TaxAct

You can receive Form 1099-K for a variety of reasons. How you report the income listed on your 1099-K depends on how you made that income, which can be confusing if you’ve never seen this form before.

You can receive Form 1099-K for a variety of reasons. How you report the income listed on your 1099-K depends on how you made that income, which can be confusing if you’ve never seen this form before.

In late December 2022, the IRS delayed an anticipated change in 1099-K reporting thresholds that would have resulted in many more taxpayers receiving Form 1099-K. Due to these delayed changes, you actually may not receive a 1099-K this year — unless you were subject to backup withholding or live in a state with a lower reporting threshold.

Still, it’s good to start preparing now for next tax season! You might get a 1099-K next year if you do any of the following during the 2023 calendar year:

·      Had friends or family reimburse you through a payment processor such as Venmo or PayPal

·      Sold items online through sites like eBay or Facebook Marketplace

·      Made hobby income from selling your creations on apps such as Etsy

·      Rented out a room in your house through an app such as VRBO or Airbnb

·      Sold goods at a farmers’ market as a side hustle and collected payments through an app like Square

To help put things into perspective, let’s review some more detailed examples of why you might receive a 1099-K this tax year and how to report your income accordingly.

Selling used personal items or reselling items

If you sold any personal items during the year, you typically only need to report the sale if you sold the item for more than you originally paid for it.

Let’s look at a couple of examples of a taxable sale:

Last year, you acquired an old table for $20. You restored the table, used it for a while, and then decided to sell it over a year later. You end up selling the table for $100, leaving you with an $80 gain. You collect the payment through Venmo (a third-party payment network) and Venmo sends you a 1099-K with this transaction listed among other third-party network transactions.

Since you sold the table for more than you paid for it, you would need to report the sale on your income tax return. In this example, the $80 profit you made would be a and taxed as such.

To calculate how much tax you might owe on a short- or long-term capital gain, use our Capital Gains Tax Calculator.

The same thing goes for reselling items. Say you purchased tickets for a music event through an online platform like TicketMaster. Something happens to make you unable to attend the event, so you resell the tickets online for $100 more than what you paid. You collect the payment through PayPal, and PayPal sends you a 1099-K with this transaction on it.

In this instance, you would need to report the sale on your tax return and owe income tax on the $100 profit you made.

However, most used personal items often decrease in value over time, meaning you likely sold them for less than what you paid. If you did not make a profit, you do not owe any income taxes on a sale. But because Form 1099-K shows your gross payments, non-taxable transactions may still be listed on the form.

Let’s look at an example of a non-taxable sale:

Say you purchased a TV 10 years ago for $400. After a while, you decide to upgrade to a bigger TV and sell your current one on Facebook Marketplace for $50.

Since you sold the TV at a loss, you would not need to pay taxes on this sale, even if the sale is listed on a 1099-K that you receive. You can still report the sale on your tax return, but there would be no income recognized and, therefore, no taxes owed on the sale.

Selling goods or services as a side hustle

Now let’s say you ran a side hustle selling goods for a profit, such as produce at a farmers’ market. You had multiple payment methods — in addition to cash sales, you collected debit and credit card payments from buyers through an app such as Square. When tax season rolls around, Square sends you a 1099-K with a list of all your gross receipts from these transactions.

Because you sold all your goods for a profit, the IRS treats this as business income, and you will need to pay taxes on that income.

Tax Tip: You may receive a 1099-K for all your digital transactions, but don’t forget that you also need to report any cash sales you made.

The same could be true for any freelancer or independent contractor work you do on the side. If you accepted electronic payment card transactions for your services, you’ll likely get a 1099-K from the third-party payment network (like Square in the example above).

Hobby selling

If you have a hobby such as painting or pottery and you sometimes sell your art for a profit, you will also need to report that income.

The IRS defines hobby selling as an activity that you engage in for sport or recreation with no intent to make a profit. Suppose you start selling your hobby pieces on Etsy with the intent of making a profit or start depending on your hobby selling as your livelihood. In that case, you risk the IRS classifying your hobby as a business and you as self-employed, meaning you’d have to file Schedule C.

If you’re unsure, you can read the IRS guidelines for determining if your side income is a hobby or a business.

Assuming you’re making income from your hobby, you’ll still need to report any profits you make. Hobby sale income is classified as “additional income” by the IRS. If you get a 1099-K detailing your hobby sale transactions, you can report your hobby income on Schedule 1, line 8 of Form 1040.

