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NEWSLETTER: Top Tax Myths



February 28, 2024


Welcome back. This week’s newsletter: Tax Myths and Tax Questions. Most savvy investors are starved for the truth, the whole truth, and nothing but the truth.  


TAX MYTHS: The Truth, The Lies, All that Falls In Between





 



 Myth #1: Remote employees can claim a home office deductions: 


  • Here’s the real skinny: If you work remotely and are not self-employed, you cannot claim any deduction for your home office. If you are employed but work from home, your employer can, but is not required to, reimburse you for expenses that are incurred. However, even if you are not reimbursed, you cannot claim the home office deduction. 


Myth #2: If you file an extension, you may wait to pay your taxes:


  • On April 15th, you can request to extend your tax return due date to October 15th. This does not mean you don’t have to pay the taxes on April 15th. The extension only gives you more time to get more of  your information together. 

  • You still need to submit your estimated tax payment by April 15th. 


Myth #3: If you file an extension, you are more likely to be audited.


  • Studies have never found any correlation between extending the deadline for filing and getting audited.

  • Although your chance of being audited does increase with your income, it does not have anything to do with filing an extension.


Myth #4: If your parents live in a nursing home, they cannot be your dependents.


  • It is true that dependents who are not relatives, need to live with you, but that rule does not apply to your parents or your children.  

  • If you support your parents, you can claim them as your dependents, no matter where they live. 

  • Here’s some qualifying information about that: If you are paying more than 50% of their overall support, your parents’ income cannot exceed more than $4,700 per year (not counting social security). Oh, and yeah—the parent you are supporting must be a US citizen. 

  • If you pay more than 7.5% of your adjusted gross income for your parents’ medical care, you can claim their medical expenses as an itemized deduction on Schedule A, even if they don’t meet the income requirement to be claimed as your dependent. 


Myth # 5: Money you inherit is taxable to you.


  • Ok, here is the reality:  If there is an inheritance tax to be paid, it is paid by the estate of the person who died, and not by you.

  • The same is true of gifts you receive.The gift giver may be subject to tax, but not the gift receiver.  And by the way, gifts you give to another person are not deductible on your tax return. 


Myth # 6: Tax-exempt income will never be taxed.


  • Some states tax income that is exempt from federal taxes

  • Tax-exempt income, though not taxed itself federally, may form an income platform that causes a greater portion of other income such as social security benefits, to be taxed. 


Myth # 7: The rich never pay any taxes.


  • US taxpayers with higher incomes pay higher income tax rates. As a result, half of US taxpayers pay 97% of all income taxes. 

  • The top 1% of earners pay one-third of all income taxes. 

  • While taxes on capital gains are lower than income taxes, the government does this in order to incentivize investing to grow the economy and add more jobs. As well, if a person  realizes a 20% capital gain on an investment that he held for 5 years, during a time when inflation was 21%, that person will be paying taxes when he actually lost money.


In looking at a few of these myths, it is easy to see the pressing need for an informed CPA and the pressing need for Wealth Strategists who are savvy about investing in ways to seize every opportunity to legally maximize tax deductions. That’s another reason to stay tuned in to The Other Side of the Coin. We’ve got your back.


Click here to schedule an appointment with one of our specialists. 



DON’T FORGET 

Check out these upcoming important tax deadlines: 


  • March 15, 2024 - Returns for partnerships and S-corps are generally due. If you request an automatic extension, these will be due on September 15.

  • April 1, 2024 - Required minimum distributions are due if you turned 73 in 2023

  • April 15th - Last day to make a contribution to your IRA, HSA, or Coverdell education savings account for the prior year. 

  • April 15th - Mail your individual or corporate  income tax return by this day. If you are requesting an automatic 6-month extension, you still need to pay any taxes due by April 15th. 

  • April 15th - First quarter 2024 estimated income tax payments are due by April 15th. 


ANNOUNCEMENTS





47 days until Tax Day! The countdown continues.


IN THE SPOTLIGHT - 









Our Spotlight this week shines on Taylor Rowell who rocks as an Executive Assistant at WD Wealth. Taylor is complicated. She is wickedly organized, and an expert at multitasking. This side of her shows in how she finesses client calls, managing calendars and generally keeps everyone on her team on track. The complicated part is that she is the picture of composure. She does all this without breaking a sweat. 



WHAT SHE’S WATCHING 

I have really been enjoying the Bigger Pockets podcasts. They tend to focus on real estate investing and seem to consistently deliver actionable advice via a variety of inspiring success stories.

WHAT SHE’S READING 

Right now I'm listening to a book by Ann Patchett titled Tom Lake. The book is set in Michigan where the mother of three girls is encouraged to share tales about her romance years before with a famous actor at a local theater company called Tom Lake. It’s really good, it’s a little like a love story. The daughters get to learn about their mother as a teen and to have a different perspective about their lives and futures. 

I am also listening to another one, Happy Place by Emily Henry. It’s kind of a funny Rom-Com. I like it because it lets me escape from all the chaos of daily life. 




TAKE A BREAK




This week we thought it would be fun to see what kind of captions our readers come up with. Take a stab at captioning the above graphic. Submit your answers to info@wdwealth.com. We’ll choose the best answer and let you know in the next newsletter. 



How’d you do on last week’s Take a Break crossword puzzle?


Want to chat? 


See you next time!


If you missed our last newsletter, click here to catch up.








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