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Buying into these could be bad news.
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The tax code is lengthy and complicated. And chances are, you’ve never actually sat down to read it through in its entirety (because maybe you’d rather do, well, just about anything else with your free time).
But because the tax code is so complex, there’s a lot of misinformation about taxes that tends to float around on the internet. And some of that bad information might make its way to you. With that in mind, here are a few tax myths you really don’t want to buy into.
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1. You can claim a home office deduction if you work remotely
These days, a lot of people are still working from home in the wake of the COVID-19 pandemic — some on a full-time basis. If that’s the case, and you’ve carved out an area of your home for a dedicated office, you may be inclined to use that as a tax write-off. Don’t.
Self-employed workers and small business owners can claim a home office deduction if they qualify by having a dedicated space for work purposes that constitutes their primary business location. But that tax deduction is not available to anyone who’s a salaried employee.
2. Claiming a home office deduction will lead to an audit
The idea of getting audited can be scary. And you may have heard that if you claim a home office deduction, it could increase your chances of the IRS further examining your tax return. But Mark Steber, Chief Tax Information Officer at Jackson Hewitt, says that if you’re entitled to a home office deduction, you shouldn’t hesitate to claim it.
The same holds true for any other legitimate deduction you’re able to claim on your taxes. If you spent $3,000 on a laptop because you needed a business-grade model to do your job, claim your tax break. Even if the IRS does audit your return, if you can provide documentation in support of the deductions you took, nothing bad might come of it.
3. It’s good to get as large a tax refund as possible
Some people intentionally withhold extra money from their paychecks to snag as high a tax refund as possible. But that can be a costly mistake.
When you forgo money in your paychecks, you put yourself at risk of falling behind on bills and having to carry credit card balances to cover your expenses. But those credit card bills can cost you a lot of money in interest.
Rather than aim for the largest refund possible, aim to break even, or get as close as possible. Your goal should be to have enough tax withheld from your earnings so you’re not collecting a lot of money from the IRS during tax season, but you’re also not writing out a large check.
Getting to the bottom of tax myths isn’t always easy. If there are aspects of tax law you’re confused about, talk to an accountant. They’re the ones who know the tax code inside and out, and they’re in a great position to give you advice on how to manage your tax situation.
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