Myth Busters: Tax Edition

There are many misconceptions surrounding taxes. However, we don’t suggest taking advice from anyone other than a tax professional.

We have highlighted some of the biggest tax misconceptions and have provided the accompanying, accurate information.

Myth 1: Filing your taxes is voluntary
Filing your taxes is reporting your income and taxes paid to the IRS. If you do not file on your own behalf, the IRS will file a return for you. However, because the IRS does not know the ins and outs of your situation, this return is not likely to be the most accurate reflection of your current status. Trying to fight the IRS on whether you should file or not is not a great plan. You should file a return annually through trusted tax software, or better yet, with an experienced tax professional.

Myth 2: If you file an extension, you can delay payment
This is one of the most common misconceptions about filing an extension. While filing an extension does allow you time to address missing or inaccurate information, provides the time needed to take advantage of all write-offs, etc. However, although you delayed your filing date, you must still pay any taxes you might owe on the original filing deadline. Should you delay payment, you will be responsible for penalties and interest fees.

Myth 3: You don’t have to file a return if I didn’t earn a certain amount
Students, retirees, or other workers who think they don’t make a lot are still responsible for filing their returns. However, low-income earners are not exempt from filing. Those who fall within a certain income bracket may be eligible for free tax preparation and/or help.

Myth 4: If I backfile my taxes, I can claim my refund no matter what
A common misconception is that the IRS will hold your refund for you indefinitely. Taxpayers have 3 years from the return due date to claim their refund. This same rule is applicable for tax credits. The IRS is not a bank. They will not hold your money for you forever.

Myth 5: All married folks have to file a joint return
For the majority of married taxpayers, filing a joint return is a good idea in order to qualify for more tax credits. However, if both spouses are high-income earners, there is a chance that filing separately would be a better option. Another reason to file separately is if couples do not want to responsible for the tax liabilities of their spouse.