4 Common Tax Myths (and How to Avoid Them)

Let’s be honest—taxes can feel like a mysterious jungle of forms, rules, and deadlines. It’s no surprise that over time, a few tax myths have taken on a life of their own. Whether you’re filing taxes for the first time or you’ve been doing it for years, you’ve probably heard things like, “Getting a big refund is great!” or “You don’t need to file if you didn’t make much money.”

The problem? Many of these statements are misleading at best and can cost you money, time, or worse—get you in trouble with the IRS.

So, let’s clear the air. Here are four of the most common tax myths and how to sidestep them with confidence.

Myth #1: A Tax Refund Means You Did Something Right

“I got a huge refund this year—I must be winning at taxes!”

This is probably the most widespread myth, and while getting a refund feels great, it’s not necessarily a win. A tax refund just means you gave the government an interest-free loan by overpaying your taxes throughout the year.

Why It’s a Problem:

That big refund is money that could’ve been in your bank account all year long—helping you pay off debt, earn interest, or invest. Overpaying on purpose isn’t a great financial strategy.

How to Avoid It:

Adjust your W-4 form with your employer to better match your actual tax liability. The IRS even has a handy Tax Withholding Estimator to help you calculate the right amount. The goal isn’t a big refund—it’s to break even as closely as possible.

Myth #2: You Don’t Have to File If You Made Less Than $13,850

It’s true that many people under a certain income threshold don’t have to file a federal tax return. In 2024, for single filers under 65, the cutoff is $13,850. But here’s the catch: “don’t have to” doesn’t mean “shouldn’t.”

Why It’s a Problem:

If you had taxes withheld from your paycheck, even if you made just a few thousand dollars, you might be due a refund. Or maybe you qualify for refundable tax credits like the Earned Income Tax Credit (EITC) or the Child Tax Credit—which could mean money back even if you paid little or nothing in taxes.

How to Avoid It:

Even if you earned below the filing threshold, run the numbers anyway. Many tax prep services and the IRS Free File tool can walk you through it quickly. A little time spent could mean a lot of cash coming back to you.

Myth #3: Side Hustles Don’t Count (Unless You Made Over $600)

This one gets people into hot water more often than you’d think. A lot of folks believe if they didn’t make at least $600 from freelance gigs, Etsy sales, or driving for Uber, they don’t have to report that income.

Why It’s a Problem:

The IRS requires you to report all income, not just what shows up on a 1099-NEC or 1099-K. That $300 you made pet-sitting? Technically, it’s taxable. Whether or not you receive a form doesn’t change your obligation to report it.

How to Avoid It:

If you’re doing any kind of gig or freelance work, keep good records of your earnings and expenses. Use a simple spreadsheet or accounting software. You may be able to write off business expenses like mileage, supplies, or software subscriptions—but only if you keep track.

And remember: reporting your side income isn’t just about staying legal—it could help if you want to qualify for a mortgage or business loan down the road.

Myth #4: Filing Taxes Is Optional If You Can’t Pay

“I can’t afford to pay my tax bill, so I’ll just skip filing this year.”

This one’s risky. While not being able to pay your taxes is stressful, not filing at all can make things much worse.

Why It’s a Problem:

The IRS separates failure to file and failure to pay—and failure to file carries harsher penalties. If you don’t file, you could face a penalty of 5% of the tax owed per month (up to 25%). If you file but don’t pay, the penalty is much lower—just 0.5% per month.

How to Avoid It:

Always file, even if you can’t pay. Then, explore options like:

  • Installment plans: You can apply online to pay in monthly installments. 
  • Offer in Compromise: In some situations, you may settle your bill for less than you owe. 
  • Hardship status: You may qualify for “Currently Not Collectible” status if you’re facing financial hardship. 

The IRS isn’t as scary as it seems—just be proactive and transparent.

Bonus Tip: Don’t Rely Solely on TikTok for Tax Advice

While social media can offer bite-sized financial tips, tax rules are complex and personal. What works for someone else might not apply to you. We’ve seen viral posts promoting all kinds of misleading advice—like claiming your kids as employees or writing off your entire vacation as a “business expense.”

When in doubt, check with the IRS website or consult a qualified tax professional.

How to Stay on the Right Side of Tax Rules

Here’s a quick checklist to help keep your taxes myth-free:

  1. Check your withholding: Especially if you’ve had a life change—new job, marriage, baby, etc.
  2. File even if you don’t “have to”: Refundable credits might surprise you.
  3. Report all income, no matter how small: Especially with side gigs.
  4. File on time—even if you can’t pay: You’ll avoid major penalties.
  5. Keep receipts and records: For deductions, business expenses, and peace of mind.

Final Thoughts

Taxes don’t have to be intimidating or confusing. Most of the fear comes from misinformation—and the good news is, that’s easy to fix. Now that you know the truth behind these common myths, you’re already ahead of the game.

A little planning, a few good habits, and staying curious can make tax time a lot smoother. So next time someone says, “Don’t worry, it’s under $600,” you’ll know better—and you’ll be able to help them too.

Remember: it’s not about being perfect—it’s about being informed.