Unfortunately, you cannot deduct hobby expenses from your hobby income. For example, if you crochet and sell your crafts on Etsy, you would not be able to deduct the cost of the yarn to reduce your profit.

Renting out personal property

When you rent out personal property — maybe household tools, yard equipment, or even your car or a room in your home — you also need to report this income on your tax return.

For example, if you occasionally rent out some yard equipment during the summer and collect payments through an app like PayPal, you may receive a 1099-K reporting all your rental transactions.

If you aren’t in the business of renting out your personal property (you only do it occasionally and don’t run it like a business), you’d report this income much like a hobby on Schedule 1, line 8k. Unlike a hobby, you can deduct expenses related to the rental of personal property. You can do this on line 24b of Schedule 1 Form 1040.

Main takeaways

Running a side hustle, selling items as a hobby, selling used personal items, or renting out your personal property are all potential scenarios in which you might receive Form 1099-K. Though Form 1099-K can be used for multiple scenarios, you must handle your tax reporting differently depending on how you made the income.

Thankfully, TaxAct^® has your back. We ask our 1099-K filers detailed questions about their 1099-K — this helps us determine how to correctly report the income. If you received Form 1099-K this year and aren’t sure what to do with it, give our intuitive tax prep software a try!

This article is for informational purposes only and not legal or financial advice.

All TaxAct offers, products and services are subject to applicable terms and conditions.

Start a side gig in 2022? Whether you lost your traditional job or you simply wanted to earn some extra cash, side gigs tend to complicate your tax filing a bit.

Start a side gig in 2022? Whether you lost your traditional job or you simply wanted to earn some extra cash, side gigs tend to complicate your tax filing a bit.

Over the years, the IRS refined its rules for gig workers. But obviously, the IRS still wants you to pay taxes on any income, whether it is your primary income source or profits earned from your side gig.

Whether you drive for a ride-sharing service, deliver groceries, or run a virtual business, you need to report your new side hustle income on your tax return. But before getting started, it’s important to understand all the possible implications so you aren’t hit with a surprise tax bill or tax penalty come tax time.

The IRS definition of gig work

With the rise of the gig economy, the IRS worked to clearly define what constitutes a “gig.” According to the IRS, the gig economy—also called sharing economy or access economy—is an activity where people earn income providing on-demand work, services or goods. Often, it’s through a digital platform like an app or website.

Side gig income must be reported on your tax return, even if you earned cash for the gig or didn’t receive any formal income statement.

Common examples of gig work include but aren’t limited to:

Again, these are just a few examples. Regardless of how you earned the money, you are responsible for reporting it to the IRS.

Understanding your side gig tax implications

So, it’s your first year of working a side gig. What does that mean when it comes time to file your own taxes?

No matter how much you earned, you must report that income as a self-employed individual. And if you also have a full-time job on top of your side gig, both forms of income need to be reported on your tax return.

That is assuming you are operating your side gig as a sole-proprietor or single-member LLC.  If that’s the case, then you need to report your side income on your individual 1040 tax return.

By filing that way, you are personally liable to pay any taxes owed out of your own pocket. Because of that, it is vital to keep accurate records of your side income and expenses throughout the year. Be sure to keep any documentation even after you file your taxes in case you are ever audited.

If your side gig earnings are only a small amount and you had no expenses related to the work you did, it will be relatively easy to report your earnings.  But if you were profitable and had high business expenses, it becomes slightly more complex. You may even be able to take the qualified business income deduction on your personal tax return. DIY tax software, like TaxAct, will calculate that deduction for you to help you accurately claim the benefit.

All about quarterly tax payments

In your first year of having a side gig, you may not know about quarterly tax payments. Any independent contractor or side gig worker is required to pay quarterly estimated taxes on the income they earn throughout the year.

Why? Well, consider a traditional full-time job. Federal income taxes are automatically taken out of each paycheck so you can keep up with your tax liability all year long. The entire U.S. tax system is designed to be pay-as-you-go. With side gig income, however, there are no taxes automatically taken out. As a result, the IRS requires side gig workers to pay estimated taxes every quarter to pay their fair share before the end of the year. Quarterly tax payments are due on the following dates for 2023:

How to file taxes for a new side gig

Regardless of whether you paid quarterly taxes when tax season rolls around, there are some things you need to prepare before you file.

Track your income

First thing’s first: track your side gig income throughout the year.

If you worked a side gig through an app, it should be relatively easy to track your income. The app typically tells you how much they paid you throughout the year. On the other hand, if your side gig didn’t use an app, you will need to track it on your own. You can do that by checking any invoices you sent out or simply looking back on your bank statements.

