Taxes are complicated, but you’re in the right place when it comes to navigating your unique tax situation. Below are some common misconceptions for individual taxes:
- “I filed an extension so I don’t have to pay by April 15” – A properly filed extension gives you an additional 6 months to file your tax return, but it does not extend your time to pay. All tax is due by April 15 each year. Any tax paid after April 15 will incur a late payment penalty and interest.
- “We got married in December so we have to file separately for the year.” – Your filing status is dependent on your marital status as of December 31 each tax year. If you get married on December 31, you are treated as married for the entire year. If you get divorced on December 31, you are treated as single for the entire year.
- “I reinvested the proceeds from the sale of stock so I don’t have to pay tax on it.” – If you hold stock outside of a retirement account, including IRA’s, the gain from the stock is taxable income in the year sold.
- “I sold employer awarded stock, but since I was taxed on it once, I don’t have to pay tax on it again.” – If you are awarded stock, it is generally included in your wages. Once you sell the stock, the gain is taxable as well.
- “I donated a week stay at our vacation home to a charity so I can take a charitable deduction.” – There is no charitable contribution for donating time at a vacation or rental home you own. The IRS allows charitable contributions for items that you give up 100% ownership of, so since you didn’t donate the house itself, there is no charitable contribution.
There are exceptions to the above, but as many find themselves stumbling across information on social media, more misconceptions are occurring. We value our relationships with our clients and are happy to discuss your tax situation in detail.