5 Common Tax Myths You Should Know Before Filing Your Tax Return
Myth: Tax returns must be filed by April 15, 2023
• Fact: Federal income tax returns are due on April 18, 2023.
A current survey found that nearly 7 out of 10 people did not know that tax day is April 18 this year. One of the biggest tax myths is that tax returns are always due on April 15th. If this date falls on a weekend or holiday, tax day is the next day of the week.
This year, the due date is April 18 because April 15 is a Saturday and the next day of the week, April 17, is recognized as a public holiday in Washington, DC, Emancipation Day, all the same federal holidays.
Some taxpayers may be given even more filing time. And those who live in it disaster areas in California, Alabama or Georgia will have a much later due date — October 16, 2023 — to file their federal income tax return and pay their tax bill, if they have one.
Myth: File an extension if you can’t pay your tax bill now
• Fact: If you owe the IRS money, you must pay it by tax day to avoid interest and penalties.
You can get an extension to file your taxes by completing a specific IRS document (Form 4868) that gives you six months — until October 16, 2023 — to file your tax return, but no more time to pay your taxes. You can also get an automatic file extension if you make an electronic payment with Direct payment on IRS.gov.
The IRS says you should estimate and pay any taxes owed by your regular deadline to avoid potential penalties. And you must submit your renewal request no later than the actual due date of your return. Also, if you owe a tax bill and don’t file it, the penalties are higher than if you file a tax return and owe it but can’t pay the full tax bill at the time.
Going forward, make regular quarterly tax payments or set up a payment schedule, said Shiloh Johnson, a board-certified public accountant and founder of Complyant, a Los Angeles-based startup that helps small business owners pay their taxes. Then “if you need to file an extension, you don’t have a payment due because you would have made those payments throughout the year.”
Myth: You can’t file your tax return for free
• Fact: If you made $73,000 or less in 2022, use an IRS Free File provider to file taxes for free. Above this amount? Use free fillable forms for your tax return.
Get access to free online tax preparation and filing by using an IRS Free File Provider. If you made $73,000 or less in 2022, you can use Free File to do your taxes. If you’ve earned more than this amount, you can use free fillable forms found at IRS.gov to do your taxes online yourself.
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Use the IRS Free File online reference book to find the best tax software based on your location, income, and specific credits and deductions. Tax providers may have their own income level rules and other requirements that must be submitted free of charge. This tool tells you which tax prep providers are best for your situation—and which providers also prepare your state tax returns for free.
And if you want to speak to someone in person, there are Voluntary Income Tax Assistance (VITA) centers across the country that help people make $60,000 or less and places that offer tax advice for the elderly, or TCE for those who are 60 or older.
Myth: If you go to an accountant and there are errors in your return, they will be liable
• Fact: You are ultimately responsible for all information on your tax return, no matter who prepares it.
So choose your tax advisor very carefully. Go to the “Choose a Tax Advisor” page on the IRS website for information about the tax advisor’s credentials and qualifications. The IRS recommends the following steps:
- Find a creator who is available year-round if questions arise.
- Avoid tax professionals whose fees are based on your refund or who claim they can get you a higher refund than a competitor.
- Always check your tax return before signing it.
Tax Tip: Compare this year’s return to last year’s
Take the time to compare this year’s tax return to last year’s, said Marinela Collado, CPA and CFP at Tobias Financial Advisors in Plantation, Fla. Taxpayers should “see what has changed and what they could have done differently”.
“Now is the time to proactively make these changes for 2023,” she said. “You cannot make any changes after the year is over.” Working with a tax professional year-round can help you avoid the same mistake.
Sign up for CNBCs Women & Assets Event: Join the CNBC event Women & Wealth on April 11 with Sharon and other personal finance experts including Suze Orman. You will talk about how women can increase their income, save for the future and make the most of their money. Register at CNBCEvents.com for this free virtual event.
https://www.cnbc.com/2023/03/15/5-common-tax-myths-to-know-before-filing-your-return.html 5 Common Tax Myths You Should Know Before Filing Your Tax Return