As much that has been written – good and bad – about the next generation, the Millennials – the scary part is that they have to pay taxes. Why is this scary? First of all, many of them view “Google” as an all-knowing entity and thus, they tend to think in terms of a basic tax software and the actual filing process as one they can simply do at their leisure sometime before April 15 next year.
To be sure, plenty of the national tax houses have tried to earn the Millennial dollar and none have done it yet. And Millennials do file taxes – often faster than earlier generations.
They just tend to leave a lot of money on the table.
Now, I understand that in reality, “tax season” has barely ended (from the point of view of those who filed extensions), but before the holidays really get rolling, I wanted to go over some of the top places that Millennials often fail to properly structure their taxes and thus, lose money. If you’ve got a family member in this generation, this might be an “easy” holiday topic that doesn’t tread to close to hurting someone’s feelings…
Even better? If you’d like to know more (or pass our team’s info along to that young person), make sure they reach out to us here at the office and make an appointment to discuss how we can help you or the next generation.
• EITC – The Earned Income Tax Credit may be the most misunderstood opportunity ever to offer tax shelter to filers. It was originally intended to help low-income families, but recent changes mean some single filers can take advantage of it, too. Still, per IRS estimates, more than one-fifth of filers eligible for the credit don’t claim it! Filers 25 and older who earn less than a certain amount can recoup some money through this credit, and the number gets a lot bigger when there are dependents.
• Get credit for saving – Millennials actually have better retirement savings habits than the previous generation, often starting their first 401(k) in their early twenties, but they tend to not take full advantage of the so-called “free money” their employers offer through a 401(k) or a Health Savings Account. The so-called Saver’s Credit offers a sliding scale of roughly 10% on qualified contributions, yet I often fail to see younger filers taking advantage of it.
• Student Loan Interest – Now, there’s a LOT of talk about this based on the President’s actions earlier this year, and while those details still need to be fully worked out regarding student loan forgiveness, there has long been an opportunity for a percentage of student loan interest to be deducted. Surprisingly, knowledge of this most basic deduction appears to be limited!
• Job Hunting Costs – Those crummy job opportunities amidst a challenging economy are – in many cases – deductible. While some of the “old” deductions have been tightened up, there are still benefits and opportunities for job seekers to recoup some of the costs of finding a job or changing career paths, and statistically, they aren’t using these. The downside? This may push you into itemizing your return, but it can help you recoup the costs of getting hired in a tough market.
• Moving expenses – One of the things that many of us seem to have forgotten about our own youth was that we moved a lot, too. The Millennials do plenty of it, and if you are willing to itemize, there are a host of deductions available – from the cost of the movers to the cost of transporting pets.
Finally, let’s talk about the “new” normal of the economy. Whether it’s Uber or UpWork, there’s a solid chance that Millennials will get more 1099 (contractor) forms than previous generations. Essentially, if you make more than $600 annually from any given source, they can (and will) consider you a contractor and issue the 1099 to cut their own tax liabilities. Here’s the deal – if you know you’ll be getting a 1099, you need to have a strategy in place to not only pay the taxes you owe, but also to mitigate the amounts you’ll have to pay.
Our solution? Simple – spend some time with us plotting and planning on what deductions and credits you may qualify for and from there, you can have a solid solution to handling your taxes – this year and all those to come.
Many of these pieces of the puzzle above simply aren’t as easy to “find” in tax preparation software, so meeting with a tax professional can really save newer taxpayers a tremendous amount of money over their careers.
All the best-