Don't Fall for These 5 Myths About Your Taxes

Ah, tax season -- ready to sit down with your paperwork and spend a Saturday plugging in numbers? (Or perhaps make repeated phone calls to your accountant's office in hopes of getting your return filed ASAP so you can apply for a mortgage -- maybe that's just me.)

No matter how you're approaching your taxes this year, there are a few pervasive myths about the process that just won't die. Let's tackle a few of them, in hopes of leaving you better prepared to handle everything tax season throws at you.

1. You don't have to report all your 1099 income

Did you do a little side work outside your regular employment situation in 2023? Or maybe you're a freelancer like me, and you juggled multiple clients who paid you without taking taxes out. If you're now sitting on a pile of 1099-NEC forms you received from these clients, you might wonder if it's OK to just not report what you earned from some of them, so you don't have to pay taxes on that money.

Resist that impulse! If you received a 1099, so did the IRS -- so it already knows you got paid, and will be expecting you to report the income. If you don't, you could face a tax audit and even be penalized.

2. You have longer to pay if you get an extension

This one has the potential to cost you in fees and penalties if you fall for it. If you need more time to assemble and file your tax return, you can get it pretty easily -- just file for an extension and you'll have until Oct. 15, 2024, to file your 2023 taxes. That's six months beyond the standard deadline of April 15, 2024 -- but that extension only applies to the tax filing itself, and not any additional money you might owe Uncle Sam.

You still need to do your best to estimate what you owe and pay that by April 15. Failure to do so means incurring a penalty of 0.50% of the tax owed for each month or part of a month that it goes unpaid, up to 25%. And if you owe money to your state, you will likely also need to ask for an extension there too.

3. You should file your tax return on paper

You might assume that a paper tax return is the safer and more secure way to file your taxes -- but you'd be wrong. E-filing is both safe and convenient if you use one of the best tax-filing software programs, and best of all, it's fast. You'll get confirmation that your return has been received, and won't have to worry about it being lost in the mail. And a faster filing means a faster refund if you're owed one (more about refunds below!).

4. You qualify for a home office deduction if you work from home

Here's an easy one to clear up. Are you one of the lucky workers still allowed to toil away from home after all the saber-rattling about "back to the office" in the wake of COVID-19 achieving some sort of normalcy in our lives? I'm thrilled for you -- remote work is great. But if you're a W-2 employee (rather than a 1099 contractor or other small business owner of some kind), you don't get to claim a home office deduction. This deduction is reserved for those of us who are self-employed.

5. You should celebrate receiving a big tax refund

Every late winter and spring, I see tons of folks on social media cheering for a huge tax refund -- and I wonder if they struggled with money at any point during the year. A tax refund represents money you loaned to the government (interest free, to boot), and that would have improved your life and personal finances had you received it during the year.

Let's say you get a refund of $3,000 when you file your 2023 taxes. Divide that by 12, and that could've been an extra $250 every month of 2023. What could an extra $250 per month do for you? It may have helped you pad your savings account, help fund a sweet vacation, or even just have given you more breathing room in your budget.

That said, I understand that a lot of Americans view a tax refund as a sort of "forced savings," and that infusion of cash every spring makes their lives a bit easier when it arrives. But based on my own history of living paycheck to paycheck, I can't help but advocate for making the changes necessary to receive more of your money in those paychecks. Consider adjusting your withholdings with your employer's human resources department -- you can figure out the change to make by using the IRS withholding calculator.

A lot of people feel stress and anxiety around tax season, and with good reason -- the government knows how much money we all made, and yet we are still supposed to recalculate that number and show our work? Take a deep breath and rest easier, knowing that you are now more well-informed and less likely to fall for a few common tax myths.