Common Tax Misconceptions

Misconception: An extension gives me more time to pay my taxes.
An extension generally gives you more time to file, not more time to pay. If you expect to owe, estimate and pay as much as you can by the payment deadline to limit potential penalties and interest. Special relief may apply in certain circumstances.

Misconception: If I’m expecting a refund, I don’t need to file a return.
You may not owe a late-filing penalty if you’re due a refund, but you generally must file to claim it. Some credits may also require a return.

Misconception: Filing a return guarantees an immediate refund.
Refund timing can vary. Returns may require additional review, and certain credits or errors can delay processing.

Misconception: The IRS will still mail my refund check.

The IRS has mostly stopped mailing paper refund checks. Give bank account details when you file. Without them, your refund may be held until you respond to an IRS letter. IRS source

Misconception: If I didn’t receive a tax form, I don’t have to report the income.
Income may still be reportable even if you did not receive a W-2, 1099, or other form. Keep your own records and share them with your tax preparer.

Misconception: No 1099 means no taxable income.
Starting with 2026 payments, many people will get fewer 1099s. Most 1099-NECs are only sent for $2,000 or more, and 1099-Ks only for over $20,000 and over 200 transactions. The income is still taxable, so keep your own records of what you were paid. IRS source

Misconception: Tips and overtime are now completely tax-free.
Not quite. There are new deductions, but they have limits: up to $25,000 of tips, and up to $12,500 of overtime ($25,000 married filing jointly). For overtime, only the extra "half" of time-and-a-half counts. Both shrink at higher incomes, and Social Security and Medicare tax still apply. IRS source

Misconception: I only need to report cryptocurrency or digital assets when I cash out to my bank account.
Some digital-asset transactions may have tax consequences even when no money is transferred to a bank account. Please provide records of purchases, sales, exchanges, and other transactions so the tax treatment can be determined.

Misconception: Investment activity only matters if I made a profit.
Sales and other reportable investment transactions may need to be included even if they resulted in a loss. Please provide the tax forms and transaction records you received.

Misconception: A K-1 is just an informational form and doesn’t affect my tax return.
A Schedule K-1 can report income, deductions, credits, and other items that may affect your individual return. Please send every K-1 you receive, including corrected forms.

Misconception: If I’m paid in cash or through an app, it isn’t taxable income.
The way you’re paid does not by itself determine whether income is taxable. Keep records of business receipts and expenses, including payments that were not reported on a tax form.

Misconception: Every purchase for my business is deductible.
Business expenses generally need to be ordinary and necessary for the business, and personal expenses aren’t deductible as business expenses. Keep receipts and explain expenses that may have both business and personal use.

Misconception: All money collected from a rental property is taxable profit.
Rental income and deductible expenses are generally reported separately, and the tax result depends on the property’s income, expenses, and circumstances. Keep records of rent received and costs such as repairs, insurance, and property taxes.

Misconception: A farm or small business can report expenses without records.
Accurate records help support income and expense amounts. Organizing totals by category—or providing a profit-and-loss statement or spreadsheet—can make tax preparation smoother.

Misconception: Itemizing deductions always lowers my tax more than taking the standard deduction.
The better choice depends on your eligible itemized deductions and the standard deduction available for your filing situation. Compare the two before deciding.

Misconception: I can claim someone as a dependent just because I support them.
Dependency rules are specific and can depend on factors such as the person’s relationship to you, residency, income, and support. Share the relevant details so eligibility can be evaluated.

Misconception: My filing status is based only on whether I’m married when I file.
Filing status depends on tax rules and facts that generally relate to your circumstances on the last day of the tax year. If your household or marital situation changed, mention it.

Misconception: My Marketplace health insurance credit can't cost me at tax time.

Starting with 2026, if the help you got with premiums turns out to be more than you qualified for, you repay the full difference. There's no longer a cap. Report income and household changes to the Marketplace during the year, and send us your Form 1095-A. IRS source

Misconception: An amended return is only needed if I made a mistake.
An amendment may be appropriate when important information changes or was missing after filing. Whether one is needed depends on the change and the return involved.

Misconception: My preparer can prepare an accurate return without complete information.
A preparer relies on the documents and details you provide. Please submit all relevant income forms, expense records, prior-year information, and corrected tax forms, and respond to follow-up questions.