Track your expenses

Once you’ve tracked your income, you can track any expenses related to your side gig. Tracking and reporting expenses that are considered “ordinary and necessary” in the course of business may qualify you for tax deductions and lower your overall tax liability. Typical expenses may include things like mileage, office expenses, equipment needs, and client meals.

Collect your forms

Next, keep track of any tax forms you received for working your side gig, such as Form 1099-K, Form 1099-MISC, Form 1099-NEC, or any other income statement. If you earned at least $600 as an independent worker, you should receive a 1099 form from the business that paid you. However, even if you don’t receive an income statement for the work you completed, you are still responsible for reporting and paying taxes on that income. Make sure any forms you receive match your own records.

File your taxes

Even if you filed your taxes on your own in the past, your tax situation has gotten even more complicated now that you have to report your side gig information. Check out TaxAct Self-Employed to help you file your self-employment income and deductions accurately. Our Deduction Maximizer feature will help you keep more of your self-employment income by identifying deductions most commonly claimed by other filers like you.

Prepare for your second year of business

It’s never too early to plan ahead for next year! Once you file your tax return, there are some things you should consider doing to make next year even easier.

First, consider opening a separate business checking and savings account for your side gig. That way, it’s easy to track your business income and expenses and keep them separate from your personal money. Plus, that also makes it easier to set aside money for quarterly tax payments.

Next, mark the quarterly tax deadlines on your calendar! If you use TaxAct to file your return, you can set up automatic quarterly tax payments to ensure you never miss a deadline.

Lastly, create a system to better track business expenses throughout the year. There are plenty of apps to help you organize your annual expenses. Do your research and implement a new system – your future self will thank you!

Are you filing your taxes for the first time this year? Filing an income tax return may sound daunting, but the good news is that most teen tax returns are simple to do — you just need to familiarize yourself with some tax basics.

Are you filing your taxes for the first time this year? Filing an income tax return may sound daunting, but the good news is that most teen tax returns are simple to do — you just need to familiarize yourself with some tax basics.

Is a teenager required to file taxes?

As a taxpayer, you don’t need to file a tax return if you earned less than the standard deduction ($12,950 in 2022). However, if the government owes you a tax refund, you will want to file a tax return to get that money back.

If you earned more than $400 by working a job such as babysitting or doing yard work in your neighborhood, like mowing lawns or raking leaves, the IRS considers you to be self-employed, regardless of your age. Because of these filing requirements, you will need to file a tax return to report that taxable income.

Another exception to the standard deduction limit is if you earned more than $1,150 in unearned income (typically from investments or interest rather than a job). If, for example, you invested in crypto or traded stocks as a minor, you may be required to file a tax return even if you made less than the standard deduction.

What is the tax rate for a teenager?

The rate you are taxed depends on how much money you earn throughout the year. Your annual income determines which income tax bracket(s) you are in. Here are the tax brackets for 2022:

For example, let’s say you earned $15,000 as a single filer in 2022. The first $10,275 you made would be taxed at 10 percent, and the remaining $4,725 would be taxed at 12 percent.

What kinds of taxes do teenagers have to pay?

As an employee, you’ll need to pay federal income tax. If you live in a state with income tax, you’ll need to pay state income taxes as well, which means filing a state tax return in addition to a federal tax return.

Luckily, if you e-file with TaxAct^®, we can pull information from your federal return to partially fill out your state return, making the process quicker and easier than filing both returns from scratch. Depending on where you live, you could owe local taxes to your city or county as well.

You’ll also need to pay FICA tax, sometimes called the payroll tax. This includes your Social Security and Medicare taxes. If you are a W-2 employee, your employer will pay for half of your FICA tax, making your Social Security tax rate 6.2 percent and your Medicare tax rate 1.45 percent.

What’s the difference between net income and gross income?

If you’re an employee, the government automatically takes the taxes you owe out of each paycheck. They call this withholding. Due to withholding, your take-home pay is the amount of money you earned minus taxes — also referred to as your net income. The amount you earned before taxes were taken out is called your gross income.

How do I file my taxes for the first time?

To start filing your first tax return, you’re going to need a few bits of information:

Why should I file my first return with TaxAct?

You have many options for e-filing online these days — so why should you choose TaxAct?

We strive to provide our customers competitive pricing to help you file for less. Another perk we’re offering all customers this year is free Xpert Assist¹. This feature allows you to connect with one of our tax experts for free if you get stuck or have a question while filing. You can also ask a tax expert to help you do a quick review to make sure all looks good before submitting your return.

