Taxes can be confusing, and with so much information floating around, it’s easy to fall for common misconceptions that could cost you money or even lead to unnecessary penalties. Whether it’s assuming you don’t have to file, misunderstanding deductions, or falling for IRS scams, believing tax myths can hurt your financial future. Let’s clear up some of the biggest tax myths and set the record straight.
1. “You Don’t Need to File If You Made Under a Certain Amount”
Many people believe that if they didn’t make much money, they aren’t required to file a tax return. While it’s true that there are income thresholds based on filing status, age, and dependency, filing is often still beneficial—even if you’re not legally required to do so.
Why this is a myth:
- You may qualify for a refund if taxes were withheld from your paycheck.
- You might be eligible for tax credits like the Earned Income Tax Credit (EITC) or the Child Tax Credit (CTC), which can provide you with money even if you owe no taxes.
- If you’re self-employed and made at least $400, you must file a return to report self-employment tax.
What you should do:
Even if you think you don’t have to file, use a tax calculator or speak with a professional to check if you qualify for a refund or tax credits.
2. “Getting a Big Refund Means You Did Your Taxes Right”
Many taxpayers celebrate when they receive a large refund, thinking it’s a sign they handled their taxes well. In reality, a big refund often means you overpaid throughout the year.
Why this is a myth:
- Your employer withholds taxes from each paycheck based on the W-4 form you submitted. If too much is withheld, you’re essentially giving the government an interest-free loan all year.
- Instead of overpaying and waiting for a refund, adjusting your withholdings could mean more money in each paycheck throughout the year.
What you should do:
Review your W-4 withholdings and adjust them if needed so that you keep more of your paycheck rather than waiting for a lump-sum refund next year.
3. “You Can Claim Anything as a Business Expense”
If you’re self-employed or own a small business, you’ve probably heard people say you can write off nearly anything as a business expense. However, the IRS has strict rules on what qualifies.
Why this is a myth:
- Only ordinary and necessary business expenses are deductible. This means purchases must be directly related to your business operations.
- Personal expenses cannot be deducted, even if they indirectly benefit your work.
- Mixing personal and business expenses can increase your risk of an IRS audit.
Examples of deductible business expenses:
✔ Office rent or coworking space fees
✔ Business-related travel (flights, hotels, and meals)
✔ Software, equipment, and supplies used exclusively for work
Examples of non-deductible expenses:
❌ Personal vacations (even if you work a little while away)
❌ Clothing (unless it is a required uniform that cannot be worn outside of work)
❌ Family meals disguised as “business meetings”
What you should do:
Keep detailed records and only claim legitimate business expenses. Using separate bank accounts for personal and business transactions will also help protect you in case of an audit.
4. “Filing Taxes is Only Important in April”
Most people associate tax season with April 15, but tax planning should be a year-round effort. Waiting until the last minute can cost you money and limit your tax-saving options.
Why this is a myth:
- Self-employed individuals and businesses often need to pay quarterly estimated taxes throughout the year.
- Certain tax deductions and credits require action before December 31, such as maxing out retirement contributions or donating to charity.
- Missing the April deadline without filing an extension can result in late fees, penalties, and interest.
What you should do:
Plan ahead by keeping tax-related documents organized and staying aware of tax-saving opportunities before the year ends.
5. “The IRS Will Call You If There’s an Issue”
Scammers frequently impersonate the IRS, claiming you owe money or that your Social Security Number has been suspended. These calls often sound urgent and threatening, leading many taxpayers to fall for tax scams.
Why this is a myth:
- The IRS does not call, text, or email first regarding tax issues. They will always send a formal letter by mail before any further action is taken.
- The IRS never demands immediate payment over the phone or requests payment via gift cards, wire transfers, or cryptocurrency.
What you should do:
If you receive a suspicious call, text, or email claiming to be from the IRS, do not respond or provide any personal information. Instead, visit www.irs.gov or call the official IRS helpline to verify any claims.
6. “You Can Claim Home Office Deductions Even if You Work at an Office”
The home office deduction can be a valuable tax break, but many people misunderstand who qualifies for it.
Why this is a myth:
- The deduction is only available to self-employed individuals or independent contractors.
- W-2 employees who work remotely do not qualify, even if they work from home full-time.
What you should do:
If you’re self-employed and use a dedicated space in your home exclusively for work, you may be able to claim the deduction. Keep accurate records and be ready to prove eligibility if necessary.
Final Thoughts
Believing tax myths can lead to missed refunds, unexpected penalties, or unnecessary stress during tax season. Whether it’s understanding your filing obligations, adjusting your withholdings, or spotting scams, being informed can help you save money and avoid costly mistakes.
If you’re unsure about your tax situation or want to make sure you’re maximizing your refund, reach out to Keen Currency today. Our team is here to guide you through the process with accuracy and confidence.
Have questions? Let’s get started on your taxes today.
