Four Tax Myths You Should Know About in 2024
As the April 15 tax filing deadline approaches, it’s important to separate fact from fiction when it comes to preparing your tax returns. “Tax laws are often summarized for the sake of quickly explaining a potential benefit or conflict,” says Andy Phillips , director of the H&R Block Tax Institute. “When details are left out, it’s easy to misinterpret the law or take advice from a trusted friend instead of taking the time to do first-hand research.” Blindly following someone else’s bad tax advice can cost you valuable time and money. Here are some of the top tax myths to be aware of this season.
“I can file a tax return using the information from my last paycheck.”
The numbers shown on your most recent pay stub may be close to what will appear on your W-2 form, but the numbers are not guaranteed to be always correct. Plus, as Phillips explains, it’s technically prohibited. “Your most recent pay stub is not considered an IRS-recognized document for filing. Usually the estimates deviate slightly during the year and are not taken into account until the end of the year. Payments such as bonuses and commissions can be easily forgotten, and the process of filing an amended return is not fun.”
Phillips’ advice: Wait for the W-2 form from your employer. He adds that you should “beware of tax preparers who advertise filing pay stubs, which is against the rules.” Your employer must have issued you a Form W-2 no later than January 31st.
“Being unemployed means I don’t have to pay taxes.”
If you receive any city, state, or federal unemployment benefits, it is considered income. All income must be reported on your tax return. Unemployment benefits paid are typically reported on Form 1099-G. This form works similar to a W-2, which tells you how much you were paid and whether taxes were withheld.
“Any money I give is considered a charitable contribution.”
Of course, giving without expecting a return is an admirable gesture. However, Phillips notes that only charitable gifts and donations made to IRS-qualified tax-exempt institutions are tax deductible. Typically, a receipt is provided when receiving a tax-deductible gift. If you have recently made a donation and are unsure whether it was made to a qualifying organization, use the Tax-Exempt Organization Finder tool located on the IRS website.
“The tax filing extension gives me more time to pay what I owe.”
Unfortunately, extending your application deadline does not give you more time to pay. Phillips says that “you should do your best to pay the estimated amount owed when you request an extension.” If you can’t pay, filing a tax return is the first important step to determine your eligibility for an IRS-approved installment payment plan.
As Phillips explains, failing to file a return on time will result in a tax penalty that starts at 5% of the amount of unpaid taxes per month, up to five months or a minimum of $485 if the return is 60 days or more in advance. late. Non-payment of interest is 0.5% of the amount of unpaid tax for each month or part of a month during which the tax remains unpaid. The fine will not exceed 25% of the amount of unpaid taxes.
By avoiding these common tax myths, you can avoid costly mistakes and headaches this filing season. Consult a qualified tax professional if you have any doubts or complex tax situations.