Ask Tiny: federal tax questions, answered plainly

Yes. Federal tax law counts all income you receive, including cash, unless a specific rule excludes it. Tips count as income too. Report the tips your employer reports and any tips you received but did not report. If you owe Social Security and Medicare tax on unreported tips, use Form 4137. Some workers may also qualify for a deduction for qualified tips, subject to limits. Keep a daily log of tips and cash payments so your totals are complete and easy to check.

Source: IRS Publication 17 (2025), Your Federal Income Tax (gross income, tips, Form 4137)

Yes. Unemployment compensation is taxable federal income, so you must report it on your federal return. You should receive Form 1099-G showing the total you received in the year. You can ask the paying agency to withhold federal income tax from each payment by filing Form W-4V. If no tax was withheld, you may owe tax when you file, so keep your Form 1099-G and payment records. Having these papers together makes it easier to report the correct total.

Source: IRS Publication 17 (2025), Your Federal Income Tax (unemployment compensation; Form W-4V withholding election)

Form 1099-K reports payments you received through a payment app, an online marketplace, or a payment card. You may have received one because a company reported those payments to the IRS. Payment apps and online marketplaces report when payments for goods or services exceed $20,000 and there are more than 200 transactions in the year. Card payments have no minimum amount, so you can receive a form for any amount. Getting a Form 1099-K does not decide whether you owe tax. Report all income from selling goods or services, even if you did not receive a form.

Source: IRS Form 1099-K FAQs: General information and Understanding your Form 1099-K (irs.gov); IRS Publication 1099 (2026), Form 1099-K reporting threshold

No. Money or property you receive as a gift from family is generally not income to you, so you do not report it on your return. The person who gives the gift may need to file Form 709 if gifts to you total more than $19,000 in the year. Filing Form 709 does not mean that person owes tax. Income the gift produces is taxable to you. For example, interest, dividends, or rent from a gifted asset must be reported on your return.

Source: IRS Gifts & Inheritances FAQ (irs.gov); Instructions for Form 709 (2025), annual exclusion of $19,000 (same amount for 2026 per IRS FAQ); IRS Publication 17 (2025), Gifts and inheritances

Usually not. The IRS says you probably do not have to file a federal return if your Social Security and SSI benefits were your only income for the year. Part of your benefits can be taxable if your other income plus half of your benefits is more than $25,000 for single filers or $32,000 for joint filers. If federal tax was withheld from your benefits, file a return to get a refund. Check Notice 703 and Publication 915 for the rules for your year.

Source: IRS Notice 703 (Rev. November 2026), Social Security Benefits (2026 tax year); IRS Publication 554 (2025), Tax Guide for Seniors (only-Social-Security rule)

Box 12 of Form W-2 lists other compensation and benefits your employer reported, each with a letter code and an amount. The code tells you what the amount is. For example, code W shows HSA contributions made by your employer or through payroll, code R shows Archer MSA contributions, and code Y shows certain nonqualified deferred compensation. Some box 12 amounts are not taxed. Keep your W-2 with your records, and use the code amounts when a form such as Form 8889 asks for them.

Source: IRS Publication 17 (2025), Your Federal Income Tax (Box 12 codes R and Y); IRS Publication 969 (2025), Health Savings Accounts (code W)

Federal income tax works the same no matter which state you live or work in. Your wages are federal taxable income, and your employer reports them on Form W-2 and withholds federal tax. Your federal return uses the same forms and rules. State income tax is different. Each state sets its own rules for residents, nonresidents, and work done inside its borders. This page does not cover state rules. For state filing, check with your state tax agency or a credentialed tax professional. Keep the Form W-2 from every employer.

Source: IRS Publication 17 (2025), Your Federal Income Tax, Chapter 5 Wages, Salaries, and Other Earnings

Report the interest as soon as you find it. Interest shown on a Form 1099-INT is taxable even if you never received the form, so it belongs on your return. If you already filed, file Form 1040-X, Amended U.S. Individual Income Tax Return, to add the interest and any tax you owe. Pay the tax as soon as you can to limit interest. If the IRS sends a notice about interest it received from a bank, respond by the date listed. Correcting it yourself is usually simpler than waiting for an IRS notice.

