Internal Revenue Service (IRS) has rejected some of the popular myths relating to filing tax returns that many people firmly believe to be true.
Voluntary Nature of Tax System
A common misconception is that the taxpayer has an option of paying or not paying the tax. This is because tax system is considered voluntary and the instructions in Form 1040 clearly state tax system to be voluntary. Even the Supreme Court has stated that the tax system of the United States is based on voluntary assessment and payment.
However, voluntary does not mean that a person has the option of paying tax or not. It merely means that the taxpayers should calculate the tax to be paid and file the tax returns on their own. The government will not calculate the tax on their behalf; it is more of a citizen’s duty to do so voluntarily. But neither the payment of the tax every year nor the filing is voluntary; it is in fact a mandatory requirement.
People think that there is no obligation on them to file tax return and IRS is legally obliged to prepare tax return for those who do not file their returns. But this is not true. IRS has the power to determine tax liability of a person who has failed to pay tax, but is not obligated to do so. The voluntary nature of tax system means that it is the responsibility of the citizens to pay tax and file their tax returns.
Wrong Notions about Auditing
Another common myth is that those who file tax early, are more likely to be audited. This is not true and the date of filing has no impact on your chances of facing an audit. Who is to be audited is determined by a score calculated by IRS algorithms.
Some people also think that the name label in the tax package has some secret code that is linked to audit selection. Due to this, a large number of returns are filed without the label. The label merely decreases processing cost and the chances of error, and has no connection with the audit selection.
The belief that calling the IRS tax help line increases the chances of audit or makes the agency scrutinize your return more closely is also wrong.
Many people file a tax return showing zero income and zero tax liability. Some people even ask for a tax refund from the withheld tax. However, people who have a taxable income cannot file a zero return and they can be punished for doing so.