{"id":99,"date":"2012-04-07T00:37:21","date_gmt":"2012-04-07T00:37:21","guid":{"rendered":"https:\/\/ayoub-associates.com\/blog\/?p=99"},"modified":"2012-07-31T04:46:37","modified_gmt":"2012-07-31T04:46:37","slug":"ten-common-tax-misconceptions","status":"publish","type":"post","link":"https:\/\/ayoub-associates.com\/blog\/ten-common-tax-misconceptions\/","title":{"rendered":"Ten Common Tax Misconceptions"},"content":{"rendered":"

By <\/cite>Laura Saunders<\/em> <\/cite><\/p>\n

The tax code has gotten so complicated that even smart
\npeople make big mistakes about filing taxes, according to the National
\nAssociation of Enrolled Agents. Here\u2019s a list of taxpayers\u2019 common
\nmisconceptions gathered by enrolled agents across the country. (Enrolled
\nagents, by the way, are allowed to represent taxpayers before the Internal
\nRevenue Service, after passing a stiff competency exam and a background check;
\nthey also prepare tax returns.)
\n<\/strong><\/strong><\/p>\n

1. \u201cI\u2019m filing an extension this year, so I don\u2019t need to pay anything yet.\u201d<\/strong>
\n<\/strong>When an extension is filed, it is just an extension on the time to file; it is
\nnot an extension on the time to pay! If a taxpayer owes $1,000 on a personal
\nreturn and files an extension, he or she has until Oct. 15 to file the return.
\nBut if the $1,000 is still owed by April 18 (taxes are due on April 17 this
\nyear), interest and penalties start to accrue. To avoid paying a penalty, you
\nmust pay at least 90% of what you estimate you owe or 100% of your 2011 tax
\nliability prior to April 18.<\/p>\n

If you don\u2019t pay in full, you\u2019ll wind up owing interest and possibly penalties
\non the liability not covered. The IRS did recently announce that it would allow
\nsome struggling taxpayers a six-month grace period. For details, click here.<\/p>\n

2. \u201cI had a big loss in the stock market this year, so I won\u2019t owe any income taxes.\u201d<\/strong>
\nThe deduction of capital losses against ordinary income is limited to $3,000.
\n<\/strong><\/p>\n

3. \u201cI traded some stocks and have a loss\/didn\u2019t make any money, so there\u2019s no need to report those sales.\u201d<\/strong>
\nThe sales must be reported on the taxpayer\u2019s return. If the stocks were bought
\nin 2011 or after, both the broker and taxpayer must provide the \u201ccost basis\u201d
\n(often the purchase price) to the IRS as well. Brokers provide this information
\nto taxpayers, but they should check carefully to make sure it is correct. This
\nis the first year brokers have had to report cost basis, and there have been
\nreports of mistakes.<\/p>\n

4. \u201cI reinvested my dividends and didn\u2019t receive them, so I don\u2019t have to pay tax on them.\u201d<\/strong>
\nWrong. Whether you receive them or reinvest them, they are income.
\n<\/strong><\/p>\n

5. \u201cThey paid me in cash and I don\u2019t have to report it.\u201d<\/strong>
\nIf it\u2019s income, you must report it.<\/p>\n

6. \u201cI\u2019m too young\/too old to have to pay taxes.\u201d<\/strong>
\nEven a dependent high school student has to file a return after earning income
\nover $5,700. And Uncle Sam may still be interested in your return after you\u2019re
\ndead. A personal representative of the decedent is required to file a final
\npersonal tax return, and possibly an estate-tax return, and pay the taxes due.
\n<\/strong><\/p>\n

7. \u201cIf I didn\u2019t receive a document about it, it\u2019s not taxable.\u201d<\/strong>
\nA good tax preparer will provide a checklist for missing documents, but too
\noften taxpayers who prepare their own returns will fail to include important
\ninformation simply because they missed something in the mail, or the document
\nwas never mailed.<\/p>\n

8. \u201cIncome earned in a foreign country is not taxable.\u201d<\/strong>
\nTaxpayers are required to report all earned income to the IRS, no matter where
\nit was earned. Taxpayers can face huge penalties for not reporting foreign
\nfinancial accounts or income earned abroad.<\/p>\n

9. \u201cIncome from my hobby can\u2019t be taxable.\u201d<\/strong>
\nThe operative word here is \u201cincome.\u201d It\u2019s taxable.<\/p>\n

10. \u201cThe IRS doesn\u2019t care about my state tax refund.\u201d<\/strong>
\nTaxpayers who itemize their deductions are allowed to deduct all state taxes
\npaid or withheld on their federal return, so in reality, paying taxes on last
\nyear\u2019s refund is correcting an over-deduction from the previous year<\/p>\n","protected":false},"excerpt":{"rendered":"

By Laura Saunders The tax code has gotten so complicated that even smart people make big mistakes about filing taxes, according to the National Association of Enrolled Agents. Here\u2019s a […]<\/p>\n","protected":false},"author":88890,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[3],"tags":[],"class_list":["post-99","post","type-post","status-publish","format-standard","hentry","category-tax-tips"],"yoast_head":"\nTen Common Tax Misconceptions - Ayoub Sidhum & Co.<\/title>\n<meta name=\"description\" content=\"Ayoub and Associates CPA Firm is a full service Corona CPA firm that provides services in accounting, tax preparation and planning, IRS audit, and sales tax. 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