Many people have a love-hate relationship with Tax Day. They love to receive a tax refund but hate the work that goes into filing their tax return. Filing myths only magnify the dread taxpayers feel as April quickly approaches.

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But when you separate myth from fact, filing your federal income tax return becomes less of a burden and just one more way to ensure you're on the right financial track.

 

Myth #1: Everyone who receives a W2 is required to file a federal income tax return.

 

Your filing status and age typically determine the minimum income thresholds that must be met before you're required to file a return. For tax year 2021, if your filing status is single and you were under 65 years of age at the end of 2021, you do not need to file a return if your gross income was less than $12,550.

 

But even if you're not required to file a tax return, doing so could generate a refund. For example, certain tax credits or having too much withheld from your paycheck can result in a refund being issued to you. Use the IRS's Interactive Tax Assistant to confirm whether you need to file a federal income tax return.

 

Myth #2: You have to pay for tax preparation services.

 

You can file taxes yourself for free using the IRS Free File system if your adjusted gross income is $73,000 or less. And TurboTax® and H&R Block® offer free tax software for simple returns. These free services guide you through a number of tax questions and provide clarification of most questions along the way. Once the return is complete, you can skip a trip to the post office and submit the return electronically.

 

Myth #3: It's too late to lower your taxable income for 2021.

 

If you have an Individual Retirement Account (IRA), you have until April 15, 2022 to make 2021 IRA contributions. The amount you contribute could decrease your taxable income — and possibly the taxes owed — on your return. Review IRA Deduction Limits to determine how much you can still contribute and reap the benefits on this year's federal tax return.

 

Myth #4: You should wait to file taxes until you're ready to pay them, even if it means you'll be late.

 

If you expect to owe taxes, not filing by the Tax Day deadline is a costly mistake. Expect to pay a failure-to-file penalty of at least 5% of the amount you owe for each month that passes until you eventually file your taxes. You can avoid this fee by requesting a six-month extension. All you have to do is submit IRS Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return by the date your tax return is due to the IRS.

 

Keep in mind that IRS Form 4868 does not help you avoid late payment penalties, which equal 0.05% of the unpaid taxes. This penalty is charged monthly until the balance is paid in full or you are approved for an IRS Payment Plan.

 

Myth #5: Tax laws remain the same for years at a time.

 

Tax laws change every year, and the degree to which these changes will impact your finances are as unique as your household finances. The more you know about these changes, the better your chances of ensuring you won't pay more in taxes than necessary. The IRS publishes a complete list of tax updates toward the end of each tax year.

 

 

There's little reason to fear this tax season when you have the facts on your side. If the thought of filing your return still has you feeling overwhelmed, consult with a qualified tax advisor. They can offer personalized guidance for your situation.