Top 10 Tax Urban Legends, Myths and Rumors.

Paul Michael — Mon, 16 Apr 2007 22:51:36 +0000

Hey, it's tax time again. If you've already looked at my other post on weird tax deductions , you'll know I like looking at the lighter side of taxation. Let's face it, at this time of year, who doesn't?

So I thought it would be fun to pop along to the Snopes.com website and check out their top 10 tax legends (it's a tricky search, I had to weed out stories not directly related to the IRS). But, what are the big myths, rumors and complete BS stories surroungding this oh-so-special time of the year? Well, here are the results.

I give you a brief synopsis, the outcome (True, False, other) and a link through to the actual legend itself. I think there are some very interesting rumors circulating out there. Not surprisingly, most are false. But hope is such a wonderful thing.

TOP 10 TAX URBAN LEGENDS.

1: Special one-time federal excise tax credit in 2006 rebates tax overpayment on phone bills.
TRUE - In May 2006, the IRS said it would no longer collect a special 3% tax levied on phone bills (a tax on the rich first imposed in 1898)

2: African-Americans are entitled to a $5,000 slavery reparation tax credit.
FALSE - A fake letter started circulating in 2000 about a reparation tax credit. In 2002, the IRS supposedly had 100,000 returns seeking the credit.

3: The U.S. government grants seven-year tax holidays to immigrants.
FALSE - Stories like this date back to the 1960s - often beefing up the story with language about "poor American kids starving." It's bogus.

4: The preprinted label on your income tax form return increases your chances of being audited.
FALSE - Don't use the label, you slip through the tax net? Seems silly, but many people think the coding on the label is 'dangerous.' It's not.

5: Nancy Pelosi to implement a 100% tax on stock market windfall profits.
FALSE - No-one knows where it started, but it's an obvious parody of extreme Democratic stereotypes. Lighten up, stockbrokers.

6: Several million dependents disappeared from income tax returns in 1987.
TRUE - They didn't disappear. They just didn't exist in the first place. Once the government asked for SSNs of dependents, guess what happened.

7: The presence of certain symbols on a variety of food products indicates a secret tax has been paid to Jews.
FALSE - A conspiracy theory circulated to increase paranoia about big business being in league with the Jews. Once again, 100% untrue.

8: New Senate bill requires ALL gun owners list their guns on federal income tax returns.
SORT OF - The Handgun Safety & Registration Act would be the imposition of a $50 tax on handguns. It's a complex issue, click on the link.

9: An angry taxpayer threatened to turn over the raising of his kids to the IRS.
TRUE - The tale has been circulating since 1990, attributed to a Mr. Bob Mullen. His three children are now grown.

10: Congressmen are exempt from paying into Social Security.
FALSE - As much as you have against politicians, they still have to pay their taxes, including the Social Security Tax.

So, there you have it. If you know of any other tax myths and legends, do tell. I love a good shaggy dog story. And if you're in the mood for more tax stories, Will has two great posts that will either save you money , or save your sanity.

This article is from Paul Michael of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread: