Friday, October 21, 2016

Tax Untruths You Need to Know

When it comes to taxes and tax law, people say and believe all kinds of things that just plain aren’t true.  Some of the things they believe are wrong but ultimately harmless. Believing some untruths, though, can end up hurting you big time, especially if you let these myths affect how or when you file your taxes.  So, to avoid falling victim to tax lies, listen up while we divulge some of the biggest tax myths that people commonly believe in.    

Tax Lie #1: You Can Deduct the Cost of Your Work Clothes
You may have heard the myth that, whatever clothes you buy for work, you can deduct from your tax bill. While it would certainly be nice if this was true- hey, we could all deduct expensive designer clothing and claim it was for work- it just isn’t.

The only time you can deduct the cost of work clothing is if you are required to purchase a specific type of clothing that MUST be worn for work and that can ONLY be worn for work. So, deducting the cost of that couture dress as a work expense just isn’t going to happen.

Tax Lie #2: If You File an Extension, You can Worry About Paying Taxes Later
If you’ve ever owed taxes and felt unsure about how you were going to pay them, someone may have suggested that you file an extension so that you’d have more time to pay. Unfortunately, though, this strategy doesn’t work!
Getting an extension gives you more time to pay your taxes, yes, but any money you owe will still be due at the regular time, and, if you don’t pay it, you’ll keep accruing charges and fees, which is the last thing you want when you’re already in a financial bind.

Tax Lie #3: Getting Bumped into the Next Tax Bracket is the Worst Thing Ever
Finally, if you live in fear of making more money and getting bumped into a higher tax bracket, stop it right now! A lot of people turn something that should be wonderful- getting a raise- into something to be feared and dreaded.

While it is true that you will probably have to pay more in taxes if you get bumped into a higher bracket, it’s also true that, more than likely, you’re not going to have to pay some crazy amount. In fact, you’ll really only be taxed an increased amount for any income you make that exceeds the tax bracket threshold. In other words, you won’t have to pay higher taxes on your WHOLE income, so relax and don’t be afraid to earn more money!

As you can see, people believe lots of things about taxes that just aren’t true. Educate yourself on the truth about tax law, and, when in doubt, don’t be afraid to ask an accountant!