As the April 15 tax filing deadline approaches, it’s important to separate fact from fiction when it comes to preparing your returns. “Tax laws are often summarized for [the] sake of quickly explaining a potential benefit—or conflict,” says Andy Phillips, Vice President of H&R Block’s Tax Institute. “When details are omitted, it’s easy to misinterpret law or consider the advice of a trusted friend versus taking time to do firsthand research.” Blindly following someone else’s bad tax advice could cost you precious time and money.

“I can file my tax return with the details from my last paycheck stub.”  

The figures listed on your last paycheck stub may be close to what will be released on your W-2, but it’s not guaranteed that the numbers are always right. Plus, as Phillips explains, this is technically not allowed. “Your last pay stub is not considered an IRS-recognized document for filing. It’s common for calculations to be slightly off throughout the year and not be accounted for until end of year. Payments such as bonuses and commissions can easily be forgotten, and no one enjoys the process of filing an amended return.”

Phillips’ advice: Wait for your employer-prepared W-2. He adds that you should “be wary of return preparers who advertise paystub filing, which is against the rules.” The employer should have issued your W-2 by Jan. 31 at the latest.

“Being unemployed means I don’t have to pay taxes.”  

If you receive any form of unemployment benefits either from the city, state, or federal level, then that’s considered income. All income should be reported on your tax return. Unemployment benefits paid are typically reported with a Form 1099-G. This form functions similarly as a W-2, outlining how much you were paid and if taxes were withheld. 

“Any money that I give counts as a charitable contribution.”  

Of course, giving without the expectation of repayment is an admirable gesture. However, Phillips notes that only charitable gifts and donations made to IRS-qualified tax-exempt institutions are tax-deductible. Typically, a receipt is provided when a tax-deductible gift is received. If you recently made a donation and are unsure if your donation was made to a qualifying organization, use the Tax Exempt Organization Search Tool located on the IRS website. Furthermore, you must itemize to deduct charitable contributions, meaning those claiming the standard deduction are not able to deduct those donations even if made to a qualified organization.

“If I work from home I can take a deduction for my home office.”

With the rise of remote work in the last few years those that work from home may think they can claim the home office deduction. Unfortunately, as Phillips explains, if you are an employee, you cannot claim the deduction—the deduction for employee business expenses was suspended beginning in 2018. On the other hand, if you are self-employed and have a home office it is likely that you can claim the home office deduction.

“This social media post told me that I can claim …”

As I wrote last week, certain tax “loopholes” may go viral, but that doesn’t mean they’re good for your specific tax situation. All across social media, I see creators telling people they can claim tax benefits that are either nonexistent or that they’re not eligible for. Philips concurs: Taxpayers should exercise caution when relying on claims made on social media and should ensure they only use reliable sources when making tax decisions.

“A tax filing extension gives me more time to pay my balance due.”  

Unfortunately, an extension of time to file does not give you more time to pay. Phillips says that “you should try your best to pay your estimated balance due when you request an extension.” If you can’t pay, filing a tax return is the first crucial step to determine your eligibility to enroll in an IRS-approved installment payment plan.

As Phillips explains, neglecting to file on time subjects you to a failure-to-file penalty, which starts at 5% of your unpaid taxes per month, up to five months. If the return is more than 60 days late, a minimum penalty applies. For this year, the minimum penalty is the lesser of 100% of the unpaid tax or $510.

On the other hand, the penalty for just failing to pay is only 0.5% of the unpaid taxes for each month or part of a month the tax remains unpaid.

“This is why it’s so important to file a return, even if you cannot pay the full amount due,” Phillips urges. As long as you file, these penalties combined won’t exceed 25% of your unpaid taxes. Phillips also notes that interest also begins to accrue after the due date on the amount you owe IRS.

By steering clear of these common tax myths, you can avoid costly mistakes and headaches this filing season. As always, it’s best to consult a qualified tax professional who can look at your specific situation and give you legitimate, tailored advice.

With tax season in full swing, it’s prime time for married couples to maximize all the tax breaks available to them. One strategy that you don’t want to leave on the table: making spousal IRA contributions.

If one spouse isn’t employed, they might be missing out on putting retirement assets in their name—not to mention reducing the tax-deferred growth possibilities as a couple.

Spousal IRA contributions can double your retirement tax breaks

The IRA contribution limits for 2024 are $7,000 for those under age 50, and $8,000 for those age 50 or older. To clarify: You can make 2024 IRA contributions until the tax deadline on April 15, 2025. Generally, you can only contribute up to these limits for your own IRA, meaning you must have an income that will allow you to do so. And as always, you can and should max out these limits, if possible. However, with a spousal IRA, your spouse can also contribute up to the limit in an IRA under your name.

That effectively doubles the amount your household can sock away in IRAs (pre-tax or Roth) each year. The only requirement is that the spouse who owns the IRA must have enough earned income to cover both contributions.

For example, let’s say Alex earns $100,000 per year and her husband Kevin is a stay-at-home dad with no income. Alex can contribute $7,000 to her own IRA. She can also contribute $7,000 to an IRA that is under Kevin’s name. That’s $14,000 total that the household can now save in IRAs, rather than just Alex’s $7,000 limit.

How spousal IRAs work

A spousal IRA isn’t actually a separate type of IRA account—rather, it’s just a traditional IRA or Roth IRA set up in the name of a spouse who has little to no income. This may include those who are caregivers for children or other family members, workers who have returned to school, or people who have left the workforce for another reason.

To be eligible for a spousal IRA, you have to meet a few requirements:

• You must file taxes as “married filing jointly.”

• The earning/contributing spouse must make enough to cover the contributions to both their own IRA and the spousal account.

• There are income-based contribution limits for Roth IRAs and tax deduction limits for traditional IRAs based on your tax filing status. These may affect which type of account you select.

One key to a spousal IRA is that ownership stays with the person named on the account, no matter which spouse is contributing the funds. This also means that an existing IRA—funded while the owner of the account was in the workforce—can function as a spousal IRA if that person is no longer earning income and their partner simply contributes to the account on their behalf.

The bottom line

Eligible couples can use a spousal IRA to double their contributions to traditional individual retirement accounts (IRAs) even if only one partner has an income, and deduct a total of $14,000 (rather than $7,000 for the individual income earner) for 2024, as long as they do so by April 15. So there is still time for married couples to make spousal IRA contributions and double their tax-advantaged retirement savings—just be sure to specify which spouse the contribution is for when sending funds to your IRA provider.

With a little planning, a spousal IRA strategy can significantly boost your households’ retirement funds. And you can get an immediate tax deduction on your taxes if you make the contributions prior to tax day—so don’t leave this tax break on the table.