Fact or fiction? Legend or law? You’ve heard rumors about various tax laws, deductions and filings, but which ones are true? Following are a few of the most common tax myths in Hayward, CA. As you make tax preparations, don’t let these lies guide your efforts.
I made the money online, so I don’t have to pay taxes on it.
Even if you don’t complete a W-9 for the earnings, you still have to report the income. The internet is not a magical tax-free space. The money you earn through the world wide web is no different than the income you earn in person. If you sell a product or perform a service, you must track and report these earnings as part of your yearly taxable income.
I don’t make much, so I won’t get audited.
Your income amount is not the determining factor of whether or not you get audited. The IRS will audit you if your return sends up red flags. To avoid an audit, don’t take questionable deductions, and be sure to follow the letter of the law for all aspects of your filings. Maintain detailed records of expenses and earnings. This will help you stay organized, file more accurate returns and prepare you in case you do get audited someday.
I’m a student, so I don’t have to pay taxes.
What makes this myth particularly dangerous is the kernel of truth inside. If you are a student and a dependent, and you earn less than $12,000 in a given tax year, you are not required to pay taxes. If you are a working student, be sure to keep close tabs on your total earnings to make sure you qualify for this exemption. Additionally, you should still file your taxes—since your employer probably withheld money for taxes, you’ll most likely get a refund.
If I take a home office deduction, I’ll get audited.
Claiming a home office has become fairly common. Because of this, it doesn’t result in an automatic audit. The IRS may closely scrutinize your claims, so be sure to follow IRS guidelines for what a home office is and how it should affect your tax returns.
I love my cat like a child, so I can claim him as a dependent.
You can never claim a pet as a dependent. Any rumors to the contrary are tax myths in Hayward, CA. People try this every year, and it always fails. Yes, you provide your four-legged friend with financial support, shelter and medical care, so your pet is dependent on you. But a tax dependent must be human. Sorry, Fluffy.
Do you have questions about other tax myths in Hayward, CA? Contact the team at Menjivar & Company CPAs, Inc. We specialize in personal, corporate, fiduciary and small business tax preparation. We also offer some payroll services, and we can represent our clients through state and IRS audits if the situation arises. With more than 40 years of experience in the industry, we are your go-to source for accounting services. Reach out to us today to arrange a consultation.
Categorised in: Tax Preparation