Don’t Fall for These Common Tax Myths
As an accounting firm in Union City, NJ, we receive a lot of questions from clients based on inaccurate information and common myths. Unfortunately, too many people fall victim to these prevalent misconceptions, causing them to incur fines or undergo audits from the Internal Revenue Service. Rather than experiencing these terrible inconveniences, learn more about common tax myths and how to avoid them.
You don’t have to file taxes
In the Form 1040 instruction book, the IRS describes our nation’s tax system as “voluntary,” which causes quite a bit of confusion. Many interpret this to mean that filing taxes is a voluntary act, but not required. If that were the case, though, how many people would actually give their hard-earned money over to the government? While the IRS should have probably chosen another word to use, what they actually mean is that you are responsible for accurately determining how much you owe in taxes every year and filing the correct paperwork.
Income earned online is tax-free
In our digital age, it’s not uncommon for people to earn money from jobs that are based completely online, or operate a company that is entirely digital. The confusion here is the belief that non-traditional methods for generating income are not subject to taxes. This could not be further from the truth. All necessary forms must be filed for income generated online. If you are a business owner, you’ll want to discuss what you need to do for taxes with an accounting firm in Union City, NJ. If you’re an employee, ask your employer how they handle taxes so you can plan accordingly, and consult an accountant if you have questions.
You are immediately audited for home office deductions
This myth is similar to the previous one because as business has evolved in the digital space, so have the opportunities for people to work from home. A few decades ago, home offices were not as prevalent, which led the IRS to audit individuals who claimed these deductions. Now, claiming home office deductions is common and does not immediately invite an audit.
Only wealthy people are audited
Yes, people who make more than $100,000 annually are twice as likely to get audited. But people who make less than that may also have this action taken against them by the IRS. The best way to protect yourself from a messy audit process is to keep records of every deduction you take on your taxes.
Accountants assume liability for any mistakes
As a trusted, premier accounting firm in Union City, NJ, Kedean’s Generation does its absolute best to minimize errors on your tax documents. However, mistakes happen and the IRS will hold you responsible, not your accountant. Do not fret, though—our team of experienced accountants will help get you through any actions brought against you by the IRS. If another accountant made a mistake on your taxes and you would like a second opinion, schedule an appointment with us today. We’ll put our three decades of experience to work for you to mitigate any problems. We’re also available to clarify any confusion about common tax myths and misconceptions.
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