There’s a lot of misinformation and myths out there about taxes, and blindly following someone else’s bad tax advice could get you into trouble. Here are 5 of the most common tax myths – and the facts behind them.
Myth: Filing income tax is voluntary.
Fact: This might seem like the most obvious tax myth, but unfortunately a lot of people tend to get confused about this one. The tax code refers to income tax filing as a system of ‘voluntary compliance’. Unfortunately, many people interpret this to mean that they can’t be forced to file. However, ‘voluntary compliance’ simply means that the Internal Revenue Service (IRS) makes taxpayers responsible for calculating and sending in their return on their own, rather than automatically sending them a check or a bill. Not filing your taxes is NOT an option; it’s illegal.
Myth: Married couples have to file jointly.
Fact: Married couples have two choices for filing status: married filing separately and married filing jointly. Most couples choose the latter because it usually has the most favorable effect on their return. However, in some cases (i.e. in the case of high medical bills), it can save you money to file separately. Before filing each year, make sure to consider both options, as your situation can change from one year to the next.
Myth: No income = no filing.
Fact: Some people believe that students and retirees don’t need to file taxes, usually because income for these groups tends to be really low. However, low-income earners aren’t exempted from filing – but there are some cases where they might be. If you’ve hit a certain age bracket or if you earn below a specific threshold, you may qualify for free tax help.
Myth: You can claim your pet as a dependent.
Fact: No matter how much you love your pets – and no matter how much you spend to take care of them – you can’t claim them as dependents. You can only claim human beings – those with a Social Security number – as a dependent. In fact, in 1986, the IRS started to require taxpayers to list their dependents’ Social Security numbers on their returns. Falsifying information to claim your pet as a dependent could land you in jail.
Myth: Your accountant is responsible for any mistakes in your return.
Fact: Professional tax preparers want to avoid making mistakes for the sake of their job security and reputation, but any tax fraud committed on your return is exclusively your responsibility. Similarly, you can’t blame tax software or false information that you read online. If you’re working with an accountant, make sure to review their work and ask questions if there’s anything you don’t understand.
The Bottom Line
There’s a lot of tax myths out there today, and the myths mentioned above are just some of them. Make sure to educate yourself about these tax myths and misconceptions – doing so can save you from a lot of trouble down the road.