3 Common Misconceptions About Tax Season

Tax time brings with it everything from a great deal of tension and stress to a load of burning questions. We can't do anything about the tension and stress, but here are answer to 3 of the most frequently asked questions during tax time.

1. What happens if I don't file by the tax deadline?

If you miss the deadline, at most, the IRS will simply charge you one of two kinds of fees: failure to file or failure to pay fees. Since the failure to file fee is significantly higher than the failure to pay fee is, it's always a good idea to file, even if you can't pay.
If you fail to file, the IRS will charge you 5% of your unpaid taxes per month, while if you fail to pay they will only charge you 0.5 of 1% per month. If you only miss the deadline by a few days, there is very little - if any - penalty.

2. Will I pay less if my spouse and I file jointly or separately?

Before 2001, the standard deduction for a married couple filing jointly was less than what they would pay if they filed individually. This was sometimes referred to as a "marriage penalty." Today joint filers are allowed to claim exactly twice as much as they would each be able to claim individually. There are still significant advantages to filing either jointly or separately, however, depending on your situation.

Advantages of filing jointly:

If you are a married couple with a single wage earner, filing jointly gives you a double deduction

• Married couples are only eligible for certain tax credits such as earned income credits, lifetime learning credits, child and dependent care credit, American opportunity credits and deductions for adoption expenses. If you are married and choose to file separately you cannot claim these credits.
• You don't have to file jointly to claim a child tax credit but the $1,000 credit doesn't begin to phase out for joint filers until $110,000 in income, whereas it phases out at $55,000 for single filers

Advantages of filing separately:

• The IRS allows you to deduct medical expenses in excess of 10% of your income. If one person makes significantly more than the other person, it might be advantageous to file separately if the person with the lesser income also has large medical bills.
• By filing jointly, both parties are legally liable for any mistakes or misinformation on a tax return. If one spouse has a complicated tax return for any reason, it might be smart to file separately.

3. Do I have to file income taxes if I didn't make much money?

If you make less than the minimum income requirement for the tax year, you don't have to file. For 2016, if you were under 65, you need to file if you made more than $10,350 if you are a single filer and $20,700 if you are married and filing jointly. The limits are slightly higher for persons aged 65 and older. If you are married and filing singly, however, the minimum is $4,050 regardless of age.

William Doonan is a tax law and legal expert in New York.