Taxpayers are likely to cling to any myth that promising and likely to lower their tax bills. In fact, many are quick to believe whatever they are told by friends, family, or even what they read on the web. The only authentic source of information on taxes is the tax law, which is best understood by the IRS and tax professionals. Explained below are some tax myths and the truth about them:
To Claim Tax Deductions, You Must Itemize
Just because most common tax deductions, like home mortgages and medical costs, require the taxpayer to file Schedule A or itemize to claim, doesn’t mean all other deductions must be itemized to be claimed. There are many other “above the line” deductions on the Adjusted Gross Income section of Form 1040 that don’t necessary require any itemization. These include alimony, moving costs, and tuition fees, amongst others.
Payments Received Below $600 don’t Have to be claimed
It is one of the most common myth and many taxpayers are misled into believing that you cannot claim received payments that is below $600. The truth is that there is a $600 threshold that payers are required to report on Form 1099. This means that you have to report the amount whether the 1099 is issued or not.
Anyone with Kids is Considered a Head of Household
The way individuals define Head of Household differs from the IRS’s definition. According to Uncle Sam, only unmarried individuals who provide for dependents can file as Heads of Households. You therefore, have to be divorced, unmarried or single at the end of the tax year and have paid over 50% of the home maintenance. Visit the IRS website to find out instances when you are considered as unmarried.
If You Evade Filing Taxes for 3, 5, or 7 Years, You are Let off the Hook by the IRS
The 3 year IRS statute of limitation that applies to most taxpayers has a number of restrictions that have to be understood. The statute in reality, never expires if you fail to file your returns. This means that the IRS will still hunt you down whenever they find sufficient reasons to.
Your Tax Professional is to Blame for Your Tax Return Flaws
Taxpayers are not excused if the tax returns prepared by tax pros contain mistakes. The IRS expects all taxpayers to read and understand tax returns before sending them. You take personal responsibility and guarantee accuracy the moment you sign against the dotted lines.
Other common myths include beliefs that correcting tax return mistakes may lead to an audit. Some believe that taxpayers are free to sell their houses tax-free after hitting 55 and minors are exempted from paying and filing tax returns. These myths are misleading and you have to be informed to avoid any troubles with the IRS.