As another tax filing season nears, taxpayers may not understand several important aspects of their tax returns. Following are some very common tax "myths," cited by the National Association of Enrolled Agents (NAEA).

Enrolled Agents are the only tax specialists licensed by the federal government to represent taxpayers before all levels of the IRS. Many also prepare tax returns, provide financial planning, accounting and other financial services for their individual and small business clients.

Tax Myth #1: I can't afford to pay any taxes by April 15 - so I'll just file for an extension.

Fact: A taxpayer can obtain an automatic, four-month extension for submitting Form 1040 by filing Form 4868 instead. Payment of any estimated tax due is not required with Form 4868 - but a reasonable estimate of the balance due must be provided. If you understate the estimated tax due, the IRS can invalidate the extension-and assess late filing fees.

Tax Myth #2: I have a non-IRA mutual fund account, so I don't have to report switching from one fund to another if it's within the same company's "family" of funds.

Fact: Sponsors offering several different funds may make it easy to switch from one fund to another, often at no cost. Since a shift between funds - even within the same family of funds - results in a reportable capital gain or loss on your tax return, fund-switching must be reported.

Tax Myth #3: I'm not required to report any tax-exempt interest to the IRS. Fact: The IRS requires you to report tax exempt interest - because:

• Tax-exempt income is one factor which determines the amount, if any, of Social Security benefits includable in your gross income;
• Tax-exempt income reveals if you may be deducting expenses incurred to purchase or carry tax-exempt obligations-which is not allowed;
• Tax-exempt income tells the IRS that there may be an Alternative Minimum Tax (AMT) liability if you have tax-exempt "private activity bonds"; and
• Tax-exempt income assists the IRS in selecting returns for possible audits.

Tax Myth #4: Educational expenses are always deductible on my tax return. Fact: To be tax-deductible, the education must be expressly required by your employer, by law, or by government regulation - or the course(s) must maintain or improve your skills in performing your current job. Even if these required standards are met, you can't deduct the cost of education to:

• help return to a job, business or profession;
• meet the minimal requirements for a trade or business; or
• qualify for a new job, trade or business.

There is a new "Lifetime Learning Credit" which may be of help.

Tax Myth #5: If I use the return label the IRS provides, I will be more likely to be audited. Fact: Using the peel-off IRS label puts a tax return into a "routine processing" mode, rather than singling it out for special processing. Your return is no more likely to be audited.

Tax laws are subject to change at any time.

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