Busted! Don’t Believe These Income Tax Filing Myths!

When it comes to income tax, most people seem very confused. Not everyone is aware of all the aspects that go into it, which could lead to myths being built around the whole concept of income tax filing. Even though the process of income tax filing has been simplified in the recent past, there is still a lot of misinformation going around. Following these falsehoods is as bad as poor advice, as it could get you in a lot of trouble with the IRS. To help you steer clear of misconceptions, Bible Harris Smith, P.C. has debunked three of the most widely believed myths about income tax filing.

Myth 1: An extension allows you to pay later
Many believe an extension allows you to defer your payment along with your filing. Unfortunately, this is not the case. An extension is simply an extension of time to file, NOT an extension of time to pay. Payments made after the original due date can be subject to late payment penalties and interest.

Myth 2: Income received in cash or below the 1099 filing threshold is not taxable
Some believe that if this money is not required to be reported on a document, it is not taxable. That is simply not the case. All income may be subject to tax, regardless of its source, payment method, amount, or legality. Al Capone wasn’t busted for his illegal activities. He was busted for tax evasion on the income he earned through those activities. The same can happen to you if income earned is not reported.

Myth 3: Inability to pay means that you should not file
Many may believe that the IRS is only alerted to their need to pay through filing a return, and if you cannot pay, not filing may delay the IRS in pursuing you. This is not true! The IRS is often very aware of the income you have earned through reporting of forms W-2, 1099, K-1, and other informational documents. Filing a tax return and paying what you can at the time can save you penalties and interest down the road. The IRS works with taxpayers like you all the time to get you onto payment plans, which may not prevent interest but can prevent penalties.

If you’re looking to steer clear of these myths, reach out to Bible Harris Smith, P.C. Employing some of the top accountants in Knoxville, TN, we ensure we provide outstanding service to our clients based on three underlying principles: professionalism, responsiveness, and quality. Our primary goal as a trusted advisor is to be available and to provide insightful advice that enables our clients to make informed financial decisions. We do not accept anything less from ourselves, and this is what we deliver to you. We stay abreast of current topics through continued professional education, allowing us to improve technical expertise, financial knowledge and serve you better. For a complete list of our services, please click here. If you have any questions about Bible Harris Smith, P.C., we’d love to hear from you. Please contact us here.