Tax Myths Busted: Separating Fact from Fiction

When it comes to taxes, misinformation can cost you time, money, and peace of mind. Myths about taxes often circulate during tax season, creating confusion and leading to mistakes that could have been avoided with the right information. Let’s separate fact from fiction and debunk some of the most common tax myths.

Myth #1: Filing for an Extension Gives You More Time to Pay Taxes

The Truth: Extensions Grant More Time to File, Not Pay

One of the most pervasive myths is that filing for an extension provides extra time to pay your taxes. While an extension does allow additional time to submit your tax return, it does not delay your tax payment deadline. Any taxes owed must still be paid by the original due date (usually April 15th). Late payments may incur penalties and interest.

Pro Tip: If you can't pay the full amount by the deadline, pay as much as you can and work with the IRS to set up a payment plan.

Myth #2: You’re More Likely to Be Audited if You File an Extension

The Truth: Filing an Extension Doesn’t Increase Audit Risk

Another common misconception is that requesting an extension will flag your return for an audit. The IRS does not penalize taxpayers for taking legitimate extensions, nor does it increase scrutiny of returns filed after the standard deadline. Audit triggers are more likely related to discrepancies or unusual deductions rather than when the return is filed.

Pro Tip: Always keep thorough records to back up deductions and claims on your tax return.

Myth #3: You Don’t Have to Report Small Side Income

The Truth: All Income Must Be Reported

Whether you earned $20 from selling items online or a few hundred dollars freelancing, the IRS requires you to report all income, regardless of the amount. Even income that isn't reported on a 1099 form must be included on your tax return.

Pro Tip: Use financial tracking software or apps to keep a record of all income sources throughout the year.

Myth #4: A Home Office Deduction Will Trigger an Audit

The Truth: Home Office Deductions Are Safe if Properly Documented

Many believe claiming a home office deduction makes you a prime target for an audit, but this isn't necessarily true. As long as your home office meets IRS requirements—such as being used exclusively for business purposes—this deduction is perfectly legitimate.

Pro Tip: Take photos and keep receipts to support your home office deduction claim.

Myth #5: Tax Software Is Always 100% Accurate

The Truth: Tax Software Helps, But You’re Still Responsible

Tax preparation software is a fantastic tool, but it’s not infallible. Errors can occur if data is entered incorrectly, or if the software doesn’t account for unique tax situations. Ultimately, you’re responsible for the accuracy of your return.

Pro Tip: Review all entries carefully and consider consulting a tax professional for complex tax scenarios.

Myth #6: Married Couples Must Always File Jointly

The Truth: Separate Filing May Be More Beneficial

While filing jointly often offers tax advantages, it’s not always the best option for married couples. In certain situations—such as when one spouse has significant medical expenses or a high student loan debt—filing separately may save money.

Pro Tip: Compare the tax implications of both filing statuses with a tax advisor to determine the optimal choice.

Myth #7: If I Didn’t Get a W-2 or 1099, I Don’t Have to Pay Taxes

The Truth: Income Must Be Reported Regardless of Documentation

If you earned income but didn’t receive a W-2 or 1099, you’re still required to report it. Employers and clients are obligated to report payments to the IRS, so failure to include this income could result in penalties or an audit.

Pro Tip: Keep personal records of all earnings and request missing forms if necessary.

Myth #8: You Can Deduct Any Charitable Contribution

The Truth: Only Qualifying Contributions Are Deductible

Not all donations are tax-deductible. Contributions must be made to qualified organizations, and the deduction amount must be properly documented. Non-cash contributions may require additional valuation.

Pro Tip: Use the IRS Tax Exempt Organization Search tool to confirm an organization’s eligibility before donating.

Myth #9: Paying Taxes Is Voluntary

The Truth: Tax Payment Is Mandatory

A fringe myth suggests that paying federal taxes is optional. However, under U.S. law, paying taxes is mandatory. Failing to file or pay taxes can result in severe penalties, including fines and imprisonment.

Pro Tip: Always file your taxes, even if you can’t pay the full amount, to avoid additional legal consequences.

Myth #10: I Can Avoid Taxes by Working “Under the Table”

The Truth: Unreported Income Is Illegal

While working under the table might seem like an easy way to avoid taxes, it’s against the law. The IRS takes unreported income seriously and has methods to identify and penalize tax evasion.

Pro Tip: Stay compliant with tax laws to avoid legal troubles and penalties.

Wrapping It Up: Knowledge Is Power

Understanding tax laws and separating myths from reality can help you avoid costly mistakes. Whether you’re filing your own taxes or working with a professional, being informed is the first step to maximizing deductions, staying compliant, and reducing stress during tax season. If you’re unsure about any aspect of your taxes, consulting with a tax advisor can provide clarity and peace of mind.