10 Terrible Tax Tips You Should Ignore

SAVING & SPENDING - TAXES
Make sure you’re getting your tax advice from trusted tax professionals.
Updated April 9, 2024
Fact checked
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Every year, millions of Americans prepare tax returns to declare their tax liability for the previous 12 months. Taxes are complicated by ever-changing tax codes and life circumstances. And everyone would rather stash money in a high-yield savings account than pay taxes.

But filing your taxes is inevitable. So, while you prepare your taxes this year, steer clear of this bad advice you may have heard on social media, in the movie, or from anyone who isn’t a tax professional.

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Filing an extension gives you more time to pay your taxes

Daniels C/peopleimages.com/Adobe taxes time and business person

Filing a tax extension only gives you more time to prepare and file your taxes. It doesn't give you more time to pay the taxes that you owe. If you do not pay your taxes on time, you'llll incur additional fees and penalties.

If you owe taxes or suspect you do, pay what you can by the deadline and contact the IRS to set up a payment plan for the rest.

Taking certain deductions will trigger an audit

Pormezz/Adobe tax deductions

There'ss a myth that certain deductions look suspicious to the IRS and will trigger an audit. The truth is deductions are legally allowed by the IRS. If your deductions are legitimate and you have the documentation, you should take all of your allowed deductions.

Exaggerate deductible expenses

seanlockephotography/Adobe charitable deduction section

While taking deductions won’t trigger an audit, lying about your deductions can. It can be tempting to fudge the numbers a bit here and there because the chances of an audit are incredibly low — less than 1%. Resist the urge to inflate your deductions by claiming a “home office” that doesn’t really exist or reporting mileage that was really for personal reasons.

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Make less money

Charnchai saeheng/Adobe businessman handing over cheque

If you make less money, you will likely pay less in taxes. You will also have less money to live on.

Taxes are a small percentage of what you earn. It’s like refusing a $10 raise because you have to spend $1 in taxes. While the amount you pay in taxes may be lower if you make less money, that doesn’t mean your tax percentage is lower overall.

Lie about how much money you make

Krakenimages.com/Adobe whispering malicious talk conversation

The IRS connects your employment to your Social Security number (SSN) or Individual Taxpayer Identification Number (ITIN). Even if you don’t file your taxes, the IRS still has that income information because your employer has reported it.

Contractors who get paid via 1099 forms also have their income reported to the IRS. Knowingly putting false information on your tax forms is illegal and can get you into hot water.

Paying taxes is optional

Kittiphan/Adobe calculating expenses at home

There are misguided theories that you can send a letter to the IRS asking them to prove where in the tax code you are personally liable or ask them to prepare your return for you. Both of these options are unreliable and may result in civil and criminal penalties.

Put your money in an offshore account

Kittiphan/Adobe couple checking bills

Contrary to the popular belief perpetuated by movies and TV shows, the IRS can track money in international offshore accounts. They consistently work to identify people who try to hide their assets through anonymous international transactions.

Moving your money to an offshore account specifically to hide it from the IRS is against the law and not the solution Hollywood makes it out to be.

Form an LLC

gesrey/Adobe llc operating agreement

Some believe that forming a limited liability company (LLC) will help reduce their tax bill. An LLC is a pass-through entity, meaning any of the tax benefits it gets, you can also get as a sole proprietor. An LLC may offer asset protection and limit personal liability but doesn’t come with tax benefits.

As an LLC, you'll also need to file your taxes quarterly instead of yearly. Forming an LLC won’t save you on taxes and will add to your to-do list.

Refuse to pay for religious reasons

Pcess609/Adobe financial accounting taxation concept

Individuals and groups of people have been trying for years to use the First Amendment and the Religious Freedom Restoration Act (RFRA) to get out of paying taxes. The argument most often used is that taxes go to pay for things against a person’s religious beliefs. Several court cases have decided this is against the law — including a Supreme Court ruling in 1982.

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Buy a house

Jirapong/Adobe handing over keys

The idea that you should buy a house to save on your taxes is much more complex than you think. Yes, you deduct property taxes and mortgage interest from your taxes. But owning a home will likely cost you much more than you will save in taxes.

Bottom line

pkstock/Adobe filing online taxes before deadline

If you’re getting your tax info from influencers or Reddit forums, you might want to think twice. There are a lot of crazy ideas floating around that may bring trouble and certainly won’t help you if you’re trying to get ahead financially.

Despite its reputation for being intimidating, the IRS has a lot of helpful information for taxpayers on its website. The primary goal of the IRS is to collect the taxes you owe — nothing more and nothing less.

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Author Details

Holly Humbert Holly is a writer who recognizes that there isn't a one-size-fits-all approach to personal finance. She is passionate about entrepreneurship, women in business, and financial literacy. With more than four years of experience, her work has been featured on MarketWatch and The Ways to Wealth.

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