To say the U.S. tax system is confusing is an understatement, so it’s no wonder there are many misconceptions about the rules.
The good news is that most people make less than $100,000 in a year and have no income other than their paychecks, so they can fill out the comparatively brief and very direct short form; almost everyone who uses the 1040EZ can fill it out themselves.
For everybody else, though, the baffling mysteries of the tax code prevail, and can ultimately cost money. To help unravel some of the perplexities of the system, here are 12 common tax myths debunked. It might save money and sanity when the deadline rolls around.
The Internal Revenue Service announced last April that taxpayers who need to make a payment in cash can now do so at 7-Eleven convenience stores.
While it may seem unusual to pay your taxes where you might otherwise pick up a Slurpee, it caters to a large number of Americans who do not have a bank account or credit card. The Federal Deposit Insurance Corporation estimates one in 13 households in the U.S. do not have a bank account.
“We continue to look for new ways to provide services for our taxpayers … this provides a new way for people who can only pay their taxes in cash without having to travel to an IRS Taxpayer Assistance Center,” said IRS Commissioner John Koskinen.
As April 17 approaches, you might be wondering, “What can I claim on my taxes when it comes to tax breaks or deductions?” Because every tax return is different, there’s no easy answer to this complicated question. However, there’s a long list of tax deductions that can reduce your taxable income, and you should take every one to which you’re entitled because overlooked tax deductions are wasted opportunities.
From child care costs to mortgage interest to charitable donations to moving expenses, the IRS offers a lengthy list of tax write-offs that can reduce your taxable income, so read carefully and decide which ones you can take.
The Internal Revenue Service today announced important changes to help taxpayers comply with revisions to the Individual Taxpayer Identification Number (ITIN) program made under a new law. The changes require some taxpayers to renew their ITINs beginning in October.
The new law will mean ITINs that have not been used on a federal tax return at least once in the last three years will no longer be valid for use on a tax return unless renewed by the taxpayer. In addition, ITINs issued prior to 2013 that have been used on a federal tax return in the last three years will need to be renewed starting this fall, and the IRS is putting in place a rolling renewal schedule, described below, to assist taxpayers.
I received a phone call last week from the niece of a client who works as a waitress with an annual income of $18,000. Not able to afford professional tax preparation services, she had gone to the library to do her own taxes on the IRS Free File System. Really simple return. Single, no dependents, one W2. Files it electronically. Takes five minutes to file. Then three weeks later she gets a letter from the IRS asking her to complete IRS Form 8962 Premium Tax Credit. She attempted completing the form using the complicated formulas and the tables provided in the instructions and became confused. Could I help her?
Some home buyers should brace themselves for sticker shock: not from the price of the house, but from the property-taxes they’ll pay when the deal closes.
Property taxes on a home valued at $420,200, the cities median home value, will set a California homeowner back $3,301 a year, according to Smart Asset analysis, based on Census Bureau data on rates and median home values.
The roughly 8 million Americans who live abroad automatically get a couple additional months each year to file their taxes. Don’t expect them to be grateful.
Filing to the Internal Revenue Service from overseas is more confusing, complicated, and expensive than it is for Americans at home (and that’s saying something). Unlike almost every other country in the world, the U.S. demands its citizens pay taxes on all foreign income. They must file even if they have lived and worked abroad for decades, and even if they’re already paying hefty taxes to the countries where they reside.
The sigh of relief a business owner heaves after filing an income tax return may be quickly followed by an unsettling thought: What if I’m audited?
Owners dread an audit not just because they might get a big bill for unpaid taxes, interest and penalties. Audits can also be time-consuming and expensive, in some cases lasting months or even years, distracting owners from running their companies and requiring them to pay accountants or lawyers to deal with the government. But companies that keep good financial records can make the process easier.
The IRS audited less than 1 percent, or nearly 1.4 million, of the nearly 192 million tax returns filed in 2014. That included business and personal returns and audits conducted either by letter or in person, according to the most recent available IRS figures. The audits resulted in an additional $25 billion in taxes recommended by IRS agents, and more than $7 billion in refunds, the IRS says.
The US Internal Revenue Service said last week that the number of records it lost in a 2015 data breach is higher than it previously thought. When the agency first announced in May 2015 that hackers had broken into its website and stolen tax transcripts, it said that about 100,000 people were affected. It bumped that number up to 334,000 last August, and now says the number of records stolen is actually 724,000.
And it gets worse. To protect the victims of the data breach from further harm, the IRS provided them with “Identity Protection PINs.” The PINs are secret codes those taxpayers now have to put on all of their tax returns, or the IRS won’t accept them. As long as they keep their PINs secret, they should be safe from fraud.
For this master plan to work, though, the IRS would also have to keep the PINs secret. Unfortunately, it seems the agency is having some trouble with that.
Security researcher and journalist Brian Krebs reported yesterday (March 1) that at least one of the PINs has been compromised. An accountant in South Dakota, Becky Wittrock, told Krebs she was assigned her PIN in 2014, after she was a victim of fraud. When she filed her tax return this year, she found out the PIN had already been used:
Wittrock said she found out her IP PIN had been compromised by thieves this year after she tried to file her tax return on Feb. 25, 2016. Turns out, the crooks beat her to the punch by more than three weeks, filing a large refund request with the IRS on Feb. 2, 2016.
Contact Us Today
Fill out the form below for a free evaluation or call us today at:
Patty me ayudo ahorrar un monton de dinero. My familia finalmente se fue de vacaciones!
I saved over $15,000 using Patty’s Income Tax IRS Tax Relief Service… such a HUGE relief! Thanks again.
Patty helped save me thousands in backed tax bills. Without your help I’d be making payments for over 4 years! You helped save me and my family. Thank you so much.