Updated: Nov 23, 2021
There are several myths about it floating around for something that has been around as long as taxes have. Here, we attempt to shed some light on the most popular myths that we’ve heard over the years.
If you want a professional tax firm dealing with your accounts from Houston or Cypress, Texas, then do get in touch with us at Redfish. We only deal with facts and not myths.
Without further ado, let’s get into it -
1. Anyone Can Do Taxes
This is probably the most used myth when dealing with tax accounting. A lot of people think that they can get taxes done by themselves.
While several people might have the aptitude for it, it all depends on the entity. If you have a business, spending time on your taxes might be wasting productive time. You might be better served spending it on your business instead.
Another factor to consider would be the changes in tax laws over a period of time. Accountants and accounting firms keep track of this. Individuals might miss these changes leading to issues in their accounting.
2. Filing Taxes Is Up to The Individual
Even today, a lot of people think that filing your taxes is a voluntary choice. Also, adding they can’t be held at fault if they didn’t file it in time.
It is true that according to the definition in tax instruction books, it says voluntary payment. This is far from the truth. Filing taxes is mandatory and can have legal repercussions if not done right.
Voluntary here means the amount of money to be paid and not the act itself. Again, filing taxes is mandatory, and it should be done to keep your side of the books clear.
3. Students Don’t Have to Pay Tax
Another common myth that goes around is that students don’t need to pay taxes. This statement is not completely wrong, and different factors determine it.
If a student is dependent on someone for their livelihood, they don’t need to pay a tax. This also holds true for students who are making less than $12.4k annually. But more than that, they do have to file their taxes.
Any amount lesser than this can even be paid as a lump sum at the end of a period. This will not attract a tax. A lot of people are unaware of this distinction and think they don’t need to pay tax.
4. Computers Do All the Work
Tax filing has been equated to a push-button button problem by several people. However, this idea is far from the truth.
Computers have indeed simplified the process of tax calculation significantly. But to assume that calculations are the only hard part of tax filing is completely wrong. Tax accountants have to deal with changes in tax law and related issues of an individual’s filing.
This can take a lot of time and effort, especially if it is a larger business with thousands of complex transactions. Tax filing is not just about the numbers; it also deals with several other bylines and changes.
5. Accountant Fees Are Too High
Another popular misconception that needs to be debunked is that tax accountants charge a lot of money. This might be true for larger firms or more experienced accountants.
But for the most part, they charge because of the quality of their services. Tax accounting is a specialized job. There are many considerations to make before tax is filed. This means not everyone can do this, and this is one reason for their rates.
Also, for bigger entities, filing taxes by themselves might be difficult or even impossible. tax accountants may save them time which may translate into savings in the long-term.
6. Tax Returns Are Usually the Same
A lot of people are still not aware of the intricacies that are involved with filing taxes. They think that most tax filings are the same, just with different numbers.
This is simply not true. Every tax return has its own set of laws and considerations that are taken into account. It might also need to account for changes in laws and other issues. This makes every tax return unique to the individual filing it.
Tax returns aren’t an assembly line designed to deliver one size fits all types of measurement.
7. Deductions For Home Office Leads to Audit
If you were looking for one of the longest-standing myths, this is definitely a contender. While it was true that home offices were subject to more scrutiny in the past, it doesn’t hold water today.
A majority of households have declared home office, and this hasn’t led to increased audits. It has become quite common these days to have a home office. And especially true post the pandemic.
8. Online Earnings Are Not Taxable
In the wake of the expanding gig culture, this has become one of the more popular myths. This is one of those myths in this list that simply has no basis or relevance.
On no tax manuals is it written that you don’t need to pay your taxes for your online business. In the eyes of the IRS, all income is the same - online or offline. Their tax filing norms are the same as any other individuals’.
You need to declare your income if you make more than $400 through sales of a product or service.
If you’re looking for professional tax accounting services in Texas, we can help. We have offices in Houston and Cypress - do give us a call.
Disclosure: SCF Securities, Redfish Capital Management, and SCF Investment Advisors do not offer legal or tax advice. Accounting services are provided by Henry D. Nguyen, CPA. This material is not intended to replace the advice of a qualified tax advisor or attorney. Please consult legal or tax professionals for specific information regarding your individual situation.