Busted! Don’t Believe These Income Tax Myths!

When the tax season comes around, you get to hear a lot of bad tax advice buzzing around from either family or friends. Know that fueling these false facts generally comes from a lack of understanding of how taxes work. With that said, it’s crucial to talk to a professional who understands your rights and obligations instead of relying on lousy advice from random chats.

To help you separate facts from fiction when it comes to filing your taxes, Moorhead Nicolini CPA has debunked three of the most widely believed myths about tax.

Myth 1: The rich don’t pay any taxes in the U.S.
This myth probably exists because the media constantly discusses how many major corporations pay their income tax. However, as with any progressive income tax system, U.S. taxpayers with higher incomes pay higher income tax rates.

Myth 2: A large tax refund is a cause for celebration
Everyone likes to receive money, but if you’re one of the millions of taxpayers who received a tax refund last filing season, you should think twice about celebrating.

A large tax refund means more money is being withheld from your paycheck than needs to be. Indeed, for the 2018 tax year, the IRS issued more than $390 billion in refunds to more than a hundred and twenty million taxpayers.

Some people may argue that this is a safe and easy way to save money, but think about it this way, if you receive a refund at the end of the tax year, that means you’ve been giving the government an interest-free loan all year. We discuss with our clients what causes a large refund and provide ways for them not to receive a large refund and receive their money throughout the year without them having to owe when they file their return.

Myth 3: If you can’t afford to pay your tax bill, don’t file your return
Some people are stuck owing the government money after they complete their tax returns. There are many reasons why this happens, you didn’t withhold enough taxes on your W-4, you had income (like selling shares) that wasn’t subject to tax withholding, or there were big changes in your tax return, like fewer dependents or deductions. If you owe a tax bill, you’re still required to file your taxes, no matter the amount. However, you might have more options than you realize. If you don’t have the cash to pay it, you should file your taxes and then contact the IRS.

If you’re looking to steer clear of more myths like these, reach out to Moorhead Nicolini CPA. We are certified public accountants and tax and business consultants with over forty years of experience. We specialize in tax preparation, bookkeeping, payroll, tax planning, and small business consulting services. We serve clients across Gaffney, Simpsonville, Spartanburg, Greenville, Greer, and the surrounding areas.

For a complete list of our services, please click here. If you have any questions about income tax and accounting, we’d love to hear from you, please contact us here.