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Some Tax Myths that People Continue to Believe In
By Darrin Mish of Law Offices of Darrin Mish
Your experience of filing taxes for quite a number of years doesn't assure that you are already an expert in taxation. The fact is, it's nearly impossible to be updated with the tax code because it undergoes revisions almost every year and there are specific codes for almost all situations. On top of this, knowing that what you think is true is not anymore true or that it was never true in the first place can be both distressing and stressful. As a result, many taxes payers complete their tax returns not knowing the whole truth, and essentially, throwing away money. At worst, this misinformation may lead to serious IRS problems. It is a usual assumption for people to automatically file for a joint tax return when they get married. What they don't realize is that they actually have the option of filing under 'married filing separately.' Usually, filing under this option will cost you more than when using a joint income tax return. But in special circumstances, this alternative actually saves you money. For couples with two income earners, experts advise that you file using both ways and evaluate which method is more beneficial and allows you to save money. You can actually make use of one method now, and then the other alternative the next year, and still find yourself saving a considerable amount of money for both occasions. Because a person's tax responsibility changes from time to time, it's important that this will be done yearly. Knowing what filing method to use should be a conjugal decision in order to avoid tax record inconsistencies and IRS issues. There are still several questions regarding the validity of deducting sales taxes. Mostly, only people who have experience filing taxes before 1986 still believe in this tax myth. 1986 was the last year that a person could deduct some sales taxes for purchases. However, today, some states have somehow permitted this kind of policy to take effect once more. Starting in 2004 and then also allowed in 2006 and 2007, people were allowed to deduct their sales taxes from either their state taxes or their federal income taxes. They had to choose between the two types and could not make the deduction on both sets of taxes. Wyoming, Alaska, Washington, Florida, Texas, South Dakota, and Nevada allow this deduction and citizens are truly appreciative of this move. To avoid a potential IRS problem, you may want to check once in a while as to the status of this policy. Another misconception results from the fact that people continue to believe in a law that no longer existed. Before, anyone aged and older than 55 years old can exclude up to $125,000 in gains or earnings from taxes when his/her house is sold. This is can be availed of under the premise that this is done only once. With the newer laws now, the stipulations are actually much better. In one amendment, the age requirement was no longer in effect and the amount for exclusion was raised to $250,000 per person. Hence, exclusions up to$500,000 can be availed by a couple who has sold a house. Another crucial change took effect permitting the exclusion to be taken every two years, instead of just once throughout the entire lifetime. This means that every two years, anyone can sell a house and exclude up to $250,000 in gains from taxes. |
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