Tax Rumors, Policies, and Facts
Before being signed into law, changes to the tax code are just rumors and ideas. Once or if they are signed as part of a bill, they become fact and thus will affect your current, future, and even past income tax returns. Below, we have compiled a list of present and past tax rumors, many of which were made part of the tax code as well as some interesting situations to read about. For current, factual tax changes, see our page of tax news plus annual tax law changes.
Various Tax Rumors, Current and Past
Before the IRS releases an official statement, eFile.com will not state tax rumors or ideas as fact to reduce inaccurate news reporting or fake news. We want to keep taxpayers as informed as possible, but rumors are a helpful way to be ahead of tax news and get an idea of the future or your tax situation and how it may be changed. Stay informed on how the IRS may contact you, learn about rumors on tax extensions and whether or not one is really needed, and see what kind of childcare expenses are tax deductible in different years.
What are taxes on unrealized gains and how are they changing?
Unrealized capital gains or losses are the amounts which you earn or lose on a property, stock, or other asset that have not yet been sold. For example, you may have unrealized gains if you are holding onto a stock which has been growing steadily over a year, but you have not yet sold it. In theory, when you sell this stock, you will have a capital gain, but until it is sold, it is just hypothetical income you could receive. There are proposals to assess taxes on unrealized gains on wealthier taxpayers beginning in 2026, but nothing has been signed into law. This could potentially result in a tax rate of up to 44.6% for wealthy Americans with income over $1 million annually, composed of the proposed highest tax bracket of 39.6% plus a 5% tax for the Net Investment Income Tax (NIIT).
Will there be a First Time Homebuyer Credit?
With the rising housing market, talks have been had about providing families, newly weds, single parents, and singles with a tax credit towards buying their first home. The credit could come in the form of a lump sum towards their home or potentially through monthly payments, up to $10,000 in total or $400 per month over two years. There is also an incentive for middle-class families who sell their home to provide more options for first-time buyers. Keep up with the homebuyer tax credit updates if anything is passed.
Is the Child Tax Credit getting enhanced for 2024?
The IRS increased the Child Tax Credit and made it fully refundable for 2021 only. Since then, rumors circulate each year as bills are drafted to bring this back to some extent, but nothing has been signed into law since.
In early 2024, there were talks of providing an additional portion of the Child Tax Credit but nothing has been finalized for this. Keep up with CTC news for updates on this.
Is the Child Tax Credit always refundable?
The Child Tax Credit or CTC has been a part of the U.S. Tax Code for multiple decades. For 2021 returns, the enhanced CTC provided an increased amount as well as payments made in advance during the year, however the CTC was reverted back to original amounts for 2022 returns and beyond. The CTC can be refundable and for you to claim it, you will need earned income. Keep up with tax news to see any current changes by U.S. Congress.
Is the IRS Monitoring Bank Accounts and Transactions of $600 or More?
The Biden Administration announced planned to allow the IRS to monitor larger transactions between private parties, businesses, and third parties. This was widely received negatively, but was not entirely been struck down. As of tax year 2023, nothing has been put into effect. The IRS set a requirement of users of third-party applications, such as Venmo and PayPal, to report transactions of $600 or more for goods and services only. This means that personal transactions, such as rent or reimbursement, will not be subject to this change. This, however, was postponed until further notice and does not affect this year's tax return. Generally, the platforms were only required to issue a 1099-K if their income on the app was more than $20,000 or if their account had 200 or more transactions in one year. This change is separate from the IRS bank monitoring proposal, currently set at a threshold of $10,000.
Will There Be a Fourth Stimulus Check?
There were rumors of a fourth stimulus check, but nothing was ever confirmed. Members of congress has expressed their support for this as have American citizens; it was rumored that it may have been included in a new stimulus bill, such as the American Families Plan, American Jobs Plan, or Build Back Better program. However, it was all part of discussion only and was not drafted into a bill. Many taxpayers learned about the government "Plus Up" payments and many news outlets reported this as the fourth stimulus payment, but this was not the case. The Plus Up payments were adjustments of the third stimulus payment for taxpayers who received less than what they were entitled to. See the potential fourth stimulus package page for updates on this information.
