5 Tax Myths to Avoid
One of the common myths surrounding taxes is that "students are exempt" from paying taxes. If you have a student in your house - or in college - who is gainfully employed, they need to file an income tax return. Regardless of their student status they are subject to taxes on the income they earned. Additionally, when it comes to your student/child, if he or she is employed the myth is that you can't still claim him or her as a dependent. If you have provided more than 50% of your child's support he or she still qualifies as your dependent and you can continue to claim them on your tax return.
Don't fall into the myth that if you're 55-years-old or older that you can sell your primary residence and reap the rewards of the sale tax free. Many years ago, this was the case, but not any more. Many years ago, the 55-year-old home seller was able to exclude up to $125,000 in profits realized as a one-time deduction on a home sale. The home had to be your primary residence to qualify. The age exemption no longer factors into being allowed this exemption.
There is another myth that if you're married you have no choice but to file a joint tax return with your spouse. This isn't true and in some cases it may not be advantageous to file married filing jointly. In the case where one spouse has a lower income but high medical expenses, it could make sense to file married filing separately so the spouse can take advantage of the medical exemption deduction that is available. It's harder to meet this threshold for exemptions if you have a high income.
If you've ever owned a home, you can't qualify for the first time home buyer credit, right? Myth again. Until September 2010, the federal government offered a first-time home buyer credit of up to $8,000 to first time home buyers. The way you qualified for this credit was by having had no ownership interest in a principal residence for three years prior to closing on a newly purchased home. Another way to qualify for a first time home buyer credit was to have owned and lived in a home as your primary residence for five years. When you purchased a new home you could have been eligible to apply for a credit of up to $6,500.
Because filing taxes is such a complicated undertaking, you certainly don't want to fall prey to myths for filing taxes. Keep in mind that when you're looking to prepare taxes it's best to look to a professional tax preparer for your tax resolution issues.
Experiencing tax problems with the IRS? Contact Guardian Tax Resolutions. The Guardian will help you resolve your tax issues with the IRS.
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