5 Tax Myths That Can Cost You Your Hard Earned Money
There are so many preconceived notions or “tax myths” that many taxpayers focus on during tax season. By doing so you can end up paying too much money or not getting back the maximum amount of money that you could have received. Therefore, today we are busting five tax myths that can cost you your hard-earned money.
Refunds Mean You Are a Good Tax Filer
Many people look forward to tax season because they receive large refunds. They associate getting a refund back to being a good filer. This is a myth. A tax refund is the money that you loaned Uncle Sam throughout the year without interest. Therefore, you should be trying to minimize the amount of tax that you pay. Once this has been done you will benefit by keeping more of your hard-earned money throughout the year.
Retired People Do Not Pay Taxes
Some retirees do not have to pay taxes but this is because they do not have a lot of income. However, if you made a lot of money when you were working you will continue to pay taxes during retirement. Furthermore, when you withdraw money from your 401 (K) you will have to pay taxes on that money. Sometimes retirement means more complications during tax time. This is because your income now consists of social security, pensions, and investment income. However, you can cut down your taxes by opening a Roth IRA. Your withdrawals will be tax free if your account is more than five years old or you are older than 59 ½.
Your Tax Return Can Be Audit Proof
There is no way for you to audit proof your tax return. No one knows what guidelines the IRS uses when they determine which returns need to be audited. The good news is you can reduce your chances of being audited.
Small Businesses Can Grow With Tax Consequences
When a small business expands, tax consequences do come into play. This is because unexpected tax liabilities occur. Therefore, it is suggested that before expanding research is conducted to find out state, local, and international tax obligations.
You Cannot Deduct Working Children
If you provide your child with more than half of their support, you are still eligible for a deduction. This can get you up to $1,000 per child so do not let the deduction pass you by.
These are five tax myths that you need to be aware of. If you continue believing these myths, your hard-earned money is going to continue going down the drain.
Remember we are a Bellevue CPAs and Seattle CPA firm!