With tax season around the corner, you’re bound to stumble upon misconceptions about tax laws. Pure’s Financial Advisor, Kamel Miqdadi, CFP®, debunks those common myths and help streamline your filing process.
FREE GUIDE | 2024 Tax Planning Guide
Transcript
It’s that time of the year when you start hearing conflicting things from friends, family, and maybe even TikTok about what is—and what isn’t—okay when filing your taxes. Be careful, there’s a lot of misinformation that can get you into trouble if you follow someone’s bad advice. In order to save you from ending up on the IRS’s radar, we’re sharing what you can do to protect yourself from some common tax myths.
Filing Taxes Is Voluntary
You’ve heard the phrase, “Nothing can be said to be certain, except death and taxes,” but that doesn’t stop some people from claiming that filing taxes in the United States is voluntary. The term “voluntary” in IRS publications refers to the fact that U.S. taxpayers calculate their own taxes. However, filing a tax return is not optional! The obligations to pay income taxes and file tax returns apply to anyone who earns more than the standard deduction amount for their filing status in a given tax year, which is clearly explained in the U.S. Income Tax Code (also known as the Internal Revenue Code).
Students Do Not Need to File Taxes
Although children and students can be claimed as dependents, they still can have filing requirements. When a student earns less than the minimum amount for filing, it could still be in their best interest to file a tax return, as they may be eligible for certain tax credits or may be due a tax refund.
You can Claim Pets as Dependents
Though your pet is a big part of your life, and you certainly provide for their financial support, you cannot claim them as dependents. While they may feel as much a part of our lives as children or grandparents, they simply don’t have Tax ID numbers, like a Social Security number.
Gifts Are Counted as Taxable Income
Gifts are not considered income for income tax purposes, but they might be reportable for gift tax. For tax year 2023, if the value of the gift is $17,000 or less per person in a calendar year, it usually doesn’t need to be reported. The IRS calls this amount the annual gift tax exclusion. For larger gifts, the person who gave the gift must file Form 709 to report it, but there usually isn’t any tax due unless the lifetime gifts made have exceeded $13.61 million.
Your Tax Preparer is Liable for Mistakes
Remember, it is ultimately your responsibility to file an accurate and complete tax return. You even sign it under penalty of perjury. If you hire someone to prepare your tax return, make sure that the person is competent to handle any complicated issues you know about on your return and that you ask questions about anything that isn’t clear. Take the extra time to make sure you have provided all the information needed and to look over the forms before filing. And when in doubt, you can always ask a second professional to look it over.
Now, these are just a few myths that circulate due to misinterpreting tax laws. That’s why Pure offers a free tax analysis to help you decipher what is truly applicable to your own certain circumstances.
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IMPORTANT DISCLOSURES:
• Investment Advisory and Financial Planning Services are offered through Pure Financial Advisors, LLC, a Registered Investment Advisor.
• Pure Financial Advisors LLC does not offer tax or legal advice. Consult with your tax advisor or attorney regarding specific situations.
• Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance.
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• Intended for educational purposes only and are not intended as individualized advice or a guarantee that you will achieve a desired result. Before implementing any strategies discussed you should consult your tax and financial advisors.
CFP® – The CERTIFIED FINANCIAL PLANNER™ certification is by the Certified Financial Planner Board of Standards, Inc. To attain the right to use the CFP® designation, an individual must satisfactorily fulfill education, experience and ethics requirements as well as pass a comprehensive exam. Thirty hours of continuing education is required every two years to maintain the designation.