Is President Biden Raising My Taxes?
With the many changing tax credits under the new presidency, taxes in general have been a popular topic. There are rumors that taxes will be raised on Americans, but these are currently not part of any bill. It is rumored that there will be increased corporate taxes, increased taxes on capital gains, and higher taxes on the wealthy. It is also worth noting that the Biden administration has expressed intent to undo Trump's Tax Cuts and Jobs Act of 2018 which raised the Standard Deduction significantly and did away with many miscellaneous deductions.
Fact or Fiction? The IRS has Suspended Use of the IRS e-file PIN to e-file your Tax Return
This is a fact. The IRS is no longer giving the option to obtain online and enter IRS eFile PINs to e-file tax returns. You will need to enter your prior-year Adjusted Gross Income, or AGI, to verify your identity with the IRS. If you do not know your AGI from last year and you do not have a copy of your last year's return, you can get the information online or get a transcript of your prior year return from the IRS. Additionally, taxpayers can acquire an IRS IP-PIN in order to enhance the security of e-filing. On eFile.com, you can enter both of these when you file online - see how eFile.com ensures safe and secure e-filing.
Real or Scam - Gone Phishing: Is the Call or Email You Received Really From the IRS?
The phone call or email is a scam. Many people have reported receiving phone calls from the IRS Fraud Division. The caller typically asks for personal information, or tells the victim that they have to send money to the IRS and provides an address. The IRS will only contact you by mail! See information on fake IRS phishing scams.
The IRS has reported that the scam has targeted many recent immigrants, but that other people are at risk for it as well. The callers provide fake IRS identification badge numbers and alter caller ID screen displays to make it appear they are from the IRS. Victims are told they owe money to the IRS and it must be paid promptly through a pre-loaded debit card or wire transfer. If the victim refuses to cooperate, they are then threatened with arrest, deportation, or suspension of a business or driver’s license. In many cases, the caller becomes hostile and insulting. Victims may also be told they have a refund due to try and trick them into sharing private information.
The IRS notes that there are a few easy ways to tell when someone is impersonating the IRS:
- The IRS never calls you initially; you will receive a notice via certified mail first.
- The IRS never demands immediate payment and all tax bills are mailed.
- Taxpayers always have the right to question or appeal the amount you owe.
- The IRS never requires specific payment methods like a prepaid debit card.
- The IRS never asks for credit card or debit card numbers over the phone.
- The IRS will never threaten to call local police or law enforcement groups to arrest you for not paying.
Be very wary if you are contacted this way and report any phone calls or emails such as these to the IRS directly.
Some tax scams involve convincing people to make fraudulent, or "frivolous", tax claims. Find out our top 5 frivolous arguments against income taxes.
Is the IRS Slipping on Tax Collections?
According to a recent report from IRS auditor Treasury Inspector General for Tax Administration (TIGTA), that may be the case. The report states that 57% of the time, IRS workers do not follow all the necessary procedures to collect unpaid taxes worth $6.7 billion (such as tracing mailing addresses, motor vehicles, and court records). The TIGTA also added that required Notices of Federal Tax Lien were not sent to taxpayers 7% of the time. The IRS responded to the report saying they were not able to collect the taxes because it couldn't find the taxpayers to verify any records to complete the procedures and send notices to them. Therefore, you may be part of the 43% exception group if you received an IRS notice about your back taxes.
Tax Audits Are Up for Upper Income Groups
If your income is above $10 million, you are more likely to be audited. Statistics shows that tax audits for higher income earners has increased in recent years. In other words, one in five of America's wealthiest households (or 18.5%) get audited every year. More tax audit statistics.
Have You Heard about the Famous Tax Evader Who...?
It is amazing what some rich and famous tax evaders thought they could get away with. For example, a professional race car driver blamed his failure to pay $80 million in taxes on an old brain injury. Read about him and other famous tax cheaters and tax evaders.
Did you receive a notice or audit from the IRS? Don't panic! Review our IRS Tax Notice, Tax Return Audit, and Audit Appeals guide for step-by-step instructions on what to do about it!
