Let’s find a tax preparation office for you

or

Information regarding browser or device support

Oh no! We may not fully support the browser or device software you are using!

To experience our site in the best way possible, please update your browser or device software, or move over to another browser.

Close
Filing your taxes

6 Tax Myths That Could Cost at Tax Time

Mark Steber Chief Tax Information Officer Published On February 18, 2021

Share

After a difficult 2020, many taxpayers could fall for common tax myths. Tax rumors, tax misinformation, and various myths are much more common than you may think. These can lead to costly errors for taxpayers who file their taxes incorrectly as a result. Bad advice can lead to big expenses, big tax bills, or even an IRS audit.

What are some common tax myths that people mistakenly think are true? 

Many people may have heard rumors or friends mention some common tax myths -- things that sound too good to be true. Some of the most common myths are:

  1. If you work from home you can deduct your home office
  2. You can claim dependent exemptions (like your kids)
  3. You must itemize to claim charitable donations
  4. You can file your taxes on a postcard
  5. You’ve already paid taxes on your retirement distribution
  6. There’s no tax penalty for not having healthcare coverage

 

There’s been a lot of misinformation around some of these topics, while others are a little complex but get oversimplified as they’re shared, like a game of telephone. Let’s learn what the truth is behind each of these tax myths.

Myth #1 - Deducting your home office if you work from home

This deduction only applies to individuals who are self-employed. If you were employed through someone other than yourself, you can’t claim the home office deduction even if you did work from home. That may come as a surprise to many who have been working from home for months now, but it’s true. 

Myth #2 - You can claim dependent exemptions

This tax myth used to be true, but that’s no longer the case. Personal exemptions for dependents ended in 2017 with the passage of the Tax Cuts and Jobs Act.

Myth #3 - You have to itemize to deduct charitable donations

This was the rule for the last tax season (2019) but this tax year (2020), it changed. You don’t have to itemize to take a charitable donation deduction when you file this year. Under the CARES Act, you can deduct up to $300 in charitable donations made to IRS-approved organizations when you take the standard deduction. If you do itemize, you get to claim all your charitable donations including the $300 as itemized deductions.

Myth #4 - I can file my taxes on a postcard

During the passage of the Tax Cuts and Jobs Act, there was a lot of talk about a new “postcard” tax return. Unfortunately, this isn’t the case. The form to which many referred to as a “postcard” is actually two pages, plus three schedules. Taxes are too complicated to file on something as small as a postcard.

Myth #5 - I’ve already paid my retirement distribution

Having withholdings on your retirement or IRA distributions doesn’t mean you already paid taxes on it. It’s a common misconception. The income and withholding still go on your tax return, to be added to other withholding and refundable credits. If you have enough withholding, you may get a tax refund. If that’s confusing, talk it over with a Tax Pro.

Myth #6 - There’s no tax penalty for not having healthcare coverage

Many people think the Affordable Care Act (often referred to as Obamacare) doesn’t matter since the penalty was removed. But the reality is that you still have to reconcile your advanced premium tax credit when you have insurance through your state’s Health Insurance Marketplace. Some states are now charging penalties if you don’t have health insurance. For people who get healthcare in the marketplace, they still get credits and MUST report them on their taxes. Not doing so could slow IRS processing, causing delays and triggering notices.

About the Author

Mark Steber is Chief Tax Information Officer, responsible for key initiatives that support overall tax service delivery and quality assurance. Mark also serves as a Jackson Hewitt liaison with the Internal Revenue Service, states, and other government authorities. With over 30 years of tax experience and deep knowledge of the federal and state tax codes, Mark is widely referenced as an expert on consumer income tax issues, especially electronic-tax and tax data-protection issues.

View Mark's LinkedIn Profile Jackson Hewitt Editorial Policy

Related articles

Filing Taxes in Two States

Multi-State taxes often appear complex. With many Americans working from home this year and not traveling to a different state for work, there is a lot more room for error when filing state taxes. Whether taxpayers worked in one state and lived in another, lived in multiple states during the year, or their spouse works out of state, they will likely have more complicated state tax returns.

View more

CARES Act Extension & Impact On IRA, 401(k) & Retirement Withdrawals

The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) was created in response to the COVID-19 pandemic to provide aid, relief, and increased economic security to affected individuals. The Act provided specific aid and tax benefits for taxpayers who needed to withdraw more money than usual from their retirement and 401(k) plans during the pandemic.

View more

Lookback Provision to Claim EITC and CTC on your 2020 Taxes

The year 2020 was one for the history books in many ways, and it’s not done delivering surprises even as tax season is under way in 2021. One pleasant surprise could be in store for many taxpayers who may qualify for the Earned Income Tax Credit (EITC) and the Additional Child Tax Credit (ACTC) under the tax law that went into effect in December 2020.

View more

Why Jackson Hewitt®?

We see you

Our Tax Pros will connect with you one-on-one, answer all your questions, and always go the extra mile to support you.

We got you

We have flexible hours, locations, and filing options that cater to every hardworking tax filer.

We fight for you

We won't stop until you get every dollar you deserve, guaranteed. It's what we've been doing for over 35 years.