Taxing times
For many of us, tax time can be trying: Math. Deductions. Exemptions. Oh, and those dreaded—even if not probable—tax audits.
It can be especially challenging for millennials (born between 1982 and 2004), who may have newfound and relatively complex tax situations, including paying off student loans, working multiple side jobs and considering options to invest at a young age.
Millennials may be marked by their confidence on many levels, but a new survey by Harris Poll, one of the longest running surveys measuring public opinion in the U.S., reveals one thing millennials aren’t so sure about: filing taxes.
An online survey of more than 1,600 U.S. adults found that 80 percent of taxpayers ages 18-34 who filed taxes last year and plan to file this year say they’re fearful about some aspect of preparing their taxes. That’s the highest of any age group. The average among all age groups was 69 percent.
“There’s a lot of confusion about new tax laws and how it will affect us all—millennials especially,” says David Myers of Liberty Tax Service in Post Falls.
Sharita Hutton Cole, communications manager for H&R Block in Post Falls, said education benefits can save parents as much as $2,500 and are commonly overlooked.
“So many of these benefits are not taken advantage of because of their complexity,” she says. “Depending on the kind of academic program, what year the student is in, income and other factors, a student may qualify for several different tax benefits,” she adds. “So, it’s important to choose the one that maximizes tax savings.”
Among those benefits:
The Lifetime Learning Credit: up to $2,000 for taxpayers who pay education expenses, such as tuition and fees, for themselves, their spouses or their dependents.
The American Opportunity Credit: up to $2,500 for taxpayers who pay tuition and fees and purchase course materials for themselves, their spouses or their dependents.
However, a taxpayer cannot claim both the Lifetime Learning and the American Opportunity credits for the same student in the same year. So taxpayers will need to study up on which credit better suits their specific situation, Johnson says.
“Taxpayers should keep their accurate records of tuition and expenses so they can claim all the benefits they’re entitled to,” she adds.
Here are just a few of the tax worries—and tips—for young tax filers:
1. Don’t miss the tax deadline: The most important part of filing your taxes is doing it by the deadline. The IRS doesn’t mind if you need more time or you don’t have the funds to pay the entire tax bill right now, but you must take the proper steps to alert them—file an extension if necessary.
2. Choose the right tax software: If your tax situation is fairly simple, you may feel comfortable filing your own taxes using a tax software program. There are many reputable programs available, so shop around to find a good deal.
3. Write off side expenses: Sure, you know how to file taxes for the income from your day job. But if you also earn money through a side job, you may have extra considerations.
4. Maximize education tax savings: If you have student loans, you could save money come tax time. Nearly all education costs, whether it’s interest paid on your student loans or additional classes you’ve taken for continuing education requirements, most are tax deductible.
5. Inquire about the savers’ credit: The longer you wait to start saving for retirement, the less time compound interest will have to work on your behalf.
6. Deduct job-hunting costs: Did you know that you can deduct any costs related to hunting for a new job? It’s true. If the new job is in your current career field, you can claim this tax deduction.
7. Block off time to file: Scheduling time to actually file your taxes is one of the most important tax tips. Block out time in your calendar to work on your taxes so you don’t have to rush through the process.
8. Double check your calculations: Even the smallest calculation errors can prove to be big mistakes when it comes to your taxes. Take time to double check your work
“Tax reform legislation will impact virtually all taxpayers,” Johnson says. The new law goes into effect for 2018, which means you could see a change to your paycheck as early as February.”
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Sources
“8 crucial tax tips for millennials” USA Today, goo.gl/X8xWYq
“Survey: Millennials fear tax season more than other age groups do” USA Today, goo.gl/J5jgdn
“Millennials Fear Filing Taxes More Than Most Americans, NerdWallet Survey Finds” NerdWallet, goo.gl/Fokjp3