IRS Paid Whistle-Blower $104 Million
Usually, crimes don't pay. However, for a former banker serving two and a half years in prison for tax evasion, it did. The IRS paid Bradley C. Birkenfeld a $104 million reward for disclosing information on the Swiss banking system, known to be a secret tax haven for Americans. This allowed the U.S. Treasury to collect unpaid taxes worth billions of dollars.
See related tax evasion stories.
Disaster Victims Still Have Time to file
When a natural disaster occurs in a certain part of the country, rumors start to come into play that they will receive an extension of time to file. Generally, the IRS does apply these extensions for those affected. Did you miss the extended tax deadline due to one of this season's natural disasters? If so, don't worry. Tax extension filers who live in federally declared disaster areas may have extra time to file each year. Real deadline changes will be posted on our disaster area information page.
How Do You Deduct Disaster Losses?
If your property was damaged by a natural disaster, such as a hurricane, you may be able to deduct disaster losses that exceed 10% of your AGI. Your loss may qualify if the amount is greater than $100.
To claim disaster losses, you need to itemize deductions and file Form 4684, Casualties and Thefts. You can prepare and eFileIT with your tax return on eFile.com.
Find out more about extended tax deadlines for disaster victims.
Do I need to file a Tax Extension? Fact or Faction: You Can Only e-file until Tax Day
Extension filers: e-file or file by October 15 of a given tax year even if you can't pay
As confirmed by the IRS, you have until October 15 following a given tax year to e-file your tax return. The common misconception is that, regardless of if you owe taxes or are owed a tax refund, you need to file by Tax Day, April 15, or you will be penalized. This is not necessarily the case, however, it is highly encouraged. We at eFile.com have simplified this on our tax extensions page, but here is an easy way to look at it:
- I owe taxes: if you do not file by April 15, you will face tax penalties. If you file an extension, your late filing penalty will be reduced or eliminated, but you will accrue late payment penalties if you do not pay your due tax.
- I am owed a refund: if you do not file by April 15, you will not face penalties since the IRS owes you. You can e-file until October 15, but why wait? Your hard-earned money is waiting for you! After October, you can no longer e-file, but can file through the mail with only three years to claim your tax refund.
If you can't afford to pay your tax bill by Tax Day - usually April 15 following a given tax year - don't let that stop you from filing your return by October 15 if you filed an extension! Why? Because the IRS penalty for filing late is literally 10 times worse than the penalty for paying your taxes late.
Find out the details of IRS penalties for not filing and not paying and remember that electronic filing or e-filing is faster and more reliable than paper filing.
Paying for After-School Child Care?
Now that the kids have gone back to school, your child care situation may have changed. Be sure to keep track of your after-school care expenses - up to 35% of these expenses may be covered by the Child and Dependent Care Tax Credit.
Deduct Summer Camp Expenses
Did you know that the cost of sending your child to day camp during the summer may be deductible? You may be able to count summer camp expenses toward the Child and Dependent Care Credit.
See other great summertime tax tips.
Texas Strip Club "Pole Tax" Upheld
Texas strip club owners were fighting the "pole tax", saying it violated their first amendment rights. However, the Texas Supreme Court has upheld the state's Sexually Oriented Business Fee Act, which imposes a $5 per patron tax on any establishment featuring nudity and alcohol. Learn about other strange taxes from the U.S. and from around the world.
Do You Pay Sales Tax Online?
One reason a lot of people enjoy shopping online is because they usually don't have to pay state sales taxes. Well, in 7 states, you might have to pay sales taxes for online purchases, depending on where the vendor or certain of its assets is physically located. Those states are Arkansas, California, Connecticut, Illinois, New York, North Carolina, and Rhode Island. The bill called the "Main Street Fairness Act" was voted into law by Congress, but expired without being enacted. The bill made it so that all online purchases may become subject to state sales taxes. With an estimated $24 billion in lost revenue at stake, this was an important issue for all states. Currently, if you make a purchase online from a state with sales tax, you will generally see this calculated when you checkout online.
August Sales Tax Holidays
Are there tax free weekends or tax holidays?
