[Millennial Money Tips] Reduce Your Worry When Tax Filing
Editor’s Note: This is the first post of a new series about managing your finances as a young adult. Tune back to Block Talk for upcoming posts on money management tips for young adults — from credit card management to taxes.
Are you between the ages of 18 and 34? Do you fear the IRS?
While this seems like a blanket statement — you are not alone. A survey conducted by NerdWallet found young adults today are more afraid of filing their taxes than any other generation. In fact, 80% of millennials are concerned about making a mistake, not getting a full refund or paying too much; compared to 60% of adults ages 55 and older.
As a millennial myself, I remember getting out of college and fearing adulthood: managing a full-time job, owning a car, paying for utilities and rent, and still finding time to have fun. Beyond that, I thought “I have to file taxes every year? How do I even do that?”
I know there are a lot of people like me still out there today. Being thrown into the real world with no real resources to point you in the right direction is scary.
Alas, you don’t have to be afraid of taxes… Here are some tax tips to help reduce your worry and maximize your potential payout:
1. Get informed by the right people.
In the same NerdWallet study, they revealed that about a third of millennial taxpayers turn to friends or family with questions instead of tax professionals. But when we turn to friends and family, how reliable is their input? While some of us might have accounting professional moms or dads, it really is important to get the right information, from the right source. You do not have to be a tax expert, just find the right resources. Here are a few:
- The IRS. (They are on Facebook, Twitter, and YouTube, too.)
- H&R Block – Block Talk
- The Tax Institute
- A tax professional
2. You need to file taxes every year. But, you can do it online.
The NerdWallet study found that the most popular method of filing taxes last year across all ages groups was online tax software programs like H&R Block: 36% of millennial taxpayers used this method.
Young taxpayers were more likely than any other age group to file a paper return: 17% of younger taxpayers sent their returns in the mail, compared with 8% among taxpayers ages 35 and older. It doesn’t hurt to save the postage and file online… just sayin’.
3. Life events impact your tax situation.
Getting married, buying a house, getting a new car, moving, job hunting, paying off student loans — all of these life events could impact your tax situation each year. So, during tax time take an inventory of the new things happening in your life. Then, as you file your taxes make sure to take each of the life events into consideration.
The more life events you go through, the more complicated your tax return will be… But that could equate to more deductions!
4. Relax, you do not need to be a tax expert.
Taxes can be complicated: you are not alone if your eyes glaze over after reviewing tax forms. Thankfully, there are tax professionals available who can help translate complex tax forms and find a favorable tax outcome. Lean on people who live and breathe taxes, so you don’t have to understand the ins and outs of every tax code.
How does college financial aid affect your tax return? Learn how to report different types of financial aid and get tax answers at H&R Block.
Have you ever thought about investing in a Cayman Islands tax haven? Before opening an account, or making adjustments to an already existing account, review these tax tips.
Lucky for you there are a number of education tax credits (and deductions). Learn about the American Opportunity Credit and Lifetime Learning Credit here.
Learn more about the state of legal residency for active duty members with help from the tax expert at H&R Block.