Source: IRS Publication 17 (2025), Chapter 6 Interest Income; Instructions for Form 1040-X (12/2025)

Backup withholding is a flat 24% tax that a payer must take out of certain payments, such as interest, dividends, and other amounts reported on Form 1099. The payer must withhold if you do not give a correct taxpayer number on Form W-9, if the IRS tells the payer your number is wrong, or if the IRS says you underreported interest or dividends. The withheld amount appears as federal income tax withheld on the form, and it counts as tax you paid. To stop it, give the payer a correct number.

Source: IRS Publication 505 (2026), Tax Withholding and Estimated Tax, Chapter 1 Backup Withholding; Form W-9

Rental income goes on Schedule E (Form 1040), Supplemental Income and Loss, Part I. List the rent you received, then subtract allowable expenses such as repairs, insurance, mortgage interest, property taxes, and depreciation. The result is your net rental income or loss, and it carries to your Form 1040. If you use the property personally, the rules limit how much you can deduct. Renting to family members below market rent can also limit deductions. Keep receipts and records for every expense.

Source: Schedule E (Form 1040), Supplemental Income and Loss, and Instructions for Schedule E (Form 1040) (2025); IRS Publication 527

Sometimes. A scholarship is tax-free only if you are a degree candidate at an eligible school, and only for tuition, required fees, books, supplies, and equipment your courses require. Amounts used for room and board, travel, or other living costs are taxable. So is any part paid for required teaching or research services. The taxable part is reported as income on your return. Publication 970 includes a worksheet that helps you figure the taxable part.

Source: IRS Publication 970 (2025), Tax Benefits for Education, Chapter 1 Scholarships, Fellowship Grants, Grants, and Tuition Reductions

Often, yes, but only if your parent meets the rules. A parent cannot be your qualifying child, so the qualifying relative test applies. Your parent's gross income must be below the IRS limit, which is $5,300 for 2026. You must have paid more than half of your parent's total support during the year. Social Security benefits count toward gross income only in some cases, so check Publication 501. If someone else can claim you as a dependent, you cannot claim dependents of your own.

Source: IRS Publication 501 (2025), Dependents, Standard Deduction, and Filing Information (qualifying relative); Rev. Proc. 2025-32, section 3.23 ($5,300 for 2026)

A qualifying child must pass five tests: relationship, age, residency, support, and joint return. The child must be your son, daughter, stepchild, foster child, sibling, or a descendant of one of them. The child must be under age 19 at the end of the year, a full-time student under age 24, or permanently and totally disabled at any age. The child must live with you more than half the year. The child cannot provide more than half of his or her own support, and generally cannot file a joint return.

Source: IRS Publication 17 (2025), Your Federal Income Tax (Chapter 3, Qualifying Child: five tests)

The kiddie tax applies to a child's unearned income, such as interest, dividends, and capital gains. If that income is more than $2,700 and the parent's tax rate is higher than the child's, the excess is taxed at the parent's rate. It applies to children under 18, to 18-year-olds whose earned income is not more than half their support, and to full-time students ages 19 to 23 with the same support rule, if at least one parent is alive. Form 8615 is used to figure it. A child's wages are earned income, not unearned income.

Source: IRS Topic no. 553 (unearned income over $2,700); Rev. Proc. 2025-32 section 4.02 ($1,350 amount for 2026); Instructions for Form 8615

Head of household is a filing status for people who are unmarried, or considered unmarried, on the last day of the year. You must have paid more than half the cost of keeping up a home for a qualifying person, such as a child or other dependent, who lived with you more than half the year. It gives you a larger standard deduction and lower tax rates than single status. The qualifying person must also meet the relationship and residency tests. Publication 501 has the complete rules and tests.

Source: IRS Publication 501 (2025), Dependents, Standard Deduction, and Filing Information, Head of Household

The standard mileage rate is an optional amount per mile that covers the cost of driving your car, so you do not have to track gas, repairs, and similar costs. It is used for business driving, medical trips, charitable service, and certain military moves. For 2026, the business rate is 72.5 cents per mile for travel from January 1 through June 30, and 76 cents per mile from July 1 through December 31. Keep a log with dates, miles, and purpose. If you use this rate for a year, you cannot also deduct your actual car costs for that year.