In order to stimulate sluggish summer commerce, many states have sales tax holidays in August on certain goods. Generally, these take place in August, but some are during different part of the year. Does your state support a sales tax holiday period? Most state websites have this information - see our state tax page and find your state to find out! On their site, search for "sales tax holiday" and find information for the current tax year.
More Relief for Innocent Spouses
An "innocent spouse," in tax terms, is one who is not responsible for their spouse's or ex-spouse's tax debts from a previously filed joint return. There was a 2-year limit on all requests for innocent spouse relief, even if your spouse had lied to you or had been abusive, but the IRS has lifted the limit for new and pending "equitable relief requests."
Learn more about innocent spouse relief. Include this form when you prepare your tax return on eFile.com.
What's the Weirdest Tax Deduction You Ever Heard of?
Pet moving expenses? Clarinet lessons? The cost of beer? Find out about these and other unusual but legitimate tax deductions.
Have You Seen the President's Tax Return?
Have you ever wondered what the President's tax return looks like? Since Nixon, the income tax return of the President of the United States has traditionally been made public knowledge. View the Presidents' Tax Returns and historic tax return forms.
Derek Jeter's 3,000th Hit Baseball - Taxable Income or Gift?
The fan who caught the 3,000th baseball hit by Derek Jeter returned the historic (and instantly valuable) ball to the Yankees, but he was given a collection of memorabilia and some front-row tickets in return. The IRS may expect the fan to pay income taxes on the fair market value of the items he received, but some tax experts believe that the items he received should be considered non-taxable gifts.
Follow-Up: A Baseball Fan's Taxes
The goodwill of the fan who caught and returned Derek Jeter's 3,000th hit baseball was recognized again. Since the Yankees gave him memorabilia worth over $150,000, other companies have come forward to pile on the gifts. Modell's and Steiner Sports have both stepped up to the plate with cash rewards, and Miller High Life has offered to pay the fan's taxes on all of the great stuff he has been given. Though some still believe that the fan's rewards should not be subject to income taxes, only to gift taxes.
One Billion e-filed Tax Returns
June of 2011 marked the milestone of one billion federal tax returns filed electronically since the IRS e-file program was launched in 1986. As of June, 2011, almost 80% of all individual 2010 Tax Returns had been securely e-filed. From then, the amount of e-filed returns has consistently topped 110 million per year, increasing to 150 million in 2019.
Find out the latest e-file tax return and direct deposit statistics.
How Much We're All Working for the Government
Each year, there is a lesser known day called Tax Freedom Day®. On that day, Americans will have earned enough money to pay for their federal, state, and local tax obligations or enough money as a whole to pay the nation's tax burden. In other words, from the beginning of the year until a point, we are all just working for the government. This date typically falls in mid-April and is around 100 days of work from American taxpayers.
Average Federal Tax Refund for 2020 Tax Season: $2,741
According to the latest IRS data, the average taxpayer's Federal Tax Refund for the 2020 Tax Season was $2,741. What do most American taxpayers do with their tax refunds? According to a recent survey, 37% of taxpayers would spend their tax refunds; 31% would save some of their refund money; 19% would pay down debt; and a small percentage would put that money into their retirement accounts or their kid's or grandkid's college savings accounts. What would you do?
TIP: The average credit card interest rate is anywhere from 15-20%, so it may be a good idea for you to use your tax refund to pay off your credit card debt - you could realize a net gain of up to 20%. There is no tax advantage to holding this debt since credit card debt cannot be deducted on your tax return next year. Furthermore, paying it off would improve your credit score! Check your tax refund status.
Did You Live in the United Kingdom? You Might Qualify for a UK Tax Rebate
Every year, many US citizens live in the United Kingdom to work or to study. Many Americans travel on a temporary basis – on a short term visa, or to complete a university course - before returning home. If you worked or studied in the UK, you very well may have paid some income taxes while you were there. The good news is that when you return to the United States, you may be eligible for a tax rebate for the taxes you paid to the United Kingdom. Find out more details (and if you might qualify for) UK Tax Rebate.