What are some tax benefits for teens?

As we said before, filing a tax return could mean getting a tax refund of any excess taxes that were withheld from your paycheck. So even if you made less than the standard deduction in 2022, it’s still a good idea to file!

Many tax breaks depend on your dependency status. If you rely on your parents or guardian for more than half of your financial support, you could be considered a dependent if you are under age 19 or under age 24 if you are a full-time student.

If you can be claimed as a dependent on someone else’s tax return, certain tax credits you might qualify for could instead be passed on to whoever is claiming you as a dependent.

One potential tax break for teen students is the student loan interest deduction. If you took out student loans for yourself, you could take a deduction for the interest you paid on those loan(s) — up to $2,500 per year. You can take this deduction even if you don’t itemize your deductions.

At what age can a teen claim a student tax credit?

If you are an undergraduate student at a college or university, you can claim the American Opportunity Tax Credit (AOTC) or Lifetime Learning Credit (LLC), so long as you are paying for your schooling and your parents can’t claim you as a dependent.

The AOTC is a credit available for four years to undergraduate students enrolled at least half-time in an undergraduate program. The LLC is available for anyone taking higher education classes enrolled in at least one course.

You can’t claim both of these credits on the same tax return. If you qualify for both, it’s generally more valuable to claim the AOTC — this tax credit covers more qualified expenses and is partially refundable, unlike the LLC.

Both tax credits are available to whoever pays for the schooling, student or parent, and students can’t claim these credits if they are dependents.

What are the consequences of not filing taxes?

Not filing your taxes can mean missing out on a tax refund at best and facing failure to pay penalties at worst.

Even if you don’t technically need to file (for instance, you made less than the standard deduction), it’s a good idea to do so anyway to make sure you aren’t leaving any money on the table.

Individual tax returns are due by April 18, 2023, this year. Be sure to file by the deadline to avoid a delayed refund or any potential failure to pay penalties if you owe taxes!

Main takeaways

Filing taxes for the first time doesn’t need to be a stressful experience. With some basic knowledge and a step-by-step tax prep guide like TaxAct at your fingertips, you’ll be ready to file with confidence this tax season. You can even file your basic federal tax return for free.

This article is for informational purposes only and not legal or financial advice.

All TaxAct offers, products and services are subject to applicable terms and conditions.

¹Xpert Assist is available as an added service to users of TaxAct’s online consumer 1040 product. Unlimited access refers to an unlimited quantity of expert contacts available to each customer. 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. Review of customer return is broad, does not extend to source documents and is not intended to be comprehensive; expert is available to address specific questions raised by customer. Offer for Free TaxAct® Xpert Assist may expire at any time. View full TaxAct Xpert Assist Terms and Conditions.

We get it; filing your taxes is a chore you’d rather not do. That’s why TaxAct^® makes the tax prep process as seamless and easy as possible — and did we mention you can also file your basic federal return with us for free¹?

We get it; filing your taxes is a chore you’d rather not do. That’s why TaxAct^® makes the tax prep process as seamless and easy as possible — and did we mention you can also file your basic federal return with us for free¹?

Is TaxAct’s offering actually free?

With TaxAct, you have different filing options for different tax situations.

Our basic federal sku includes your tax return essentials like W-2 income plus retirement and unemployment income. You can also claim popular tax breaks for dependents and current students like the Child Tax Credit or Earned Income Tax Credit (EITC).

In addition, you’ll get the following when you use TaxAct:

How do you file your basic federal taxes for free with minimum fuss with TaxAct?

No fuss is something we take seriously. We’ve streamlined our tax software to make filing your taxes a breeze.

To file your basic federal tax return for free this year, follow these eight steps:

Main takeaways about filing your Basic Federal Return with TaxAct

TaxAct makes free online tax preparation easy when you file your basic federal tax return with us. We’ll guide you step-by-step through filing your own taxes for free.

When you file with us, you’ll also get peace of mind thanks to our free Xpert Assist² feature that connects you with a real tax professional for tax assistance and our Maximum Refund and 100k Accuracy Guarantees^.*

Ready to file? Let’s get started.

All TaxAct offers, products and services are subject to applicable terms and conditions.

^*Read more about the TaxAct Maximum Refund and $100k Accuracy Guarantees.

¹Free TaxAct Online Free Edition makes free federal filing available for basic returns only. Not everyone has a basic return. Find out if you have a basic return and more about what this year’s Free Edition includes.  For all other online products, you can start free and pay only when you file. This means you will not be charged if you decide to stop using any product prior to printing or e-filing.

