By: Malory Wood d/b/a The Missing Ink
It is getting to be that time of year again. Tax season! Tax Day is quickly approaching so you better start preparing now. With the world at our fingertips, it is no wonder there is so much misinformation. It is important to learn tax facts versus tax fiction before you end up in hot water. Or worse, audited.
Here are the biggest tax myths debunked for your reference this tax season:
Filing Your Taxes is Optional
There are an alarming number of people who believe they do not have to file their taxes. Somewhere along the line, people misinterpreted the word “voluntary” as it is named in the Form 1040 instruction manual regarding tax forms.
The “voluntary” excerpt is solely in direct reference to each individual being responsible for how much they owe in taxes, and NOT insinuating they do not have to file. Each person must be accounted for, whether as dependents or head of household.
Students are Exempt from Filing
This is a tricky situation. Some student my be exempt from filing taxes; however, others may not. Here is an easy breakdown:
- If the student earns more than $10,400 in income, they must file taxes
- If student is under 24 years old and earns less than the select minimum income, they should file with their parents
To eliminate an issue, every student should file, regardless of income earned.
Home Offices Equal Office Deductions
Many sole proprietors believe because they have a desk in their home, they may qualify for an office deduction. This is not always the case. In order to properly file for an office deduction, the “office” must account for at least 20% of the home.
In addition, if you work at an office and “bring work home,” you are not eligible for the deduction. You are eligible only if your home office is your main place of business.
Low-Income Earners Never Get Audited
Many associate the IRS with high-income earners. The IRS’ mission is to target any and all financial discrepancies and does not discriminate who they audit. As a matter of fact, according to the Tax Foundation, workers who earn less than $25,000 annually may be more likely to be targeted for an audit; especially if they receive the Earned Income Tax Credit.
Married Couples Must File Together
One may assume it mandatory to file jointly if married; however, you are eligible to file separately if wanted. Married couple are eligible to qualify for extra tax credits when filing jointly. When there is a large difference in income earned between the two parties, it is possible to claim an even bigger bonus from the IRS.
If the couple earns over $150,000 collectively, it is also possible to receive a penalty when taxes are filed jointly. Some situations prove filing separately may be a better option.
This tax season, you don’t have to go it alone. Carlos Marzan is top industry leader and owner of CAM Accounting. He is an expert in taxes and financial planning with a loyal following. If you need assistance, contact Mr. Marzan today for a free initial consultation.