Taxes and tax filing are often one of the most confusing issues people face all year. With the ever changing laws and guidelines the areas of what is allowed and what is not allowed is often quite difficult to determine. What’s more is that what works for one person may not work for another leading to even greater confusion. To help you a bit with the process, below are three common myths about filing taxes.
The first myth has to do with paper filing. Many people believe that they must file on paper because it is better than filing electronically. People who often keep every last record for their taxes take great comfort in printing their returns on paper for filing. That being said, there have been great advances in the e-filing process and this option is now usually the best way to file. Not only do you receive your refund faster than mailing in a paper return, e-filed returns are often more accurate than their paper counterparts. There is no waiting in line at the post office, no paying for postage, and you can still print a copy to keep for your records.
The next myth is that you should spend more on tax deductible items just to get more write offs. While this can be somewhat tempting to do, the amount you are spending is not going to come close to equaling the amount you get back in your tax refund. Furthermore, spending too much reduces the amount of money you have on hand to work with day to day, just for the chance at a bigger return at the end of the year. So, think twice about doing this. It is advisable that you speak with a CPA firm to determine the best purchases to make and the best tax deductions to take.
The third myth when it comes to filing taxes is that a big refund is always best. Many people attempt to modify their withholding amount during the year, in the hopes of getting a big check at tax time. Doing this could actually work in the opposite way, and you may end up owing taxes which could negatively impact your personal budget. Plus, when you overpay through withholding all you are doing is giving the government your money interest free, and you could be using that money now. Talk to an accountant to find out what your recommended withholding rate is and try to stick to it. Having more money in your hand each week definitely outweighs a large check one time per year.