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 prepared 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. View full TaxAct Xpert Assist Terms and Conditions here.

³ TaxAct can import the data you filed last year with us or your return from PDF files of 1040 returns prepared by many but not all tax prep software solutions.

⁴ Our Deduction Maximizer is programmed to research dozens of deductions that often go overlooked.

⁵ State filings additional.

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PARTICIPATION CONSTITUTES ENTRANT’S FULL AND UNCONDITIONAL AGREEMENT TO AND ACCEPTANCE OF THESE OFFICIAL GIVEAWAY RULES, WHICH ARE FINAL AND BINDING. WINNING A PRIZE IS CONTINGENT UPON COMPLYING WITH THE OFFICIAL GIVEAWAY RULES AND FULFILLING ALL CONDITIONS TO WIN, WHICH ARE FULLY DESCRIBED HEREIN.

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1. Eligibility: Participation open to those residing within the contiguous United States and District of Columbia, excluding Florida, New York, Alaska, and Hawaii, who are legal U.S. residents 18 years of age or older and the age of majority in the U.S. jurisdiction of residence at the time of entry, except employees of TaxAct, and its parent company, Blucora, Inc., their subsidiaries, affiliates, divisions, advertising and promotion agencies, individuals engaged in the development, production or distribution of materials for this Giveaway, and their immediate family members and persons living in the same households of each (whether related or not) are not eligible to participate. Void outside the U.S. and where prohibited by law.

Giveaway Entry Period: Texas Bowl Ticket Giveaway (“Giveaway”) sponsored by TaxAct, Inc. (the “Sponsor”) begins at 12:00:00 PM (ET) on December 15, 2022 and ends at 11:59:59 PM (ET) on December 23, 2022 (“Giveaway Period”). The Sponsor’s designated computer clock shall be the official time keeper for this Sweepstakes. TaxAct reserves the right to extend the dates for the Giveaway Period. Eligible entrants for the Giveaway have a chance to win up to two of the fifty (50) available tickets.

2. Limit on Entries & How to Enter: Limit one (1) entry for the Giveaway over course of the Giveaway Period per person or household address. Entries over these limits are void. All entries are Sponsor’s property. During the Giveaway Period, eligible entrants for the Texas Bowl Giveaway must either follow TaxAct on Instagram or like TaxAct’s page on Facebook. In the event of a dispute as to any registration, the authorized account holder of the email address associated with the social media account used to register will be deemed to be the entrant. The “authorized account holder” is the natural person assigned an email address by an Internet access provider, online service provider or other organization responsible for assigning email addresses for the domain associated with the submitted address. Each potential winner may be required to show proof of being an authorized account holder.

Eligible entrants may enter the Giveaway via Instagram by doing each of the following: (i) liking TaxAct’s Instagram Post (as defined below) and (ii) following TaxAct on Instagram. For purposes of these Official Giveaway Rules, the term TaxAct’s Instagram Post is limited to the following:  “🔥🔥🔥  Hot ticket giveaway coming in fast. Win 2 free tickets to the TaxAct Texas Bowl. WHEN: December 28 at 8:00 p.m. CST. WHERE: Houston, Texas. HOW TO ENTER: 1) Like this post and 2) follow us. We have 50 tickets altogether and will hold drawings daily until they’re gone. So, get in early for more chances to win. See all the competition details by following the link in our bio.”

Eligible entrants may enter the Giveaway via Facebook by doing each of the following: (i) liking TaxAct’s Facebook Page and (ii) liking TaxAct’s Facebook Post. For purposes of these Official Giveaway Rules, the term TaxAct’s Facebook Post is limited to the following: “🚨🚨🚨 Here’s another awesome football ticket giveaway. This time, 2 free tickets to the TaxAct Texas Bowl on December 28 at 8:00 p.m. CST in Houston, Texas. TO ENTER Like this page 👍 Like this post 👍 We have 50 tickets altogether and will hold drawings daily until they’re gone. So, get in early for more chances to win. See all the competition details here: LINK”

3. Random Giveway Drawing / Prizes / Approximate Retail Values (“ARV”) / Odds: Beginning on or about December 15, 2022, at 4:30 p.m., at least one random Giveaway drawing will be conducted daily by Sponsor from among all valid, eligible entries received over the course of the Giveaway Period. TaxAct reserves the right to conduct more than one random Giveaway drawing each day. Through the random Giveaway drawings, TaxAct plans to give away a total of fifty (50) tickets to the Texas Bowl. All decisions of Sponsor and/or administrator shall be final and binding in all respects. Odds of winning the prize depends upon when you enter the Giveaway and the total number of eligible entries received over the course of the Givaway Period. Each Giveaway consists exclusively of: (i) up to two (2) tickets to the TaxAct Texas Bowl occurring at 8:00 pm CT in Houston, Texas on December 28, 2022. Each winner will be responsible for their travel and lodging for the bowl games. If applicable, each Giveaway winner may receive a 1099 tax form for the approximate retail value (“ARV”) of the Giveaway.

