As it’ll come to taxes, myths are all abound. And it isn’t any surprise. Similar to the thought of coming up against a big bear or fearing your airplane soaring down inside the Bermuda Triangle, the concept of tangling with the Internal Revenue Service is a pretty frightening idea. It does not help that taxes are complex, which is going to make it difficult to sort out fact from fiction.
Therefore, if you have a desire to improve your filing experience for 2017, below are some tax myths that quite a few individuals will fall for, according to the tax professionals.
Your work clothing is tax-deductible
An accounting and tax professor with Widener University in Chester, PA, Theresa Shea, states that she has had a lot of clients who enter her place of business thinking that any kind of work clothes are deductible.
Shea says that some clothes are tax-deductible, while most aren’t. The only kind of clothes for which someone might take a deduction is clothes that specifically are required by an employer and aren’t appropriate to wear outside of the work place.
You may estimate your figures since you always can file an amended tax return later on
There’s some fact in that. You may file an amended tax return if you find out that you made an error on your taxes. Click here to learn more about filing an amended tax return: https://scottpartners.com.au/.
However, relying too much on that strategy, and thinking that it is perfectly alright to guess because of the capability of amending, is a huge mistake, according to another tax expert.
Because within the technical sense, if you guess the numbers, realistically you, as a taxpayer filed a false return, a tax return you know is false, which technically is a crime.
Moreover, the likelihood that you actually will file an amendment later on is slim to none. Chances are, you will not remember.
According to experts, at least until an Internal Revenue Service examination gets triggered. If figures are missing, file it and inform the IRS that it has estimates, and be certain the actual correct tax return is filed.
Filing an extension provides additional time to pay
An extension provides you additional time to prepare the taxes; however, if you owe funds, and you file 6 months later, it’s pricier than paying in April, according to certified financial planner, Jordan Niefeld.
Niefeld was a tax Certified Public Accountant for 8 years and claims that most clients thought that if they filed a 6-month extension on taxes on October 15th rather than the standard April 15th, no foul, no harm, from a financial viewpoint. However, you’re hurting yourself, he adds.
You might file on October 15th, yet the clock on the interest began on April 15th. Extensions, in other words, are okay if you need that period to get your taxes collected, yet not as a method of saving money.
If there isn’t any record of the funds, it does not need to be reported. All of us wish that. However, no, that just isn’t the case.
Granted, if you discover $10 on the street, and you put it in your pocket, in reality, the IRS never will know, even though, technically you ought to report it. However, if you are making money, and you do not report it, that is a severe no-no.
Tax analyst Andrew Oswalt reports that this myth oftentimes trips people up who are earning cash on the side, perhaps by driving one time per week for a ride-sharing provider such as Uber.
Therefore, assuming you earned over $600 in any given gig, your employer is going to send you a Form 1099-MISC, and the funds on that form are going to be subjected to self-employment taxes. However, on the bright side, you might have the ability to deduct costs associated with the side gig.
Earning more money will bump you into higher tax bracket
Individuals close to getting to a new tax bracket all of a sudden may be concerned that because they are earning more money, they are going to be hit by more taxes than ever and they might even wonder if they’d have been better off not attaining that promotion or raise. Not so fast, according to Ben Sullivan, a certified financial planner.
Sullivan states one example which might provide more clarity. A married taxpayer who earns $500,000 of regular income might be within the highest tax bracket, which, in 2015, was 39.6%, yet only the part that exceeds $464,850 might be taxed at this rate. The first $464,850, in other words, still is taxed at a lower rate.
However, do yourself a favor and do not share that “problem” with friends who are within a lower tax bracket. You’ll be mocked.