Source: IRS Notice 2026-10, section 3 and Announcement 2026-11 (Internal Revenue Bulletin 2026-29) for 2026 rates; IRS Publication 463 (2025), Standard Mileage Rate (no double deduction)

A deduction lowers the income you are taxed on, so its tax savings depend on your tax bracket. A tax credit lowers the tax you owe, dollar for dollar. For example, a $1,000 credit reduces your tax by $1,000, while a $1,000 deduction saves less than that. Some credits are refundable, which means you can get money back even if you owe no tax. Check the instructions for each benefit to see which type it is.

Source: IRS Publication 17 (2025), Your Federal Income Tax (Introduction: credits reduce tax; Standard Deduction reduces taxable income; refundable credits)

Yes, if you meet the rules. You can deduct up to $2,500 of interest you paid on a qualified student loan during the year. It is an adjustment to income, so you can claim it even if you do not itemize, and it is reported on Schedule 1. Income limits reduce the deduction as income rises, and you cannot claim it if you file as married filing separately. You must be legally obligated to pay the loan. Check Publication 970 for the income limits for your tax year.

Source: IRS Publication 970 (2025), Tax Benefits for Education (student loan interest deduction, chapter 4); IRS Publication 17 (2025) (Schedule 1, line 21)

Usually not. For most people, moving expenses are not deductible. The main exceptions are members of the Armed Forces on active duty who move because of a military order for a permanent change of station, and, under a 2025 law change, members of the intelligence community. Eligible movers use Form 3903 to figure the deduction. You also cannot deduct expenses your employer paid for or reimbursed. Check the Form 3903 instructions and IRS Publication 3 for the rules that apply to your year.

Source: IRS Instructions for Form 3903; IRS Publication 3, Armed Forces' Tax Guide; IRS Publication 6079 (Rev. 5-2026) item 2.11.6 (moving expense deduction not allowed except active military and intelligence community, P.L. 119-21 section 70113)

Schedule 1 (Form 1040) is where you list extra income and adjustments to income that do not fit on the main Form 1040. Part I covers additional income, such as unemployment compensation and business income from Schedule C. Part II covers adjustments, such as the IRA deduction on line 20 and the student loan interest deduction on line 21. Its totals carry to Form 1040, lines 8 and 10, so you will use it if you have any of these items.

Source: IRS Form 1040 (2025), lines 8 and 10 (Schedule 1 totals); IRS Form 8880 instructions (Schedule 1, line 20 IRA deduction); IRS Publication 17 (2025) (Schedule 1, line 21 student loan interest)

Yes, starting in 2026. If you take the standard deduction, you can deduct cash or check gifts to eligible charities, up to $1,000 for single filers or $2,000 for married couples filing jointly. The amount is added to your standard deduction. Gifts of goods, such as clothing, do not count under this rule. Keep a bank record or written receipt for each gift. If you itemize, the rules are different. Only the part of your gifts above 0.5% of your adjusted gross income is deductible.

Source: IRS Publication 505 (2026), Tax Withholding and Estimated Tax, What's New and Worksheet 2-4

Form 8962, Premium Tax Credit, figures the credit for people who bought health insurance through the Marketplace and may qualify for help with premiums. If advance payments of the credit were sent to your insurer during the year, you use Form 8962 to reconcile them with the amount you actually qualify for. The result can increase your refund or require you to repay part of the advance. You need Form 1095-A from the Marketplace to complete it. Your credit depends on your income, household size, and plan.

Source: IRS Form 8962, Premium Tax Credit (PTC); IRS.gov 'About Form 8962' page

Keep records that support your return until the period for the IRS to assess tax or to allow a refund runs out. For most returns, that is 3 years from the date you filed, or from the due date if you filed early. Keep records for 6 years if you left out income that was more than 25% of the gross income on your return. Keep records for 7 years if you claimed a loss from worthless securities or bad debt. Keep property records, such as those for a home, until the period ends for the year you sell it.

Source: IRS Publication 17 (2025), Your Federal Income Tax (What Records Should I Keep?; Table 1-6, Period of Limitations)

An ITIN, or individual taxpayer identification number, is a nine-digit number the IRS issues to people who need a U.S. tax ID but are not eligible for a Social Security number. You need one if you must file a U.S. federal return or be claimed as a dependent and you do not have a Social Security number. Apply with Form W-7 and include the required documents that prove your identity and foreign status. Some ITINs expire if they are not used on a return, so check whether yours needs renewal before you file.