4. Potential Winner Notification: Potential prize winners will be notified within twenty-four (24) hours of the random drawing via direct message through the respective social media platform by a representative of the Sponsor. In response to the prize notification, the potential winner must send a reply via direct message with his/her/their name, complete mailing address and email address in order to claim the prize. Potential prize winners will be required to sign an Affidavit of Eligibility/Release of Liability/Publicity and Advertising Consent and Release (“Prize Claim Documents”) (except where prohibited by law) and such other documents reasonably required by Sponsor as part of the prize claim process. All such documents must be signed and returned within three (3) days of notification or prize will be forfeited and an alternate winner may be selected as provided for in these Official Rules. Any potential prize winner is subject to verification before any prize will be awarded. In the event that any potential prize winner is disqualified for any reason, an alternate winner will be selected in a random drawing from all eligible entries received during the Giveaway Period. If, despite reasonable efforts, a potential winner does not respond within three (3) days of the first notification attempt and return his/her/their executed Prize Claim Documents in that timeframe, or if the prize or prize notification is returned as unclaimed or undeliverable to such potential winner, such potential winner will forfeit his/her/their prize and an alternate winner may be selected. Sponsor, in its sole discretion, will attempt to contact up to three (3) potential winners of any prize in accordance with the above procedure, after which the prize in question may go unawarded if it remains unclaimed. Return of any prize notification as undeliverable for any reason will result in disqualification.

5. Conditions of Participation & Certain Restrictions: The participant is solely responsible for entering the Giveaway between December 15, 2022 and December 23, 2022, as well as properly claiming a prize within three (3) days of Giveaway notification if selected as a Giveaway winner. Giveaway winners must agree to certain terms and conditions related to eligibility, release of liability, and Sponsor’s use of winner’s name and/or likeness for publicity, advertising and promotional purposes, without compensation (unless prohibited by law) as part of the prize claim process. Noncompliance may result in disqualification and forfeiture of prize. Once a prize has been delivered to the winner via  email from Sponsor, the prize is considered “awarded.” Taxes on any prize are the sole responsibility of the winner. No cash equivalents, prize substitutions or transfer of prize permitted except that Sponsor reserves the right to substitute a prize of equal or greater value in the event that an offered prize is unavailable. Acceptance of prize constitutes permission to the Sponsor to use winner’s name and/or likeness for purposes of advertising and promotion without additional compensation, unless prohibited by law. All entries become the property of Sponsor and will not be acknowledged or returned. By entering, entrants acknowledge compliance with these Official Rules, including all eligibility requirements. By participating, entrants agree to release Sponsor and its parent company, Blucora, Inc., and its affiliates, subsidiaries, divisions, wholesalers, retailers or distributors, advertising and promotion agencies or social media platforms, such platforms include but are not limited to Facebook and Instagram, and each of their respective officers, directors, employees, agents or representatives (collectively, “Released Parties”) from and against any and all claims, demands, losses and liabilities of any nature whatsoever, which entrant may now or hereafter be entitled to assert, including but not limited to, any death, injury, loss of enjoyment, damage to computer equipment, or other harm or loss of any nature whatsoever caused or contributed to by participation in the Giveaway, any of the prizes awarded in the Giveaway and/or in connection with the awarding, receipt and use or misuse of prize, and/or claims based on publicity rights, defamation or invasion of privacy. Winners acknowledge that neither Sponsor nor its agents have made nor are in any manner responsible or liable for any warranty, representation or guarantee, express or implied, in fact or in law, relative to any prize, including, but not limited to, its quality, mechanical condition or fitness for a particular purpose. Any and all warranties and/or guarantees on a prize, if any, are subject to the manufacturers’ terms therefore and winners agree to look solely to such manufacturers for any such warranty and/or guarantee. By participating in this Giveaway, entrants agree to be bound by the Official Rules and the decisions of the Sponsor, which are final and binding in all respects.  Sponsor not responsible for any typographical or other error in the printing of the offer or in administration of the Giveaway.

