate to qualifying 501(c)(3) organizations. Cash donations are deductible up to 60% of your AGI; non-cash property up to 30% of AGI. You need a written acknowledgment from the charity for donations of $250 or more. Donations to individuals, political organizations, or candidates are not deductible.

Yes, if you itemize. However, only the portion of medical expenses that exceeds 7.5% of your AGI is deductible. For example, if your AGI is $60,000 and you had $6,000 in medical expenses, only $1,500 (the amount above 7.5% × $60,000 = $4,500) is deductible. Qualifying expenses include doctor visits, prescriptions, medical equipment, and health insurance premiums not paid by your employer. See our itemized deductions guide.

Independent contractors pay: (1) Federal income tax on net profit, (2) Self-employment tax of 15.3% (covering both employee and employer portions of Social Security and Medicare), and (3) State income tax if applicable. They can deduct 50% of the self-employment tax from their gross income. See our self-employed tax guide.

Since self-employed workers have no employer withholding, they generally must pay taxes four times per year directly to the IRS. Due dates: April 15 (Q1), June 16 (Q2), September 15 (Q3), and January 15 of the following year (Q4). Use Form 1040-ES to calculate and pay. Underpayment may result in penalties. See our deadlines guide.

Best practice: open a separate business bank account and credit card. Track all business expenses with receipts and records. Only expenses that are "ordinary and necessary" for your business are deductible. Mixed-use items (like a phone used for both personal and business) can only be deducted in proportion to business use. Good recordkeeping is essential and required by law.

Business expenses charged to a credit card are deductible in the year they are charged, not when paid. The card must be used for legitimate business expenses. Interest on business credit cards is also deductible as a business expense. Personal expenses charged to a business card are not deductible and create accounting complications.

Only the business-use portion is deductible. You must track total miles driven and separate business miles from personal miles. The 2025 standard mileage rate is 70 cents per mile for business use. Alternatively, you can deduct actual expenses (gas, insurance, depreciation, repairs) in proportion to business use. Commuting miles (home to office) are never deductible.

Don't panic — most IRS letters are routine. Read it carefully to understand what action, if any, is required. Common reasons include: a math error that was corrected, additional information needed, a change to your return, or confirmation of a payment. Do NOT ignore IRS letters. Respond by the deadline shown. If you're unsure, consult a tax professional or contact the IRS directly using the phone number on the letter. See our audit guide.

An IRS audit is a review of your tax return to verify that income and deductions are reported accurately. Most audits are "correspondence audits" — conducted entirely by mail and resolved quickly. Others involve an in-person meeting. Having organized records and receipts is your best defense. See our complete audit guide for what to expect and how to respond.

Yes. The IRS treats cryptocurrency as property. When you sell, exchange, or otherwise dispose of cryptocurrency, you must report any gain or loss. Short-term gains (assets held less than one year) are taxed as ordinary income; long-term gains (held one year+) are taxed at lower capital gains rates. Mining and staking rewards are also taxable as ordinary income when received. See our capital gains guide.

Yes. All gambling winnings — including lottery prizes, casino winnings, and sports betting — are taxable income. They are reported on Form 1040 as "Other Income." For winnings over certain thresholds, the payer will withhold 24% for federal taxes and issue a Form W-2G. Gambling losses can be deducted, but only up to the amount of your gambling winnings, and only if you itemize deductions.

Gifts: The recipient of a gift generally does not owe federal income tax on the gift received. The GIVER may owe gift tax if the gift exceeds the annual exclusion ($18,000 per recipient in 2024). Inheritances: Federal inheritance tax does not exist in the U.S., but some states have their own inheritance taxes. Assets inherited may have a "stepped-up" basis, which can reduce capital gains taxes if you later sell them. Always consult a professional for estate and inheritance planning.