Source: IRS Publication 17 (2025), Your Federal Income Tax (Social Security Number and ITIN; ITIN renewal; Form W-7)

Often, but only within IRS limits. You can file a return for any prior year you have not filed. IRS e-file rules generally accept prior-year returns for the current year and the two years before it, and only through tax software that supports that year. Older years, or years your software does not support, usually must be filed on paper. IRS Free File does not process prior-year returns, so check the filing options for the year you need.

Source: IRS.gov, Benefits of Modernized e-File (MeF accepts the current tax year and two prior years); IRS Publication 1436 (Rev. 10-2026)

Form 4868 gives you an automatic six more months to file your return. For the 2025 return, the new deadline is October 15, 2026. It does not give you more time to pay. Any tax you owe was still due April 15, 2026, and interest and possibly penalties apply from that date until you pay. Estimate what you owe and pay as much as you can when you file the extension. You do not need to explain why you need more time.

Source: IRS Form 4868 (2025), Application for Automatic Extension of Time To File U.S. Individual Income Tax Return

The underpayment penalty is an amount the IRS charges when you did not pay enough tax during the year, through withholding or estimated payments. It is figured separately for each payment period. The IRS can often figure it for you, but Form 2210 is the form used to calculate it. Some exceptions apply, such as when you owe less than a set minimum. Publication 505 explains the required payments and how to avoid the penalty.

Source: IRS Publication 505 (2026), Tax Withholding and Estimated Tax, Chapter 2 Estimated Tax; IRS Form 2210

Yes. File Form 1040-X, Amended U.S. Individual Income Tax Return, after you file your original return. Include any forms and schedules you are changing, and explain each change in Part II. For a refund, you generally must file within 3 years after the original return was filed, or within 2 years after the tax was paid, whichever is later. Processing can take up to 16 weeks. Some credits have their own rules, so check the instructions for that credit before you claim it.

Source: IRS Instructions for Form 1040-X (12/2025); IRS.gov 'Amended returns & Form 1040-X' FAQ

An IP PIN is a six-digit number the IRS gives to you to prevent someone else from filing a return using your Social Security number. You enter it on your return, and the IRS uses it to verify your identity. The fastest way to get one is through your IRS Online Account. Parents and guardians can request one for a dependent. You can request one even if you are not required to file. The IRS does not start contact with taxpayers by email, text, or social media to request personal information.

Source: IRS.gov, 'Get an identity protection PIN' (irs.gov/individuals/get-an-identity-protection-pin)

A transcript is an IRS record of your tax return or account information. A tax return transcript shows most of the line items from the return as filed. You may need one to apply for a loan, financial aid, or a mortgage, or to prepare an amended or missing return. You can view and download transcripts in your IRS Online Account. You can also request one by mail with Form 4506-T. Mailed transcripts usually arrive in 5 to 10 days. Transcripts partly mask personal information.

Source: IRS.gov, 'Get your tax records and transcripts' page; Form 4506-T, Request for Transcript of Tax Return

The saver's credit, also called the retirement savings contributions credit, can reduce your tax if you put money into a retirement plan. Eligible contributions include IRA contributions and elective deferrals to a 401(k), 403(b), or similar plan. The credit is worth up to $1,000 ($2,000 if married filing jointly). Your income must be under the IRS limit for your filing status. You cannot take it if you were born after January 1, 2008, someone else claims you as a dependent, or you were a student. Use Form 8880.

Source: IRS Form 8880 (General Instructions; About Form 8880, Credit for Qualified Retirement Savings Contributions); IRS Publication 17 (2025) (saver's credit)

HSA contributions can lower your tax, and the rules depend on who pays. Contributions you make are usually deductible on your federal return, even if you do not itemize. Employer contributions are not included in your income, and payroll contributions made through a cafeteria plan are not taxed. Money you withdraw for qualified medical expenses is not taxed. Report HSA activity on Form 8889. Contributions above the annual limit are not deductible, and excess employer contributions are taxed.

