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Don't Fall for These 20 Common Tax Myths

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To say the U.S. tax system is confusing is an understatement, so it's no wonder there are many misconceptions about the rules. The good news is that most people make less than $100,000 in a year and have no income other than their paychecks, so they can fill out the comparatively brief and very direct short form; almost everyone who uses the 1040EZ can fill it out themselves. For everybody else, though, the baffling mysteries of the tax code prevail, and can ultimately cost money. To help unravel some of the perplexities of the system, here are 12 common tax myths debunked. It might save money and sanity when the deadline rolls around.

MYTH: FILING A TAX RETURN IS VOLUNTARY

No, it isn't. It's mandatory, although compliance is voluntary -- only because the Internal Revenue Service can't follow everybody in the country around to make sure they file. There is, in fact, a law (Title 26 of the U.S. Code, ratified by the 16th Amendment to the Constitution) that requires every individual with taxable income to file. While some people make too little to file, in general everybody with an income is expected to send in a return.

MYTH: STUDENTS DON'T HAVE TO FILE A TAX RETURN

Maybe true, maybe not. The IRS cares not about the educational status of citizens but about their income. If students have more than $10,400 in income or $400 in self-employment income, they need to file. Even if working students earn less than the filing minimum, it's a good idea to file, because a refund may be due. But students under 24 who have less than the minimum filing income may be claimed under their parents’ taxes, and therefore, should file with their parents.

MYTH: HAVING A WORK DESK MEANS A HOME OFFICE DEDUCTION

People who work at home can claim the part of their home in which they work as a deduction, that's true. But people who work in an office during the day and sometimes bring work home do not have a home office, according to the IRS, even if they have a dedicated place at home from which to work. The home office deduction applies only if the home is the principal place of business, which means the taxpayer must be self-employed.

MYTH: CLAIMING A HOME OFFICE IS AN AUTOMATIC AUDIT

Nope. There is no such thing as an automatic audit. There's no way to game the system to avoid one, either. Fraudulently claiming a home office, very high self-employment income, or taking more business deductions than income from self-employment are red flags, though. And there are a few scenarios that might trigger an audit: major changes in income or charitable giving, missing forms or files or numbers that don't add up, claiming business expenses for a hobby, and having an overseas bank account or foreign assets. The best way to avoid an audit is to be careful and honest about deductions.

MYTH: LOW-INCOME FILERS DON'T GET AUDITED

The IRS is looking for discrepancies, not income. So an audit could happen no matter how low a filer's income. In fact, people with income under $25,000 are slightly more likely to get audited if they claim an Earned Income Tax Credit, according to the Tax Foundation. The IRS is extremely short-handed now, so everybody’s chance of getting audited is pretty low -- in fact, only 0.70 percent of all 2016 individual returns got called for an audit.

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