7 Common Tax Myths, Busted!

“Believe nothing you hear and only one half that you see.”

The above saying holds true, especially when it comes to tax-related information. Fake news and myths might be getting a lot of attention and making headlines, but you cannot choose to believe everything you hear. There is quite a lot of misinformation out there pertaining to filing taxes, and following them blindly might get you into trouble.

Read on to recognize some of the most common tax myths and misconceptions and learn to distinguish fact from fiction.

Myth	Fact
MYTH 1: Business taxes only impact business owners	Corporate tax burdens extend beyond ownership. Employees bear over 50% of the burden. CPAs should communicate this to clients when advising on business tax strategies.
MYTH 2: Clients must wait for prior-year returns to process before filing the current one	Clients can file the current year's returns without waiting for prior-year returns to process. Automation in tax software ensures seamless filing, even with unprocessed previous returns.
MYTH 3: Receiving a refund means no need to adjust withholding next year	Taxpayers should always review withholding annually. CPAs utilizing automated tools like the IRS Withholding Estimator can streamline this process for clients, especially during life events.
MYTH 4: Filing extensions increases audit risk	Filing extensions can actually reduce audit risk. Automated workflows and outsourced support allow firms to handle extensions efficiently without risking errors from rushed filings.
MYTH 5: Tax preparers are responsible for return errors	Tax preparers are vital, but clients are legally responsible for the accuracy of returns. Outsourcing compliance functions helps ensure accuracy and reduces firm liability, but clients must still provide correct data.
MYTH 6: Paper filing is the most secure method	Electronic filing is far more secure and efficient. Outsourcing tax filing to secure platforms ensures better protection of client data, with automation speeding up processing and reducing errors.
MYTH 7: Tax professionals can expedite refund processing	Outsourcing or using advanced tax software won't speed up refund dates. Use IRS tools like "Where's My Refund?" for accurate information. Automation can track refund status but doesn't change refund timing.

TAX MYTH 1: BUSINESS TAXES AFFECT ONLY BUSINESS OWNERS
It’s a common misconception that businesses bear the full burden of taxes. In reality, employees also take on a significant portion.

Empirical studies show that employees bear over 50% of the burden of corporate income tax. CPAs should help clients understand the broader impact of tax strategies on their workforce, not just ownership.

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TAX MYTH 2: CLIENTS MUST WAIT FOR PRIOR-YEAR RETURNS TO PROCESS BEFORE FILING THE CURRENT YEAR
Some believe that clients should wait for their previous year’s return to be processed before filing the current one. However, the IRS allows clients to file their current year’s return even if the prior year’s is still pending.

CPAs leveraging automation can guide clients through the process by ensuring they enter $0 for the previous year’s AGI in e-filing software, streamlining the filing process for unprocessed returns.

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TAX MYTH 3: GETTING A REFUND THIS YEAR MEANS NO NEED TO ADJUST WITHHOLDING NEXT YEAR
A refund doesn’t mean withholding adjustments aren’t needed. Taxpayers should regularly review their withholding, particularly after significant life changes like marriage, divorce, or new dependents.

CPAs and tax firms can use automation tools, such as the IRS Withholding Estimator, to help clients adjust their withholdings proactively for better tax planning.

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TAX MYTH 4: FILING FOR AN EXTENSION INCREASES AUDIT RISK
Contrary to popular belief, filing an extension does not increase the likelihood of an audit. In fact, an extension may reduce audit risk by allowing for a more accurate and complete return.

Outsourcing and automation enable firms to file extensions efficiently without rushing, ensuring clients receive high-quality, compliant tax filings while minimizing errors.

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TAX MYTH 5: TAX PREPARERS ARE RESPONSIBLE FOR ERRORS ON CLIENT RETURNS
Clients often think tax preparers are responsible for any mistakes on their returns. However, clients are legally accountable for the information they provide, even if a preparer files the return.

Outsourcing compliance services can help mitigate risk, but CPAs must ensure that clients provide accurate data and understand their responsibility for the return’s contents.

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TAX MYTH 6: PAPER RETURNS ARE MORE SECURE THAN E-FILING
Many believe that paper returns are more secure, but this is false. Electronic filing is both more secure and faster, reducing the chances of identity theft and processing delays.

CPAs should encourage clients to file electronically. Outsourcing firms using secure digital platforms can further enhance data protection and reduce the risk of manual errors.

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TAX MYTH 7: PROFESSIONAL TAX PREPARERS CAN EXPEDITE REFUND DATES
Some clients think tax preparers can speed up refund processing, but tax professionals have no control over refund timelines.

CPAs and tax preparers should set client expectations by explaining that even with automation and outsourcing, refund timing is determined solely by the IRS. It is best to use the Where’s My Refund? tool to get accurate and timely information regarding tax refund dates. 

 

WRAPPING UP

File your taxes with confidence or delegate them to the best professional tax preparers, who will efficiently meet the deadlines while guaranteeing maximum refunds. To avoid falling prey to tax myths and misinformation, it is best to follow IRS Statements and Announcements.