Source: IRS Publication 969 (2025), Health Savings Accounts and Other Tax-Favored Health Plans (deductibility, employer exclusion, excess contributions, Form 8889)

Form 1099-R reports money you took out of a pension, annuity, IRA, or other retirement account. Find the taxable amount in box 2a. If box 2b is checked, the payer did not figure the taxable amount, so you must. Box 4 shows federal tax already withheld. Report the total from box 1 on the IRA distributions or pensions and annuities lines of Form 1040, along with the taxable amount. Roth withdrawals and rollovers can work differently, so read the form instructions or talk to a credentialed tax professional.

Source: IRS Form 1099-R; Instructions for Forms 1099-R and 5498 (2026)

Form 8889 is used with a Health Savings Account (HSA). It reports contributions you and your employer made, figures your HSA deduction, and reports distributions you took from the account. Withdrawals for qualified medical expenses are tax-free. Withdrawals for other reasons are taxable and may carry an additional tax. Use this form only if you had an HSA during the year. Your HSA trustee sends Form 1099-SA, which shows the amounts you withdrew.

Source: IRS Form 8889, Health Savings Accounts (HSAs); IRS.gov 'About Form 8889' page

No, generally not. Self-employment tax applies when your net earnings from self-employment are $400 or more for the year. Net earnings are your business income minus your business expenses. Even when self-employment tax does not apply, that side income is still taxable income, so you must report it if you have a filing requirement. Check Publication 17 for the filing rules that apply to your situation.

Source: IRS Publication 17 (2025), Your Federal Income Tax (Table 1-3 and Self-Employment Tax: net earnings of at least $400)

The foreign tax credit lets you reduce your U.S. tax by the income taxes you paid to another country on the same income. Most filers claim it with Form 1116, Foreign Tax Credit. For 2025 returns, if your foreign taxes are $300 or less ($600 if married filing jointly), all of your foreign income is passive, and the payer reported it on a qualified payee statement, you may skip Form 1116 and claim the credit on Schedule 3 (Form 1040). The credit cannot be more than the U.S. tax on that foreign income. Keep your foreign tax receipts.

Source: IRS Form 1116, Foreign Tax Credit, and Instructions for Form 1116 (2025)

It depends on your income and activities. A nonresident alien with income from U.S. sources may need to file Form 1040-NR, even if no tax is due. A nonresident alien engaged in a U.S. trade or business generally must file. Some people must also file Form 8843 to report days of presence in the United States. Publication 519, U.S. Tax Guide for Aliens, explains who must file and when. If you are unsure, ask a credentialed tax professional before the due date.

Source: IRS Publication 519 (2025), U.S. Tax Guide for Aliens, Chapter 7 Filing Information

The FBAR, FinCEN Form 114, is an annual report to the Treasury Department about foreign bank and financial accounts. You must file it if you are a U.S. person with a financial interest in, or signature authority over, foreign accounts whose combined value exceeded $10,000 at any time during the calendar year. It is separate from your income tax return. For 2025 accounts, it is due April 15, 2026, and FinCEN grants an automatic extension to October 15, 2026. You file it electronically through FinCEN's BSA E-Filing system.

Source: FinCEN Form 114 (FBAR); IRS.gov 'Report of Foreign Bank and Financial Accounts (FBAR)' page; FinCEN FBAR line item filing instructions

Basis is your investment in an asset for tax purposes. For stock you buy, basis is usually the purchase price plus commissions and fees. When you sell, your gain or loss equals the sale price minus your adjusted basis. Some events change basis, such as reinvested dividends, stock splits, or a disallowed wash sale loss added to new shares. Stock you receive as a gift or inheritance follows different rules. Brokers often report basis on Form 1099-B, but check it, because not all basis is reported.

Source: IRS Publication 551 (12/2025), Basis of Assets, Stocks and Bonds; IRS Publication 550 (2025), Wash Sales

A wash sale happens when you sell stock or securities at a loss and, within 30 days before or after that sale, you buy substantially identical stock or securities. You cannot deduct that loss right away. The disallowed loss is added to the cost of the new shares, which postpones the deduction until you sell those shares. Buying the same stock in an IRA or Roth IRA also triggers the rule, and in that case the loss is lost for good. Your broker's Form 1099-B often shows wash sales.

Source: IRS Publication 550 (2025), Investment Income and Expenses, Wash Sales