Few topics spark as much confusion as taxes. Some questions feel too simple to ask, yet skipping them could mean missed savings or costly mistakes. Myths spread, misconceptions thrive, and the smallest errors trigger significant consequences. The real question is: How many of these tricky tax facts do you actually know?
What Happens If You Pick The Wrong Filing Status?
Selecting the incorrect filing status can shrink refunds or trigger higher tax bills. The IRS provides five options, each impacting deductions and tax brackets. Married couples filing separately may lose credits, while head-of-household status often yields bigger benefits. Always double-check before filing—it’s a costly mistake to fix!
Do You Really Have To Report That $20 You Made On Venmo?
Even small earnings from side gigs, tips, or Venmo transactions can be taxable. The IRS expects all income reported, whether paid via cash, check, or app. Exceeding $600 from freelancing? Expect a 1099 form. Ignoring these deposits might raise flags, especially with digital payment tracking expanding.
What Is The Difference Between A Tax Credit And A Tax Deduction?
Tax deductions lower taxable income, but credits slash tax bills directly. A $1,000 deduction may save a few hundred dollars, whereas a $1,000 credit cuts taxes by a full grand. You can get money back through the Earned Income Tax Credit, a refundable credit. Use them wisely!
Can You Get In Trouble For Claiming A Home Office Deduction?
Misusing this deduction triggers audits. Only spaces exclusively for work qualify—using a dining table doesn’t count. The simplified method allows $5 per square foot, up to 300 square feet. Freelancers and small business owners benefit most but ensure all claims are legitimate to avoid penalties.
Why Did Your Friend Get A Huge Refund While You Owe Money?
Refunds depend on tax withholding and deductions. Overpaying taxes throughout the year leads to refunds, but underpaying results in bills. Adjusting your W-4 can help avoid unexpected tax bills. Self-employed individuals often owe due to missing estimated payments. Thoughtful tax planning ensures predictable outcomes next April.
Do You Really Need To File Taxes If You Made Very Little Money?
Earning below the standard deduction might exempt you from filing. However, skipping it could mean losing refunds or credits. The Child Tax Credit provides money back even with low earnings. Always check—leaving free money on the table is never wise.
What Happens If You Make A Mistake On Your Tax Return?
Errors can delay refunds or trigger audits. If you misreport income, forget deductions, or claim the wrong status, file an amended return using Form 1040-X. The IRS allows corrections within three years. Honest mistakes are fixable; intentional errors, on the other hand, lead to penalties or worse.
What If You Just Ignore Your Taxes This Year?
Skipping tax filing invites serious trouble. The IRS charges 5% monthly on unpaid taxes, which maxes out at 25%. After months, expect wage garnishments or bank levies. If taxes can’t be paid, file anyway and request a payment plan. Ignoring the issue only compounds the problem.
What Happens If You Forget To Report Income?
Leaving out even a small amount of income can trigger IRS scrutiny. Employers and clients send W-2s and 1099s directly to the IRS, so mismatched records raise red flags. If caught, expect penalties or interest on unpaid taxes. The best move? File an amended return using Form 1040-X before the IRS contacts you.
How Do You Know If You Are Being Audited?
The IRS notifies taxpayers by mail, never by phone or email. Audits stem from income mismatches or suspicious claims. Some involve simple mail verification, while others require in-depth reviews. Keeping accurate records minimizes risk. If audited, honesty and documentation are the best defense.
