Don't Fall for These Four Tax Myths

The IRS really just wants everyone to get along.

Unfortunately, not all taxpayers like to play nice in the sandbox. Some intentionally try to get away with excessive or disproportionate deductions or expenses. Others are just the victim of some very bad accounting advice.

Here are 4 tax filing and deduction myths that are easily debunked.

1. Having a desk and a computer means I can take a home office deduction.

If you are self-employed, the IRS does allow you to deduct a portion of the home that you may be using solely for business purposes.

According to the IRS, in order to deduct expenses related to business use, you must exclusively and regularly use part of your home as the principal place of business in the normal course of your trade or commerce.

How to take an IRS deduction for the business use of your home

2. All of my gambling winnings are not taxable because I had a ton of losses

This may well be true, but all gambling winnings are taxable. Once you win over a certain amount from one source, the payer is required to report this to you, and to the IRS, via Form W-2G. Gambling winnings must be reported to the IRS on Line 21 of the Form 1040, as '‹Å"Other Income.'

The IRS allows you to deduct losses only up to the amount of your winnings. Additionally, you must keep a log, or ledger, of your losses. Some casinos can track the amount you spend using a player's card. If not, keep a log of the date and the amount spent and won. Hold onto your receipts from lotteries, raffles, horse and dog races.

What type of income does the IRS consider taxable?

3. I don't have to report all of my tip income

If you work in restaurant service, then you may be making only a nominal wage. Most of your income comes from tips. Because tips are largely given as cash, they are difficult to track.

However, according to the IRS, all tips are considered taxable income and must be reported on your tax return. If you receive more than $20 in tips per month, then this must be reported to your employer, who has a responsibility to include it in your income and to withhold taxes on it.

See the IRS article Tips, Withholding and Reporting for more information.

4. It doesn't matter if my return is late. I have 3 years to claim my refund.

By law, the IRS allows a taxpayer three years to make a claim for a refund. However, this does not mean that taxpayers who might have a refund should wait to file their return. All individual tax returns are due by mid-April, unless you have filed a Form 4868 that grants an automatic 6-month extension.

There are no benefits to waiting to file; the IRS does not hold your money for investment purposes nor do they pay interest on the refund. Also, while you may know you have a refund, the IRS does not, especially if your refund is coming from undocumented sources such as investment losses.

If a return legally needs to be filed, then after multiple notices are sent out, the IRS may assess a balance due based on documents that are reported to them by all of your payers. The return is assessed in a high tax bracket, irrespective of exemptions, deduction or credits.

What happens if my return is not filed?

More from this Contributor:

7 things you don't know about your federal tax refund

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5 facts about IRS interest on unpaid taxes