Ask Away...: Don't Fall for These Common Tax Myths

Wednesday, August 31, 2016

Don't Fall for These Common Tax Myths

I’m no fan of tax. Very few people are. People don’t even like to think about taxes. And that causes a lot of myths and misconceptions to float about in the minds of taxpayers. Some of these myths are a little silly. Some of them can cost you a lot of money. Some of them could get you into serious legal trouble.

So what are some of the biggest, strangest, and most common myths about tax out there? Today, we’re going to be taking a look at just a few.

I’m paid in cash, so I don’t have to report it

I’m not quite sure where people get this from. Actually, maybe I have some idea. On television shows and in movies, you sometimes get characters asking for cash so they don’t have to report it to the IRS.

The problem is that these characters are often criminals. When they say they don’t “have to”, what they mean is that it’s harder for the IRS to trace. After all, if it’s not going straight into your bank account, how’s the IRS to know? The problem comes when you start showing up with assets despite not having paid from a bank account. Then the IRS are going to know you have an unreported source of income. Remember: if it’s income, you have to report it!

You can’t negotiate with the IRS

Look, I don’t particularly like the IRS. But to suggest that everyone who works there is some heartless monster who will grab your cash at any cost is a bit of an exaggeration. The problem is that most people seem to have this image.

This can lead to a variety of behavior. It can lead them to not pay taxes due to a perceived moral high ground. It can lead them to believe that they can’t simply talk to the IRS if they have a problem. But the IRS is made up of actual people who may be willing to work with you if you have a problem. If you want to negotiate or dispute something, get in touch with them. Work with a highly praised tax lawyer and your chances of success will be much higher.

Income tax is illegal, voluntary, invalid, unconstitutional, etc

Listen to all the libertarian or voluntaryist arguments you want. Clutch onto your copy of Atlas Shrugged as tightly as you please. The fact is, however you feel about it from a moral standpoint, the law requires you to pay tax.

That doesn’t mean you shouldn’t have anti-tax points of view. That doesn’t mean you shouldn’t maintain a blog filled with daily diatribes against taxation. But it does mean that you need to pay tax. Many tax protestors will claim that filing tax returns is, by law, completely voluntary. But these arguments tend to be held up by nothing more than rhetoric and skewed semantics. Trust me: I sympathize. But by using false pretenses to avoid paying tax, you’re only going to get yourself into trouble. I know the founding of America was rooted in a revolt against taxes. But tax is the law!

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