6. Contingency of Giveaway: Released Parties are not responsible for lost, late, or illegible entries nor for electronic transmission errors resulting in omission, interruption, deletion, defect, delay in operations or transmission, theft or destruction or unauthorized access to or alterations of entry materials, or for technical, network, telephone equipment, electronic, computer, hardware or software malfunctions or limitations of any kind, or inaccurate transmissions of or failure to receive entry information by Sponsor on account of technical problems or traffic congestion on the Internet or at any website or any combination thereof. If for any reason the Giveaway is not capable of running as planned, including infection by computer virus, bugs, tampering, unauthorized intervention, fraud, technical failures, or any other causes beyond the control of the Sponsor which corrupt or affect the administration, security, fairness, integrity, or proper conduct of this Giveaway, the Sponsor reserves the right at its sole discretion, to cancel, terminate, modify or suspend the Giveaway and to award the available prizes via a random drawing from among all valid eligible entries received up to the point of the action taken by the Sponsor provided a sufficient number of entries have been received. Caution: Any attempt by any person to deliberately damage any website or undermine the legitimate operation of the Giveaway is a violation of criminal and civil laws and should such an attempt be made; Sponsor reserve the right to seek damages from any such person to the fullest extent of the law.

7. Governing Law & Forum. These Official Rules shall be governed by and interpreted in accordance with the laws of the State of Texas, without regard to choice of law or conflict of law principles. Any suit or proceeding brought in connection with the Giveaway or any aspect of or participation in the Giveaway shall be brought in state court located in Dallas County or federal court located in Dallas, Texas. The parties to any such suit or proceeding shall submit to the exclusive jurisdiction of such courts and waive any and all objections based on jurisdiction, venue, or inconvenient forum.

8.Entire Agreement. The Official Rules constitute the entire agreement between Sponsor and any and all Giveaway participants with respect to all aspects of the Giveaway. The Official Rules supersede and cancel any and all prior and contemporaneous negotiations, agreements, and understandings (oral and written) with respect to the Giveaway.

9. Confidentiality:  For information about how the Sponsor uses your personal information, please see its privacy statement, located at Privacy Notice Statement – TaxAct.

10. Winner’s List: To receive name and city / state of residence of winners of prizes valued at $25 or more, mail a stamped, self-addressed envelope accompanied with a signed, hand-printed request to “TaxAct Texas Bowl Ticket Giveaway Winner’s List”, TaxAct, Inc., ATTN: Marketing, 3200 Olympus Blvd., Suite 100, Dallas, Texas 75019. All requests must be received by February 14, 2023.

11. Sponsor: TaxAct, Inc., 3200 Olympus Blvd., Suite 100, Dallas, Texas 75019.

It’s time to review some important tax basics before the upcoming tax season. Here are seven things to remember when e-filing your federal income tax return this year — and how each could impact your refund amount.

It’s time to review some important tax basics before the upcoming tax season. Here are seven things to remember when e-filing your federal income tax return this year — and how each could impact your refund amount.

1.       Life events

As you go through the e-filing process, TaxAct^® provides a sneak peek of your estimated Federal Refund. This number will fluctuate as you input more of your tax information.

Before you begin filling out your federal return, we’ll ask you basic questions about your marital status, whether you have kids, or if you had any significant life events happen this tax year.

One of the best things you can do to get an accurate refund estimate is to fill out your Basic Info before you start inputting any of your tax forms.

While it might be tempting to skip this step and jump right into your W-2s and other income, not so fast! Your answers to the Basic Info questions help us guide you to which tax credits and deductions you might qualify for later.

Entering your basic information upfront will ensure we are factoring in the tax breaks you could potentially claim. This not only makes the tax filing process as simple and straightforward for you as possible, but it could potentially save you money as well.

2.   Filing status

After you fill out your basic information, our tax software suggests which tax filing status might be best for you.

There are five options you can choose from:

Sometimes you might qualify for more than one filing status. In this case, we’ll suggest the filing status that will likely give you the most tax advantages. Handy, right?

This is another reason why filling out your Basic Info first is essential to get the most accurate approximation of your tax refund!

3.    Dependents

As you’re filling out the Basic Info section, we’ll also ask if you have any dependents to claim.

A dependent is anyone who relies on someone besides themselves (or their spouse) for financial support. Typically, a dependent would be either your qualifying child or another relative. You cannot claim your spouse as a dependent.

