Tax Myths Busted!
One more week until Tax Day...
Have you filed yours yet? I haven't (probably should get on that, actually), and when I read in USA Today that roughly 47% of Americans won't even have to worry about paying federal income taxes, I start to wonder if I should even bother.
Oh sure, there's the threat of prison time for tax evasion, but really, what's the point if half the damn country isn't going to pay up and get off scot-free? Tax time can be either very trying or something to actually look forward to.
While some people are dreading the thought of gathering all their receipts, W-2s, and other documents to try and decipher how much they'll owe Uncle Sam, others have visions of refunds and rebates dancing in their heads.
To shed some light on the hoopla surrounding April 15th, here are 5 common tax myths, busted! 1.
Nearly half of Americans won't pay taxes.
Hey, this sounds familiar.
While it's actually true, it's mainly restricted to very low income families and seniors, while others will save themselves the trouble with earned income and saver's credits.
But just because they're not surrendering to federal income tax doesn't mean they're completely tax exempt.
They still have to pay social security and Medicare taxes, assuming they're, uh, working.
If they're driving anywhere, they gotta pay tax on gas, and if they like to go get liquored up or out for a smoke, there's taxes on alcohol and tobacco as well.
Throw property taxes in, and the percentage of tax payers goes up higher.
So really, no one can escape the tax man.
2.
My tax returns are all in Greek.
It's common knowledge: Taxes are ridiculously complicated.
The instructions for the 1040 form, the one most of us use to file our taxes, is over 100 pages long.
That's a lot of trees.
The good news though, is that the majority of Americans have simpler tax returns than they realize.
Most of us get our income from standard wages, salaries, and pensions, meaning it's easier to calculate our deductibles.
The 1040EZ, the tax form nearly half of Americans use, is only 13 lines long, making things much easier to understand, especially if you use software to back it up.
3.
I don't have any deductible business expenses.
Most people think that because they're not business owners, they don't have any employment-related expenses they can report.
But think about this - have you ever had to spend anything yourself for your job? Teachers can deduct extra school supply expenses they purchase, and anyone that chooses to work for themselves can look into incorporating themselves as a business if they want to become eligible for savings on health insurance premiums and travel expenses.
4.
We're overtaxed.
Hell yes, we are! Moving on...
Okay, seriously though, as bad as we think we have it, other parts of the world are even worse off in this department.
Back in 2006, 30 of the world's richest countries ponied up about 36% of their gross domestic product, with some European countries exceeding 40% due to extensive government services.
So yeah, things could actually be worse.
5.
If we raised taxes, we'd get rid of the deficit.
Nope, not really.
In order to just reduce the deficit to 3% of our GDP, taxes would need to be raised by about 40%.
That would mean a tax hike to about 14% for the lowest income rate and as much as 48% for top rate.
And that's to reduce the deficit, not eliminate it entirely.
So not only would it be political suicide to even suggest such a hike, it wouldn't even wipe out the debt.
Have you filed yours yet? I haven't (probably should get on that, actually), and when I read in USA Today that roughly 47% of Americans won't even have to worry about paying federal income taxes, I start to wonder if I should even bother.
Oh sure, there's the threat of prison time for tax evasion, but really, what's the point if half the damn country isn't going to pay up and get off scot-free? Tax time can be either very trying or something to actually look forward to.
While some people are dreading the thought of gathering all their receipts, W-2s, and other documents to try and decipher how much they'll owe Uncle Sam, others have visions of refunds and rebates dancing in their heads.
To shed some light on the hoopla surrounding April 15th, here are 5 common tax myths, busted! 1.
Nearly half of Americans won't pay taxes.
Hey, this sounds familiar.
While it's actually true, it's mainly restricted to very low income families and seniors, while others will save themselves the trouble with earned income and saver's credits.
But just because they're not surrendering to federal income tax doesn't mean they're completely tax exempt.
They still have to pay social security and Medicare taxes, assuming they're, uh, working.
If they're driving anywhere, they gotta pay tax on gas, and if they like to go get liquored up or out for a smoke, there's taxes on alcohol and tobacco as well.
Throw property taxes in, and the percentage of tax payers goes up higher.
So really, no one can escape the tax man.
2.
My tax returns are all in Greek.
It's common knowledge: Taxes are ridiculously complicated.
The instructions for the 1040 form, the one most of us use to file our taxes, is over 100 pages long.
That's a lot of trees.
The good news though, is that the majority of Americans have simpler tax returns than they realize.
Most of us get our income from standard wages, salaries, and pensions, meaning it's easier to calculate our deductibles.
The 1040EZ, the tax form nearly half of Americans use, is only 13 lines long, making things much easier to understand, especially if you use software to back it up.
3.
I don't have any deductible business expenses.
Most people think that because they're not business owners, they don't have any employment-related expenses they can report.
But think about this - have you ever had to spend anything yourself for your job? Teachers can deduct extra school supply expenses they purchase, and anyone that chooses to work for themselves can look into incorporating themselves as a business if they want to become eligible for savings on health insurance premiums and travel expenses.
4.
We're overtaxed.
Hell yes, we are! Moving on...
Okay, seriously though, as bad as we think we have it, other parts of the world are even worse off in this department.
Back in 2006, 30 of the world's richest countries ponied up about 36% of their gross domestic product, with some European countries exceeding 40% due to extensive government services.
So yeah, things could actually be worse.
5.
If we raised taxes, we'd get rid of the deficit.
Nope, not really.
In order to just reduce the deficit to 3% of our GDP, taxes would need to be raised by about 40%.
That would mean a tax hike to about 14% for the lowest income rate and as much as 48% for top rate.
And that's to reduce the deficit, not eliminate it entirely.
So not only would it be political suicide to even suggest such a hike, it wouldn't even wipe out the debt.
Source...