5 Tax Myths You Should Stop Believing
1. I filed an extension. So, I don’t have to file or pay until October.
Actually, an Extension is only an extension to FILE and not and extension to pay. If you have a balance due on your return, the tax is due in April even though the return isn’t due until October. If you don’t pay the balance in April, you will be assessed a Failure to Pay penalty calculated all the way back to Tax Day. Still don’t believe me? The form you file for an extension is called Form 4508: Application for Automatic Extension of Time To File U.S. Individual Income Tax Return.
2. Social Security isn’t taxable.
Well… that depends. If you’re receiving SSI then it isn’t taxable at all. If you’re receiving monthly retirement, survivor benefits, or disability then your benefits MIGHT be taxable.
A portion of your benefits are taxable if the total of ½ the benefits + all other income is greater than:
$25,000 if you file Single, Head of Household, or Qualifying Widow(er), or Married Filing Separate and lived apart from your spouse the whole year
$32,000 if you file Married Filing Jointly
$0 if you’re Married Filing Separate and lived with your spouse at any point during the year
3. Students don’t have to pay taxes.
Maybe… If you’re a student and earned MORE than $12,000, you need to file a tax return. If you’re a single dependent, then you need to file a return if you have more than $6350 in earned income OR $1050 in unearned income. Though, it would be a good idea to file a return if you had any income since you would likely get a refund of the taxes that were withheld from your check. No reason to pay taxes if you don’t have to!
4. Home office deductions will cause an audit.
No, but claiming unreasonable home office deductions will. Your space must be for regular and exclusive use and your principal place of business. So, that guest room that your in-laws sleep in that doubles as your office space… not exclusive use. Sorry! Also, Employees working from home can no longer claim a deduction for home office expenses. This was a change made as part of the new Tax Cuts and Jobs Act.
5. My accountant is liable for mistakes.
Nope. This is why it’s imperative that you find someone that knows what they’re doing. It is YOUR return, so you’re responsible. Always make sure that the person filing your return has their own PTIN number, a CPA license, an EA certification, or is part of the Annual Filing Season Program. Ask them how many returns they prepare annually and whether they prepare returns outside of tax season. And, always review your return. If you’re not sure what something is, ask!