Debunking popular tax mythsPosted: Updated:
PHOENIX - With more than 70,000 pages worth of U.S. tax laws, it's no wonder myths about the tax code have multiplied.
“The tax code, the last major revision was 1986, and it's literally a book about that thick of nothing but bible paper,” CPA Shauna Wekherlein said.
So 3 On Your Side went to Wekherlein and Valley tax expert, Aashish Parekh, to set the record straight on some of the most popular tax myths.
The first deals with a question someone asked on Twitter and out whether you can claim your dog as a dependent.
That would be a stretch, but our expert says surprisingly, you can claim your dog as a deduction if you're a female, if the dog is taller than your knee.
“If it’s brought along with you as some sort of guard or protector in any sort of business that you do, then, yes you can write off Fido. You can write off his food, the vet bills, the dog walkers, almost everything,” Wekherlein said.
Another myth: E-filing increases your chance of an audit.
The IRS says that's flat-out wrong, and so does our expert.
“No, there are no different statistics whether you e-file or whether you file a paper return,” Parekh said.
Filing an extension increases your chance of being audited is also a myth.
Our expert said asking for more time actually decreases that risk.
“File an extension, file in May, June because by that point the IRS has already pulled from their audit pool that file from January to April,” Wekherlein said.
Out on the streets of Phoenix, people were also talking tax myths.
“Is getting a big refund a good thing?” taxpayer Alexis Tidwell asked.
No, according to our experts.
Getting a big refund means you've given the government too much money over the past year.
“It's not a good idea to get a big refund,” Parekh said.
Someone on Facebook asked about the myth that paying taxes is voluntary.
“Oh no, unfortunately not,” Wekherlein said. “Typically if you don't file for more than a year or two years the IRS will come knocking on your door.”
This myth actually stems from the tax code itself, which says the tax system is voluntary.
Many people have tried using this as a defense to not pay, and each time courts throw the book at them, further clarifying that paying taxes is a must.
The IRS has compiled a list of what it calls “The Truth about Frivolous Tax Arguments.”
Questions about what taxpayers can deduct or write off are always popular during tax time.
Wekherlein says dry-cleaning can only be written off if you’re having it done for professional purposes, like work or going to a job interview.
If you have a job that calls for you to be in the public eye, Wekherlein says, out-of-the-ordinary services like Botox injections can also be written off. Liposuction can be, too, if mandated by a doctor.
Uniforms can also be written off.
In fact, Wekherlein says, anything with a company logo on it can be deducted because you’re basically a walking advertisement.
“I remember about three years in to opening my own practice, a client came in and said, ‘Well how do I write off every single piece of clothing that I own?’ I told him about the advertising. He came back two weeks later, his socks, his pants, his hat, his jacket, his underwear all had his corporate logo on it. He wrote off every single penny of it and the IRS didn’t argue,” Wekherlein said.
Parekh also suggests taxpayers steer clear of using round numbers when filing.
He says using round numbers shows you are estimating your figures which could trigger an audit.
Remember, the tax deadline is extended by three days this year because of Emancipation Day, a holiday observed in the District of Columbia. Tax returns must be complete by April 18, 2011, unless, of course, you filed for an extension.