Here are the basics of who can qualify as a dependent:

The dependent also may not:

Claiming dependents on your tax return can open the door to many tax benefits. If you list dependents in your Basic Info section, that tells us you may qualify for certain tax deductions and credits, which we will help you identify later.

For example, let’s say you are married with two kids who qualify as dependents. This means you likely qualify for the Child Tax Credit, so TaxAct will bring that up for you in the Credits section of your federal tax return.

Now let’s assume your kids are in daycare while you and your spouse work during the week. If so, you may qualify to claim the Child and Dependent Care Credit, worth 25-35 percent of qualified childcare expenses you may have paid. You can receive a maximum credit of up to $2,100 on up to $6,000 for two or more qualifying dependents. So, if you list dependents in your Basic Info, we will ask you about childcare costs.

These are just two examples of how claiming dependents could increase your tax refund, but you could also qualify for other child-related tax breaks.

4.   Tax deductions and credits

Tax deductions and tax credits are two distinctive things.

Both tax deductions and tax credits can reduce the amount of taxes you pay — but they do so differently.

A tax credit allows you to subtract the credit amount from your taxes owed as a dollar-for-dollar tax reduction. For example, if you owe $3,000 in taxes and receive a $2,000 tax credit, your tax bill would decrease to $1,000.

Some tax credits are refundable. This means that if the tax credit reduces your tax bill below zero, you get the excess credit amount refunded. For example, if you only owe $2,000 in taxes and receive a $4,000 refundable tax credit, you will receive the excess $2,000 as a tax refund.

A tax deduction, in contrast, reduces your taxable income instead of your taxes owed. For instance, if your taxable income was $50,000 and you received a $5,000 tax deduction, your taxable income would decrease to $45,000.

Both credits and deductions contribute to your total refund amount. Just make sure you answer all our interview questions when e-filing so we can help you identify which tax breaks you could claim!

5.    AGI

While filling out your income tax return, you may see “AGI” referenced. What does this mean?

AGI stands for adjusted gross income. Your AGI is your gross income (wages, business income, capital gains, etc.) minus certain deductions (retirement contributions, student loan interest paid, and HSA contributions, to name a few).

AGI is not the same as your taxable income; instead, your AGI helps determine your taxable income. To do so, we take your AGI minus the standard deduction ($12,950 for a single filer in 2022) and any other above-the-line deductions you qualify to claim.

6.    Standard deduction vs. itemized deductions

Now that we know what tax deductions are, let’s look at the two deduction options you have when filing your income tax return.

First up: the standard deduction.

The U.S. tax system allows every taxpayer to receive a standard deduction. This is a flat dollar amount that everyone can automatically subtract from their taxable income.

Your standard deduction amount depends on the tax filing status we mentioned earlier. For tax year 2022, the standard deduction is $12,950 for single taxpayers. Standard deduction amounts typically increase every year to account for inflation.

But you don’t have to take the standard deduction — there’s also another option called itemized deductions.

When you itemize, instead of taking the standard flat-rate deduction, you’d list all your deductions separately. Some examples of itemized deductions are personal property taxes, some medical expenses, disaster losses, and any state sales tax or state income tax you paid.

It typically only makes sense to itemize if the total of your itemized deductions exceeds the standard deduction. This generally means you’ll owe less federal income tax, which can increase your tax refund.

For example, let’s say you add up all your itemized deductions as a single filer for 2022, and the total is $9,000. You would probably want to claim the standard deduction instead, which would be worth $12,950 — almost $4,000 more.

If you’re still unsure which option is better for you, TaxAct adds up all your entered itemized deductions and recommends the method that will save you the most money.

7.    Your tax refund

And finally, the one you’ve been waiting for — your tax refund!

If you had excess income tax withheld from your paychecks during the year, you could get it back as a tax refund when you file your return. You may also be able to claim a tax refund if you qualify to claim enough refundable tax credits.

When you file with TaxAct, you can choose how you’d like to receive your tax refund. The quickest way to receive your refund is to e-file your return and choose to have your refund directly deposited into your bank account.

You can also check the status of your refund. The IRS has a tool called Where’s My Refund? that allows you to track your tax refund 24 hours after e-filing your federal return. The IRS updates this tool daily, typically overnight.

If you’d rather use a mobile device, you can track your refund using the IRS2Go app.

Some tax returns take longer to process than others — it depends on whether your return needs corrections or includes certain forms. You can call the IRS for an update if you haven’t received your refund within 21 days of e-filing (or six months with paper returns).

All TaxAct offers, products and services are subject to applicable terms and conditions.

This article is for informational purposes only and not legal or financial advice.