The shocking things Americans don’t know about filing their taxes
For starters, many don’t even know new tax legislation passed
Universal/courtesy Everett / Everett Collection
A lack of knowledge about tax laws could mean losing money.
If you’re confused about the finer points of filing your taxes this year, you’re not alone. Americans are receiving failing grades on their tax knowledge.
Despite the fact that most people have to file a tax return, they have many basic facts wrong, according to a study published Wednesday from the personal-finance company NerdWallet, which surveyed more than 2,000 adults in December 2017.
For starters, some 26% of people, did not know a new tax bill was signed into law last year, and about half didn’t know income tax brackets are changing under those new rules, NerdWallet found. President Donald Trump signed the Republican tax bill into law Dec. 22, 2017.
“The tax law was passed quickly, and there were a lot of different versions of it,” said Andrea Coombes, a tax expert at NerdWallet. “Also, it was in December, when a lot of people are distracted by the holidays.”
See also: Here are the winners and losers of the new tax law
Half of people don’t know that income tax brackets have changed
Just 49% of people knew the income tax brackets will be changing under the new law, and 50% of people don’t know how their own income tax bracket will change. The new law will impact 2018 taxes, which will be filed in 2019.
Consumers should become familiar with the new laws, so they don’t make a mistake and end up owing more money than they’re expecting, Coombes said.
One way to do that: Check out MarketWatch’s Trump tax calculator to find out if you’ll pay more or less.
Americans think common tax-reduction strategies are illegal
Some 65% of people NerdWallet surveyed thought it was illegal to make extra mortgage payments in order to reduce taxes, when doing that is perfectly legal, the study found.
Some 75% of people believe that opening or contributing to an Individual Retirement Account (IRA) after the end of the year was illegal. In fact, filers can do this during a new year, but before their tax filing deadline. The cap for the amount you can contribute to your account changes, based on whether or not you have an employer-sponsored retirement plan.
On the plus side: 90% of Americans know they must include money they received “under the table” on their tax forms. The obvious downside: 10% of people thought keeping that money off the books was perfectly OK.
People are afraid, very afraid of auditing
This confusion might be a major reason why 28% of people said their biggest concern is getting audited. Another 21% said they are worried about having to pay more after filing.
In reality, the chances of being audited are low. The Internal Revenue Service audited just one million individual returns in 2016, according to The Wall Street Journal. That’s less than 1% of the individual tax returns that were filed.
To avoid making mistakes on your taxes, hire a tax professional, or use a reputable online tax software. Or get yourself a 99-cent binder.
https://www.marketwatch.com/story/t...dont-know-about-filing-their-taxes-2018-02-21
For starters, many don’t even know new tax legislation passed
A lack of knowledge about tax laws could mean losing money.
If you’re confused about the finer points of filing your taxes this year, you’re not alone. Americans are receiving failing grades on their tax knowledge.
Despite the fact that most people have to file a tax return, they have many basic facts wrong, according to a study published Wednesday from the personal-finance company NerdWallet, which surveyed more than 2,000 adults in December 2017.
For starters, some 26% of people, did not know a new tax bill was signed into law last year, and about half didn’t know income tax brackets are changing under those new rules, NerdWallet found. President Donald Trump signed the Republican tax bill into law Dec. 22, 2017.
“The tax law was passed quickly, and there were a lot of different versions of it,” said Andrea Coombes, a tax expert at NerdWallet. “Also, it was in December, when a lot of people are distracted by the holidays.”
See also: Here are the winners and losers of the new tax law
Half of people don’t know that income tax brackets have changed
Just 49% of people knew the income tax brackets will be changing under the new law, and 50% of people don’t know how their own income tax bracket will change. The new law will impact 2018 taxes, which will be filed in 2019.
Consumers should become familiar with the new laws, so they don’t make a mistake and end up owing more money than they’re expecting, Coombes said.
One way to do that: Check out MarketWatch’s Trump tax calculator to find out if you’ll pay more or less.
Americans think common tax-reduction strategies are illegal
Some 65% of people NerdWallet surveyed thought it was illegal to make extra mortgage payments in order to reduce taxes, when doing that is perfectly legal, the study found.
Some 75% of people believe that opening or contributing to an Individual Retirement Account (IRA) after the end of the year was illegal. In fact, filers can do this during a new year, but before their tax filing deadline. The cap for the amount you can contribute to your account changes, based on whether or not you have an employer-sponsored retirement plan.
On the plus side: 90% of Americans know they must include money they received “under the table” on their tax forms. The obvious downside: 10% of people thought keeping that money off the books was perfectly OK.
People are afraid, very afraid of auditing
This confusion might be a major reason why 28% of people said their biggest concern is getting audited. Another 21% said they are worried about having to pay more after filing.
In reality, the chances of being audited are low. The Internal Revenue Service audited just one million individual returns in 2016, according to The Wall Street Journal. That’s less than 1% of the individual tax returns that were filed.
To avoid making mistakes on your taxes, hire a tax professional, or use a reputable online tax software. Or get yourself a 99-cent binder.
https://www.marketwatch.com/story/t...dont-know-about-filing-their-taxes-2018-02-21
