Our team at TaxCom, LLC has been working in the financial services industry for many years, and in that time, many people have come to us for tax advice. We have also encountered a great deal of bad tax advice, and that is what we are here to talk about in this article. To correct misinformation, we have put together a list of some of the most common pieces of tax advice that you should ignore.
Bad Tax Tip #1: Getting a tax extension will give you more time to pay your taxes.
No, it won’t. A tax extension gives you more time to file your taxes, not more time to pay them. If you owe money to the IRS, a tax extension will not help you get out of trouble. What you should do instead in that situation is pay as much as you can of what you owe by the April tax deadline and contact the IRS to get on a payment plan to make up the rest.
Bad Tax Tip #2: You should buy real estate to get tax breaks.
While mortgage interest and property taxes can be deducted from your taxable income, it’s foolish to buy real estate just to get a tax break. If the property itself is a bad deal, there’s no tax break that can make it into a good one. We recommend that you ignore this common tax advice and only buy real estate if it makes sense for your needs and financial goals.
Bad Tax Tip #3: You’ll get audited if you take the ________ deduction (fill in the blank with the deduction of choice)
First, any certain deduction is no more likely to trigger an audit than anything else. Second, even if you do get audited, so what? As long as you are calculating everything properly and reporting it accurately, there shouldn’t be a problem, and you will most likely leave money on the table if you skip a deduction that you qualify for.