If you’re like most people, you’re required to file a federal tax return each year. For many, this annual process is a standard — albeit tedious — chore. But if you’ve been hiding a big secret, your tax forms could turn your life upside down.
The Complete Guide: What Can I Write Off On My Taxes?
More than just standard financial paperwork, these highly personal forms contain telling facts about your life. Key details, including your marital status, tax bracket and annual earnings, are noted on your tax forms.
“In my 15 years of experience, I’ve learned some crazy things about clients that they wish to keep confidential,” said Josh Zimmelman, owner and president of Westwood Tax & Consulting, a New York-based accounting firm with offices in Manhattan and Long Island. “However, when filing taxes with Uncle Sam, these secrets often come out into the open.”
Read More: What Are the 2020-2021 Federal Tax Brackets and Tax Rates?
With any luck, the only stress you’ll endure this tax season is deciding how to spend your giant refund. But if you’ve been living a lie, you might not be so fortunate. If you’re hiding anything, you might want to come clean and spill thesesecrets that will show up on your tax forms.
Last updated: April 29, 2021
You Have Children From a Past Relationship — or Affair
“Children don’t need to live with you full time to qualify as dependents, and even non-custodial parents can claim them if it’s part of your separation or divorce agreement,” said Zimmelman. “So, it’s possible to hide the fact that you’re a parent from your current significant other. This could especially cause a problem if those kids weren’t from a past relationship and instead are the result of an infidelity during your current relationship.”It might be relatively easy to hide children from a significant other when you share custody with the other parent, but tax forms don’t lie. If you’re claiming a child that’s under 19 years old — or under 24 if they’re full-time students — as a dependent, this information will appear on your tax return, said Zimmelman.If your children are under age 17 and you meet certain requirements, you’re eligible for a sizable tax credit. You definitely don’t want to pass it up — especially if you want tosave money on your taxes— but it will appear on your Form 1040 or Form 1040A.Discover: See the Full List of Money’s Most Influential and More
You Were — or Still Are — Married
“If you’re still married, this information would be on your tax return — even if you’re separated and even if you and your spouse aren’t filing jointly,” said Zimmelman. “If you’re legally divorced but pay or receive alimony, this would also appear on your tax return.”Even if you’re “single” now, but your divorce wasn’t finalized before the end of the tax year, you still must file as married. You can opt to file separately from your former spouse, but your tax forms will confirm you were married last year.“This could affect your current relationship if you’d hidden the fact that you were — or still are — married,” said Zimmelman. “Whether you’re cheating on your spouse or just haven’t legally finalized your divorce, anyone you’re dating deserves to know if you’re married. Even if your divorce is final, your significant other would probably be upset to learn that you were married before and didn’t tell them.”Related: 15 Secrets You Should Never Keep From Your Accountant
You Lost Your Job
The income you earned last year is the central focus of your tax forms. So, if your spouse catches a glimpse of them, you’re busted.“Since all your income would appear on your tax returns, if you no longer have a job or are receiving unemployment benefits, this would all be apparent from your return,” said Zimmelman. “You might have hidden your job loss out of embarrassment or shame, but you can’t hide it from the IRS.”If the earnings on your W-2 are notably less than expected, it will be clear you haven’t been honest. Even if you’ve been secretly holding a part-time job to make ends meet, you’re going to have to explain why you’ve received a W-2 from a company you supposedly don’t work at. And the game you’ve been playing is over.“If you’ve kept this a secret from your spouse or significant other, it could seriously hurt your relationship,” said Zimmelman. “One ofthe biggest causes of relationship problemsis lack of honest and open communication, especially when it comes to finances.”
You Have a Secret Stash of Money
If you think your secret stash of cash is exempt from the rules, it’s not.“You might be able to hide your money from a significant other, but you can’t hide it from the IRS,” said Zimmelman. “Not all of your U.S. bank accounts will be indicated on your return — unless you’ve earned interest on them during the year. But if your significant other notices that your income statements show you made more money than you actually have on hand, they might get suspicious about where the rest of it went.”Any offshore bank accounts, investments and trusts you have must be reported on your tax forms as well, said Vincenzo Villamena, founder and CEO of CPA firm Online Taxman.“Foreign bank accounts are noted in (a) few places on the tax return, particularly in Schedule B for interest and dividends — even if you did not receive an income from these accounts — as well as the FBAR and Form 8938,” he said.Learn:Common Mistakes People Make When Filing Their Own Taxes
You Got a Raise and Kept It a Secret
Whether you got a promotion or salary increase, it’s always exciting to find a little extra padding in your paycheck. The right thing to do is immediately tell your spouse about your raise. But maybe you opted to keep it under wraps.The thing is, your earnings are the central focus of your income taxes, so your secret is about to be revealed. The amount of money you earned last year will be clearly stated on your W-2 — including bonuses and commissions — and you’ll need to input this on your Form 1040, Form 1040A or Form 1040EZ.Don’t expect your partner to be happy when they realize you earned extra cash and kept it from them. Even if your family already has plenty of money, this is indicative of a larger problem. Sit your spouse down and spill the beans before they see your tax forms and do the math themselves. Receiving a sincere explanation from you might soften the blow of the news.
You Haven’t Been Honest With the Public
Taxes are private business for most people, but your finances could potentially become an open book if you’re a politician running for office. If you haven’t been playing by the rules, your tax forms could expose many secrets that wouldn’t impress constituents. For example, NPR notes three reasons voters care about politicians’ taxes: potential conflicts of interest, charitable donations and to gauge total net worth.All sources of income must be listed on Form 1040 — or whichever version you use — blatantly revealing how you earned your money. This could highlight a potential conflict of interest, causing voters to question your priorities.People typically want to vote for a politician who truly cares about charitable causes. If you’ve embellished your financial support of certain organizations, this could come to light through your tax forms. You can deduct charitable donations to charity by itemizing them on Form 1040, Schedule A. Opting to skip this step is a clear indicator you haven’t been truthful to voters.More From GOBankingRatesMoney’s Most Influential: Where Do Americans Get Their Financial Advice?
Don’t Miss Out on Nominating Your Favorite Small Business To Be Featured on GOBankingRates — Ends May 31
‘Rich Dad Poor Dad’ Author Robert Kiyosaki: You Should Never Say ‘I Can’t Afford That’
Everything You Need To Know About Taxes This Year
This article originally appeared on GOBankingRates.com: Secrets on Your Tax Forms That Could Ruin You
Source: Read Full Article
