Do you know how often we live through myths? Lack of accurate information leads to misinterpretation of reality and results in various problems and misunderstandings.
For instance, if you have a habit of popping your fingers, many people around with sheer annoyance might say, “Stop that if you don’t wanna get arthritis”. Well, that’s a myth too because cracking fingers has nothing to do with arthritis.
Just as myth involves every aspect of life, tax is no exception in this regard. Especially as tax filing involves so many segments and updates, it’s natural to get influenced by such myths. So here’s to debunking tax myths! This article entails all the necessary tax myths that will keep you alert from any misunderstanding during the tax filing process.
Myth 1: Filing Taxes is Voluntary
Many people misunderstand tax filing as the Form 1040 instruction book uses the term ‘voluntary’ to describe the tax system. By ‘voluntary’ many people misconceive that tax payment is not mandatory. However, the term ‘voluntary’ in the form infers that each individual must be voluntarily responsible for determining the correct amount of tax owed. Hence, it has no connection and is not an optional act.
Myth 2: The IRS is Obligated to File your Return
After filing a tax return, you highly anticipate that the IRS will file a return for you. This is a myth because the IRS is mainly responsible to verify your return. If they find anything untoward in your process, they will get back to you.
Myth 3: Calling/Visiting the IRS will accelerate your Tax Refund
It’s a common misconception that directly contacting the IRS will speed your tax refund process. You will be living in a fool’s paradise if you believe so.
Through the online process, you can easily check your tax refund status with the Where’s My Refund? Tool or IRS2Go mobile app. An alternate means is to call the automated refund hotline at 800-829-1954.
Myth 4: Self-employed or Side-Income is Tax Free
It is true that as a self-employed individual, you are eligible for certain tax credit. However, it’s not entirely tax free. You must report your taxes. Fill up and submit the W-2 form of your self-employed venture as the government needs to be informed. From 2022, income earned over $600 through digital payments will be reported to the IRS for the next year’s tax.
You are eligible for self-employed credits to reduce your tax expenses. However, you must file your taxes accordingly.
A student is not required to pay taxes. However, it is applicable only when a student earns less than $ 12,550 during that tax year.
Myth 5: Online Source of Earning is Tax Free
Income earned online is no different than offline. If your earned income, regardless of any medium, stands more than $400, you are required to declare the income on your taxes. Hence, you will have to fill up W-9 and report your income to the IRS.
Myth 6: Getting Tax Extension means you can File Tax on October
The tax extension for filing taxes for the tax year 2021 is October 17, 2022. However, it is misperceived by many that tax extension means that someone is exempted from paying any taxes until October. In truth, a tax extension means getting an extra six months within which one can complete their tax filing process. Tax extensions are logical for situations such as lost paperwork or any awaited copies.
In short, tax extension refers to you getting an extra 6 months to pay your taxes any time within October 17th, 2022.
So next time you file your taxes, keep these common tax myths in mind to avoid any mistakes or misunderstanding. Hopefully, this article will help you to tactfully file your taxes. Spread out the words to dispel the tax myths. For any tax support, contact Ahad&Co, the best CPA firm in NYC.