1099 Workers: 11 Tax Myths, Busted!
When it comes to doing your taxes, it seems like everyone has advice to give… and it’s not always helpful. With many tax myths floating around, we’re here to set the record straight:
Myth #1 : I missed the tax filing deadline and now I have to wait until next year to file!
Busted! If you missed the deadline, you should still try to file as soon as possible. Late payment and late filing penalties accrue over time, so filing a day or even a week late could mean a very, very low penalty!
Myth #2: I can’t pay my taxes with my credit card.
Busted! If you wish to pay down your tax liability with a credit card, you can – you’ll just have to pay a service fee of around $4.
Myth #3: I can’t file my taxes because I haven’t filed in years.
Busted! If you’re behind on your taxes, you can still get back in good standing with the IRS by filing all your returns this year. Keep in mind that you’ll forfeit potential refunds if you’re over 3 years late. Late filing penalties will max out at 25% of your owed tax, but you can typically submit reasonable cause arguments to ask the IRS not to charge you penalties. If you do owe money and can’t pay, you can set up a payment agreement with the IRS.
Myth #4: I don’t have to file taxes because I’m self-employed.
Busted! All businesses are required to file tax returns, even businesses of one. Not sure how to file taxes as a 1099’er? Read our tax guide here.
Myth #5: If I don’t file my taxes, the IRS will do it for me.
Busted! While it’s nice to imagine that someone else will take care of the hassle for you, your returns are your responsibility. Sometimes, the IRS will file a substitute for return (SFR) 2-3 years after you fail to file yours. If this happens, you’ll owe the maximum possible taxes and penalties. Filing your own returns – even if you’re a year or two late – is the best way to save money on taxes.
Myth #6: I can use my extra bedroom as both a home office and a guest bedroom, and still deduct it!
Busted! Home offices can only be deducted if they’re a dedicated home workspace used solely and regularly for your business. The IRS keeps a closer eye on this deduction than others, so be sure to follow the rules.
Myth #7: Filing for an extension means I will automatically get audited.
Busted! Filing a six-month extension does not trigger an audit. In fact, with more time to accurately file your return, you’ll probably be less likely to get audited!
Myth #8: If I file for an extension, I can put off making tax payments.
Busted! Extensions do not give you extra time to pay the tax you owe. In fact, if you don’t pay your total balance due by the April 15th deadline, you’ll be charged interest and penalties. The simplest way to save money on taxes is to file accurately, including all your deductions, by the deadline.
Myth #9: I am married, so I have to file jointly.
Busted! While it is typically ideal to file jointly, spouses do have the option to file separately. This option can sometimes save you money if you or your spouse has a large amount of out-of-pocket medical expenses; you’ll be able to deduct more of these costs if you have a lower income.
Myth #10: I didn’t make enough money from self-employment to report the income.
Busted! The IRS considers any 1099 payment as taxable income – even if it’s only a few hundred dollars.
Myth 11: If I deduct all my business expenses, I’ll definitely get audited.
Busted! If you’re deducting business expenses, just be sure to do so accurately. Very few taxpayers are audited. In fact, things that are more likely to raise red flags are math errors and deducting expenses that are not absolutely necessary to your business. Not sure which costs you can write-off? Follow our customized guide here. Want to make deducting your expenses easier when you file next year? Start tracking your expenses with Stride’s free tax app today.
Have some more tax myths you’d like us to bust? Send your tax questions our way at email@example.com.