4 Ubiquitous Tax Myths -- Debunked

IRS Income Tax Audit
Alamy
By Anna Williams

Did you know that the U.S. tax code is over 70,000 pages long?

In other words: Mere mortals like us don't have the time -- or patience -- to read through it all. Unfortunately, that can lead to a whole lot of misinformation.

With tax planning season now well under way, Wall St. Cheat Sheet spelled out four of these common tax myths and misconceptions -- and the real truth behind each of them.

1. I Can Make My Return Audit-Proof

Sure, only about 1 percent of all taxpayers actually end up being audited. But there's also no way to guarantee you won't end up being among them. The IRS selects Americans from every income bracket to audit, and even if you submit a flawless return, there's still a chance you could be singled out for further screening.

Of course, it still stands to reason that the more blatant the mistakes that appear on your return, the more likely it is you'll end up being audited. Make sure you're avoiding these top ten tax mistakes now -- and you could save yourself a major headache later on.

2. A Tax Audit Means a Big Scary Man at My Door

Just hearing the word "audit" drives deep fear into most of us. You might imagine that your small error will result in men in black rummaging through your paperwork.

You can relax about this one. %VIRTUAL-article-sponsoredlinks%In fiscal year 2012, less than a quarter of the 1 percent of individual returns that were audited were examined in person -- most are actually conducted by mail. So while you'll still want to avoid an examination of any kind, you might sleep easier knowing that it's unlikely to happen on your own turf. (The exceptions are business and estate audits, which usually do happen "in the field.")

3. I'll Be Tax-Free Once I Retire

Retirement can mean many things -- spoiling the grandkids, kicking back on the beach, or finally having time to focus on all those hobbies you've been neglecting. What it most likely doesn't mean: Living tax-free.

The fact is, you'll (hopefully!) still have an income in retirement -- and the IRS' job is to, well, collect taxes on income. But while you won't be able to avoid Uncle Sam altogether, you can make strategic moves to reduce your tax liability in retirement as much as possible. That might mean socking away part of your retirement savings into a Roth IRA, if you can -- or taking advantage of these other eight ways to lower your tax bill after you've quit the workforce.

4. Businesses Pay the Most Taxes, Not Me

Many folks believe that wealthy corporations bear the brunt of Uncle Sam's bill -- but that's actually far from the truth. In fact, the Treasury Department forecasts that it will collect about $1.4 trillion in individual income taxes this fiscal year, versus just $333.4 billion from corporate income taxes. Overall, our income taxes make up close to half -- 47 percent -- of total government receipts.


More from LearnVest


Top Tax Deductions for Consultants

Consultants are likely to have deductible business expenses that can help you save big on your taxes. A checklist can help you account for every deduction you’re entitled to use. Here are the top tax deductions for consultants.

Read More

Brought to you by TurboTax.com

Seven Things You Didn't Know About Taxes

You know your federal taxes pay for government programs and services, like roads and national defense. And you may even know the difference between FICA and income tax. But did you know if you want to buy sparklers in West Virginia, you can expect to pay a special fee?

Read More

Brought to you by TurboTax.com

2018 Tax Reform Impact: What You Should Know

Congress has passed the largest piece of tax reform legislation in more than three decades. The bill will affect the taxes of most taxpayers, but one key point to keep in mind is that for most people, the bill won't affect your taxes for 2017 (the one you file in 2018).

Read More

Brought to you by TurboTax.com

Video: How to Estimate the Value of Clothing for IRS Deductions

Learn how to estimate the value of clothing for IRS tax deductions as charitable donations. The value of clothing donations to charity are based on published lists of retail values or current thrift store prices. List your donation values on the Form 8283 with the help of TurboTax in this video on filing annual taxes.

Read More

Brought to you by TurboTax.com
Read Full Story