Tax Refund Myths Debunked: What You Need to Know

27 May 2025

Tax season is here, and with it comes a flood of advice—some of which is completely wrong. You've probably heard friends or family say things like, "Getting a big tax refund means you're winning at life!" or "You don’t need to file if you didn’t make much money."

Well, it's time to set the record straight. In this article, we’ll debunk some of the most common tax refund myths so you can avoid costly mistakes and keep more of your hard-earned cash.

Myth #1: A Big Tax Refund Means You’re Doing Something Right

Many people celebrate a large tax refund like it's a bonus check from the government. But in reality, a big refund often means that too much money was taken out of your paycheck throughout the year.

Think about it this way: Would you willingly give someone an interest-free loan for months or even a year? Probably not. But when the IRS holds onto your overpaid taxes, that’s essentially what’s happening.

Instead of giving the government extra money upfront, consider adjusting your tax withholdings. This way, you’ll have more money in your paycheck throughout the year rather than waiting for a lump sum in April.

Myth #2: You Don’t Need to File Taxes if You Didn't Earn Much Income

Sure, if you didn’t make much money, it’s possible that you won't owe any taxes—but that doesn’t mean you shouldn’t file. In fact, you might be leaving free money on the table.

Many low-income earners qualify for tax credits like the Earned Income Tax Credit (EITC) or the Child Tax Credit. If you don’t file, you won’t get those refunds, even if you’re entitled to them.

So, even if your income was low, it’s worth filing just to see if you can get some money back.

Myth #3: Filing Early Increases Your Chances of an Audit

Some people hesitate to file their taxes early because they think it will put them on the IRS’s radar. But the truth is, filing early has absolutely nothing to do with your chances of getting audited.

What actually increases your audit risk? Things like failing to report all your income, making math errors, claiming questionable deductions, or having a large number of business expenses that don’t align with your income level.

If you’ve filed your return honestly and kept good records, you have nothing to worry about—no matter when you file.

Myth #4: Getting a Tax Refund Means You Didn’t Pay Taxes

This is a big one. Some people think that getting a refund means they somehow skipped out on paying taxes. But that’s not how it works.

Your tax refund is simply the difference between what you paid throughout the year (via paycheck withholdings) and what you actually owed. If you overpaid, you get a refund. If you underpaid, you owe money.

At the end of the day, everyone with taxable income pays taxes—it’s just a matter of whether you sent in too much or not enough throughout the year.

Myth #5: Side Hustles and Gig Work Don’t Impact Your Tax Refund

If you’re making money through side gigs like freelancing, ride-sharing, or selling online, don’t assume your tax situation is the same as when you were just a W-2 employee.

Unlike traditional jobs where taxes are automatically withheld from your paycheck, gig workers are responsible for setting aside and paying their own taxes. If you forgot to do that, you might be in for an unpleasant surprise when tax time rolls around.

The IRS expects you to make estimated tax payments throughout the year if you’re self-employed or earning extra income. If you don’t, you could owe penalties in addition to any taxes due.

Myth #6: Dependents Can’t File a Tax Return

Just because someone is claimed as a dependent on another person’s tax return doesn’t mean they can’t file their own return. In fact, if they had a job, it might be beneficial for them to file.

Dependents who had taxes withheld from their paychecks may be able to get a refund if they file their own tax return. Plus, some credits and deductions are available even if someone else claims them as a dependent.

Myth #7: The IRS Will Contact You by Phone if There’s an Issue

This is one of the most dangerous myths out there. If you get a call from someone claiming to be from the IRS and demanding immediate payment, hang up—it’s a scam.

The IRS never calls taxpayers out of the blue to demand payments over the phone. They will always contact you via mail first. If someone is threatening you with jail time or insisting on immediate payment via gift cards or wire transfers, it’s a fraudster trying to steal your money.

Myth #8: You Can’t Claim Deductions If You Take the Standard Deduction

Many taxpayers believe that if they take the standard deduction, they can’t claim any other deductions. That’s not entirely true.

While you can’t itemize deductions and take the standard deduction, there are certain “above-the-line” deductions you can still claim, like:

- Student loan interest
- Educator expenses (for teachers)
- IRA contributions
- Self-employment retirement contributions

So, even if you’re not itemizing, don’t assume you’re out of options for reducing your taxable income.

Myth #9: Amending a Tax Return Will Get You Audited

Nobody enjoys fixing mistakes, but if you realize you made an error on your tax return, don’t let the fear of an audit stop you from correcting it.

Amended returns don’t automatically trigger audits. The IRS understands that mistakes happen, so they allow taxpayers to file Form 1040-X to make corrections.

Now, if your amended return suddenly includes questionable deductions or drastically changes your income, that might raise a red flag. But if you’re simply correcting an honest mistake, there’s nothing to worry about.

Myth #10: Your Refund Status Updates in Real-Time

If you’re constantly checking the IRS’s "Where’s My Refund?" tool, hoping for minute-by-minute updates, you’re in for disappointment.

The IRS updates refund statuses once a day, usually overnight. Clicking “refresh” every few minutes isn’t going to speed up your refund (even though we’ve all been guilty of trying).

However, if it’s been more than 21 days and you still haven’t received your refund, you may want to check for potential issues or delays.

Final Thoughts

There’s a lot of misinformation floating around when it comes to tax refunds, and believing these myths can lead to costly mistakes. Hopefully, this article has helped clear up some of the biggest misconceptions so you can make smarter tax decisions.

Remember, taxes don’t have to be complicated—just take it step by step, and when in doubt, consult a tax professional to make sure you’re on the right track.