Tax Myths

Here are some tax myths you should be aware of
Tax time is just around the corner, and hopefully you have your W-2 and are getting ready to put your 2007 tax return behind you. As you review materials and get excited about refunds, rebates and deductions, don't fall for these common tax myths that will only lead to time-consuming research and perhaps a higher tax bill instead of a hefty return.

tax myth no. 1

I don’t have to pay taxes

According to the February 2008 CCH Complete Tax Survey, 23% surveyed said they did not have to file taxes or were unsure whether they had to or not. Every person in this country needs to file taxes, including students, children, people who make no money, and people who get paid only in cash. Returns for students and children are often lumped into the tax returns of their parents, but they must still file, regardless. You should never fall into the tax myth of not filing. Even if there are no immediate consequences, if one day you decide to file your own taxes or take a job where taxes are withheld, the IRS will quickly notice a gaping hole in your tax return history. Even if you owe no back-taxes, there are always fines, and the process of catching up will consume a great deal of your time. Don't fall victim to this tax myth and make sure that you file your tax return every year, regardless of your financial situation or social status.

tax myth no. 2

My accountant is liable (for mistakes)

Many taxpayers assume that if they go to a professional firm, the accountant will be liable for any errors or omissions that may result in you having to pay more taxes, penalties or even endure an audit. The accountant may have made a mistake, but the responsibility to pay for it comes on your shoulders. First, never assume your accountant has everything under control. Computer accounting software today makes basic math errors less common, but you should always review your return and understand what is being submitted to the IRS before it goes out the door. Most importantly, be accountable for your own situation. Sometimes, a mistake by an account may not result in fines or an audit, but it can manifest itself in the form of a missed deduction or tax credit.

tax myth no. 3

I don’t have any business expenses

Just because you're not a business owner, it doesn't mean you don't have valid business- or employment-related expenses you can deduct on your taxes. At your 9-to-5 job, ask yourself what things you're paying for in order to maintain employment. If you're a teacher, for example, you will often find yourself making extra school supply purchases for your students -- these are deductible. If you have a certain uniform for work, you may be able to deduct dry cleaning expenses. If you are becoming part of the growing segment of freelancers, consider incorporating yourself as a business. That step will cost you a few extra dollars in terms of state and legal fees, but you may become eligible for far more favorable tax treatment when it comes to health insurance premiums, travel and entertainment deductions, and even a retirement plan via a SEP IRA. 

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