Find out which tax urban legends are true and which are not: Internet ScamBusters #225
Since so many subscribers are currently focused on their taxes, today we'll reveal three tax time urban legends making the rounds. Can you spot which one is true?
In addition, we've gotten hundreds of questions from subscribers about the topic of copyright -- as well as hundreds of other inquiries that are filled with myths about copyright.
Most subscribers don't know what is OK... and what's not... when it comes to using other people's copyrighted information (text, audio, music, video, graphics, etc.) -- especially when the information is on the Internet.
So we'll answer these questions in this issue by pointing you to an excellent article called "10 Big Myths About Copyright Explained."
Let's check out today's topics...
Three Tax Time Urban Legends
Every year around tax time, myths, rumors, and urban legends pop up about deductions, avoiding audits, and even how to file. Does using the IRS preprinted label eliminate you from the random audit pool? Are you entitled to a tax credit? The list goes on...
Tax time is certainly stressful enough for most people without urban legends and rumors about what you can and cannot do. The following three urban legends related to tax season are currently very popular. Can you spot which one is true?
Tax Urban Legend #1: If you do not use the IRS preprinted label supplied with your tax form, you will escape the chances of being audited.
The emails going around say that label supplied by the IRS contains a special 'code.' By handwriting your address rather than using the preprinted label, you eliminate the code and therefore escape the automated pool of random audits.
Is this urban legend true? Of course not.
The label is simply a convenience. Use it or not, it won't eliminate you from being chosen for a random audit.
In fact, some people believe just the opposite: that you have a better chance of being audited if you do NOT use the label. We've seen no evidence for this counter-idea either, by the way.
Tax Time Urban Legend #2: There is a special one-time federal excise tax credit in 2006 which rebates overpayments on phone bills.
Can you really get a tax credit on your 2006 tax return for excise tax payments you made to the phone companies on your phone bills?
Yes, it is true!
The IRS lost a court case that required phone companies to charge you a 3% excise tax. Phone companies were required to stop charging this excise tax and the IRS is issuing a one-time refund in 2006.
Look for a detailed explanation from your tax preparer or on your tax forms.
Be sure that you don't request too large a credit though -- the IRS says it is carefully reviewing this item for abuse.
Tax Urban Legend #3: African American Tax Credit
Are African-Americans entitled to a slavery reparation tax credit of $5,000?
Here is a common example of the email that is circulating:
--- Begin urban legend email ---
This goes out to all my friends, family, and everyone in the African American community. Once you receive this message please write down the number and then pass it along to every African American you know.
As you my know, all African Americans living here in the United States are descendants of slavery, therefore our government has finally passed a bill to pay all descendants back. The way they are paying us back is through a refund called the, "Black Inheritance Tax Refund/40 Acres and a Mule". When you call this number you'll give them your name, address, and phone number and they'll send you out a packet, which includes further details and information on how to receive the refund.
I was informed that it will take only two weeks to receive the packet and then two weeks to receive the money. Now, if you know our government I bet they are not expecting a lot of people to call for this refund, and they may be right, because many of us will not be informed of this.
Therefore, this is why I am taking it upon myself to pass on this information, so our community will soon be informed through word-of-mouth about what has been owed to our ancestors all these years. Expect to wait anywhere from 5mins-25mins (There will not be any music to entertain you while you wait!)
Ps: You must be 18 years or older and I'm assuming a legal residence of the United States. So, request an application for yourself, husband, wife, sister, brother, father, mother, etc, or just pass the number along. [Phone number deleted]
--- End urban legend email ---
Is there really a slavery reparation tax credit?
No. Different versions of this email circulate every year: the amount of the credit and the text vary. Some versions say you call a specific phone number (like the example above). Others say you simply add a credit amount to a specific line of your 1040 form. However, they are all false.
So, only the second of these popular tax urban legends is true. And this article should not be taken as tax advice. 🙂
Copyright -- and Copyright Myths -- Explained
Several times a week we hear from subscribers who believe one of the 10 biggest myths about copyright.
This is a very important topic for all our subscribers -- because ignorance of the law is not an excuse. Plus, there are myths causing people to believe they cannot do things when, in fact, it is perfectly fine.
To answer all these questions, we recommend an excellent article by Brad Templeton called "10 Big Myths About Copyright Explained."
What is copyright? According to Brad Templeton, copyright is "basically the legal exclusive right of the author of a creative work to control the copying of that work."
We highly recommend you check out this copyright myths article now.
That's all for today -- we'll see you next week.