Top 10 Tax Urban Legends, Myths and Rumors.


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 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.


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.

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If I've come to the wrong place to get my question answered, I'm really sorry! Please let me know if you have any ideas if that is the case of another blog where I might get my question answered. Anyone who can answer would be great! My email is:

I'm trying to weave together a short story for a creative writing class, and need some banking information. In my book/novella, there is a woman who owned a business. The guy who she sold the business to is trying to pay things off, and gives her 100,000 to pay it off. She doesn't want to get him in trouble, so she accepts the money. She is selling a property and getting some sum of money, say 100,000 dollars. She's giving 4 ten thousand portions to family and friends, and depositing the rest. She plans on paying taxes on it, but for some reason she thinks she is going to get harassed by the government. She is therefore keeping the cash in a safe and depositing it 2500 dollars at a time in order to avoid harassment by the government (she's been depositing 2500 a month already). Couple of questions regarding tax/banking: how much could she deposit with no harassment? Could those 4 individuals deposit 10,000 without having any reprucussions? Or would they have to deposit in small increments to avoid harassment? Also, does one have to pay taxes on money given as a gift, say as a person who had received the 10K? She is trying to protect the guy from getting in is this a bad idea on her part? Methinks it is, or at least the plot of my story hopes so!

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GuestBob Henderson

Libertarians claim federal income tax payment is voluntary. Punishment for not paying is therefore un-Constitutional. Is there any truth to this?