Don't Fall for These 3 Tax Filing Fallacies

No one likes to pay taxes. We all want to reduce our tax liability. However, some people try to use justifications that just don't work. If you are caught, then you could find yourself audited -- owing even more in penalties and fees. So, before you try to work the system, realize the truth behind these three tax-filing fallacies:

1. Paying taxes is voluntary: This is a common myth, circulated yearly by enthusiasts who think they aren't breaking the law when they decide not to pay their taxes. The Constitution allows for the collection of taxes (including income taxes), and further laws since then set forth the requirement to pay taxes. Anti-tax folks like to cite IRS statements and a 1960 Supreme Court case that mention "voluntary assessment and payment...," but the truth is that the word "voluntary" in this phrase refers to the fact that taxpayers are required to assess their own tax liability and then volunteer the information without further prodding. Of course, if you don't volunteer the information, the government is perfectly within its rights to audit you and force you to give it up.

2. You don't have to report income if you don't have a 1099: This is a nice thought for those who get side income. However, you have to report all of your income, whether a company issues you a 1099 or not. It's true that companies don't have to issue you a 1099 if they pay you less than $600. But you're still on the hook to report it. Also, some companies report to the IRS, but neglect to send you a 1099. Then you're really busted.

3. You can deduct hours worked for charity: Some people try to itemize hours "donated" by working on behalf of a charity. If you make $25 an hour regularly, the thinking goes, you can deduct $100 if you "donate" four hours of your time to charity. Time spent helping others and doing charitable works isn't tax deductible, though. You can deduct donations of goods and cash, and you can deduct mileage traveled. But you can't deduct your time.