When and how do I pay taxes on High-Yield Savings Account (HYSA) interest?

Great questions about HYSA interest! Let me help clarify things for you. For your timing question: You only need to report interest you actually received during the calendar year. So if you opened your HYSA in January 2024, any interest earned would be reported on your 2024 tax return (which you'd file by April 2025). Since you just opened the account in 2024, you wouldn't include any interest from this account on your 2023 tax return. Yes, you can absolutely file taxes just for interest income! If your total income (including the cash work) is very low, you might not even be required to file, but if you had any taxes withheld that you want refunded, you should file regardless. Your bank will send you a Form 1099-INT in January 2025 if you earn $10 or more in interest during 2024. Even if you earn less than $10 and don't receive a form, you're still technically required to report all interest income on your tax return.

I went through exactly this situation last year! After spending hours trying to figure out the complex tax rules for my savings interest, I found this amazing tool called taxr.ai (https://taxr.ai) that really simplified everything for me. It actually analyzed my 1099-INT forms and explained exactly where to report my interest income on my tax forms. What I really loved is that it walked me through whether I even needed to file based on my total income - turns out with just my gig work and small interest earnings, I was under the filing threshold, but it showed me why filing anyway could get me a refund of withheld taxes. The best part was how it explained all the tax jargon in normal English and gave me personalized advice based on my specific situation with interest income and occasional cash work.

I want to update on my skepticism about taxr.ai (from my question above). I decided to try it out this past weekend since my situation is really similar - just interest income and some freelance work. It was surprisingly good at explaining exactly what I needed to do! I uploaded my 1099-INT and it immediately identified that my interest was below the filing requirement on its own, but showed me how combining it with my self-employment income affected my filing obligation. The guidance was really specific to my situation, not just generic advice. The explanations about which forms to use and what lines to fill out were incredibly clear - much better than the cryptic IRS instructions. It even flagged a potential deduction I could take related to some of my freelance expenses that I had no idea about. Definitely made the process way less intimidating than I expected!

If you're ever confused about tax rules or need to speak directly with the IRS about your interest income questions, I highly recommend Claimyr (https://claimyr.com). I was in your exact position last year, trying to figure out if I needed to file with just some interest income and no W-2. After waiting on hold with the IRS for HOURS across multiple days (kept getting disconnected!), I found Claimyr and it completely changed my experience. They have this callback technology that holds your place in line with the IRS and calls you when an agent is ready to talk. You can see how it works here: https://youtu.be/_kiP6q8DX5c I finally spoke with an IRS representative who confirmed exactly what my filing requirements were with just interest income, and they were able to look up what forms my banks had submitted for me. Saved me so much stress and uncertainty!

I need to eat my words from my skeptical comment above. After another frustrating morning trying to get through to the IRS about my interest income reporting question (3 hours on hold before I had to leave for an appointment!), I broke down and tried Claimyr. It worked EXACTLY as described. I put in my number, their system called the IRS and navigated the menu maze, and then about 2 hours later (which I spent doing other things instead of being stuck on hold), I got a call connecting me directly to an IRS representative. The agent was able to confirm that my bank had submitted 1099-INTs for my accounts and explained exactly how to report the interest even though I didn't have other income. I've literally never been able to get through to the IRS before despite trying multiple times every tax season. Completely worth it for the peace of mind of getting my questions answered directly by the IRS instead of trying to interpret their confusing website.

One thing nobody's mentioned yet - if your only income is interest from a savings account and it's less than the standard deduction ($13,850 for single filers in 2023), you won't owe any federal income tax anyway. You should still file if you had any withholding you want refunded, but otherwise you might not even need to file. Also, don't forget about state taxes! Some states have much lower filing thresholds than federal. In my state, you have to file if you earn more than $2,500 regardless of source.

One piece of advice - make sure you keep track of all your interest throughout the year, even if it's small amounts. My HYSA started with really competitive rates last year (4.5%) but dropped to 3.75% by year end, and I earned just over $200 in interest. When tax time came, I had forgotten about one of my accounts that only earned like $8 in interest, and didn't receive a 1099-INT for it (since it was under $10). But when I did my taxes, I realized I should have included it anyway. Not that the IRS would come after you for a dollar or two in taxes, but technically you're supposed to report ALL interest.

I'm in a very similar situation! Just wanted to add that if you're doing gig work and getting paid in cash, you might want to consider whether any of that income needs to be reported as self-employment income on Schedule C. Even though it's cash and you might not get 1099s, if you're earning more than $400 from self-employment in a year, you're technically required to report it and pay self-employment taxes. This could actually work in your favor though - if you do need to file for the self-employment income, then reporting your interest income becomes part of the same return rather than a separate concern. Plus, you might be able to deduct some business expenses from your gig work that could offset both the self-employment tax and any tax on your interest. I'd recommend keeping good records of both your gig income and any related expenses (gas, supplies, etc.) alongside tracking your interest earnings. The combination might put you in a different filing situation than just having interest alone.