Avoid Tax Mistakes:
There are many tax myths floating around. Things that have been passed around from person to person. Due to how common they are, many believe them to be true. In this article, we hope to dispel these myths for you so that you do not find yourself in trouble with the IRS due to misinformation.
- All Work Clothes are Tax Deductible
Though some work clothes expenses are deductible, not all are. The rule to follow is that the only work clothing that is deductible is that which is specifically required by your employer and the clothing is not suitable to wear anywhere besides work. A good example of this would be if you have to purchase a specific uniform. If you wear suits or dress clothes these typically are not deductible since you can technically wear them elsewhere, even if you personally choose not to do so.
- Estimate Taxes and Amend Later
In an effort to get their taxes filed as quickly as possible, some people think that they can guess some information and go back later and file an amendment to fill in the correct information. Do not do this! This would be considered lying on your taxes because you knowingly put in incorrect information. You are better off waiting a few weeks to file a complete and accurate return and avoid giving the IRS any red flags that may cause them to audit you.
- You Can Delay Paying by Filing an Extension
While filing an extension may push back the actual date that you have to file, it does not change the due date of your taxes owed, which must be paid throughout the year using withholdings or estimated tax payments, the balance, if owed, is still due April 15th. If you choose to wait to pay with your extended return it will hurt you because the IRS will add penalties and interest starting April 15th through the day that you actually pay them.
- Side Job Money Does Not Have to Be Reported
All money that you earn as income needs to be reported to the IRS, even if that income is just coming from a side business you have. You also need to report any 1099 income that you receive. It is also important to note that you will have to pay self-employment tax on any income that you earn from a side business, even though you are employed elsewhere.
- You Shouldn’t Take That Promotion Because It Will Bump You Up a Tax Bracket
Many people are worried about increasing their income, and thus increasing their tax bracket. Though moving your tax brackets will affect you a little, it would not affect you as much as you think. The only income that will be taxed at a higher percentage is the income that exceeds that bracket’s specific threshold amounts. So if you only have $2,000 of income that is over the tax bracket amount, you would only be paying the greater tax on the $2,000, not all of your income.
Unfortunately, these are only a few of the many tax myths that are out there. Be sure you are not falling prey to any of these myths by hiring a qualified tax preparer who can help you get the maximum refund possible without putting you in jeopardy.
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