Undelivered Tax Refund Checks Total $1.3 Billion for 2020
Every year, the IRS has thousands of refund checks returned to them because of incorrect mailing addresses. Additionally, they retain any tax refunds due if they go unclaimed by taxpayers. In 2020, for example, the IRS announced that around 1.3 million taxpayers were due a 2017 refund which had gone undelivered because the IRS had the wrong address on file or they simple did not file to claim it. The average amount of these refund checks was $865 for a total of over $1.3 billion which is not even including tax credits! The date to claim these refunds has passed and thus this money has gone to the U.S. Treasury instead of the taxpayers who were rightfully owed them. The IRS recommends using electronic filing and direct deposit to ensure the proper delivery of your tax refund money. Using e-file paired with direct deposit will also guarantee a faster refund.
Find out how to claim your undelivered tax refund check.
Tax Fact: Your Taxes and the Federal Government Debt
Did you know that the U.S. Government is rumored to be adding about $10 million more debt per hour? The total U.S. Government debt as of June 1, 2021: $28 trillion.
Tax Humor: "You don't pay taxes. They take taxes." -Chris Rock
Tax Rumor: No Payroll Tax Holiday for Employers?
The Payroll Tax Holiday is a tax deferral or suspension with the intention of providing temporary financially relief to taxpayers; specifically, to middle-class workers who remain employed and thus cannot claim unemployment benefits. This would give those taxpayers a break in the beginning of the year; specifically, this is from January 1 - April 1 of a year.
The Congressional Budget Office says a payroll tax holiday would be a more effective stimulus for the economy than a decrease in the income tax. If employers got a break on employment taxes, they would probably be more likely to start hiring again - and decreasing unemployment may be the only sure way to get the economy rolling again. However, a payroll tax holiday would temporarily increase the deficit and that is seen as political suicide.
New Federal Tax Lien Relief
The IRS has implemented an expedited process that will make it easier for financially distressed homeowners to avoid a federal tax lien that would block the refinancing of a mortgage or the sale of a home.
Learn more about tax liens on mortgages and federal tax lien relief.
Tax Consequences of Bankruptcy and Insolvency
This year has been financially brutal for many taxpayers. It is important to know the tax ramifications of bankruptcy or insolvency.
Learn more about bankruptcy and insolvency.
Mortgage Forgiveness Debt Relief Act
The IRS has reassured homeowners that although mortgage workouts and foreclosures can have tax consequences, special relief provisions can often reduce or eliminate the tax consequences for financially-strapped taxpayers who have lost their homes. If you find that you owe additional tax due to a home foreclosure or mortgage refinancing, you may request a payment agreement with the IRS. In some cases, eligible taxpayers may qualify to settle their debt for less than the full amount through an offer-in-compromise.
Learn more about canceled or forgiven debt and mortgage debt relief.
Report Foreign Income
The IRS and U.S. Treasury have released tax guidance for United States citizens and residents living and/or working abroad. To avoid any rumors or misconceptions, there are tax credits in place to reduce your tax burden so you do not pay tax on the same income twice. Report your foreign earned income on eFile.com and we will calculate this credit on your return.
Learn more about earning foreign income and paying foreign taxes.
Need a Copy of an old W-2?
If you are still working for the same employer, simply request the W-2 from them. If the W-2 is from a previous employer, you may call the IRS for forms forms or instructions at 1-800-829-3676. You will need to provide as much information as you have about the employer from whom you need the W-2 (even if they have gone out of business). In addition, you may want to call the Social Security Administration (SSA) at 1-800-772-1213 for help with obtaining wage information and other W-2 data.
Learn more about the W-2, wage and salary form.
Poker Tournament Winnings Must Be Reported to the IRS
Casinos and other sponsors of poker tournaments are generally required to report gambling winnings to the Internal Revenue Service. This requirement was designed to clear up confusion about the tax reporting rules that apply to poker tournaments. In recent years, some casinos and players have been confused over whether poker tournament sponsors who hold the money for participants in a poker tournament are required to report the winnings to the IRS and withhold tax on the winnings. Winners are also frequently confused about whether they have to pay taxes on their winnings and about how much they must report.
Learn more about reporting and paying taxes on gambling winnings.
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