The Truth Behind Common Tax Myths

Tax myths spread quickly and can lead to costly mistakes or missed opportunities. Here’s what’s fact and what’s fiction.

Tax Myth 1: Moving into a higher tax bracket means you’ll take home less money.

Reality: The U.S. tax system is progressive. Only the income above the bracket threshold is taxed at the higher rate, not your entire salary.

Best practice: Know your marginal tax rate (the rate applied to your next dollar of income). It helps you understand the real impact of raises, bonuses, and investment income.

Tax Myth 2: A tax refund means you did everything right.

Reality: A refund means you loaned the government your money—without interest.

Best practice: Review last year’s tax return and adjust your paycheck withholdings for current-year changes (like new deductions or tax-free income). Keeping more of your paycheck throughout the year improves cash flow.

Myth 3: If you’re self-employed, you can deduct everything.

Reality: Only expenses that are ordinary and necessary for your business qualify.

Best practice: Use a dedicated business bank account and avoid mixing business and personal spending. Commingling funds can lead the IRS to deny deductions.

Myth 4: If you didn’t receive a Form 1099, you don’t have to report the income.

Reality: All income is taxable, whether you receive a 1099 or not.

Best practice: Track all sources of income throughout the year and compare them to prior years’ 1099s to make sure nothing gets missed.

Have questions about your tax situation? We’re here to guide you with year-round planning and support.