Raise your hand if you filed your taxes online this year.
You’re not alone. According to a recent Nerdwallet/Harris Poll survey 36% of millennials and 35% of adults over 35 filed their taxes online. It makes sense. It’s so much easier than trudging down to the post office and picking up paper copies of every imaginable 1040 form and all the schedules you can stuff into your bag. You don’t even have to leave the house to file online, and you can get text message updates on the status of your return.
..for all age groups, that same Nerdwallet study also found that millennials are the most likely group to go the old-fashioned route and file their taxes through the mail. Of the 1,600 people surveyed, 17% of those ages 18-34 mailed paper returns, compared to just 8% among taxpayers over age 35. Perhaps an underlying factor behind this surprising statistic is that millennials are the most nervous about messing up their taxes. Eighty percent of them report feeling concern about making tax mistakes that will cause them to either overpay or not get their full refund.
But here’s the thing. Paper tax forms don’t make your taxes more accurate. It might feel better, like you’re putting more effort into it, but the IRS doesn’t care. Filling in the boxes with a ballpoint pen doesn’t make your numbers any more accurate than typing them on a keyboard.
No kids, no mortgage, and they often file singly. But as the workforce and economy evolve, millennials’ taxes are getting more complicated. Side hustles (aka contracting gigs) will always be taxed after the fact, even if you’ve already spent your entire paycheck; low buy-in investments, even if it’s just $5, must be reported; and finally, to look at the bright side, paid student loan interest can be tax deductible.
In my experience, one of the common reasons millennials avoid doing their taxes is because they suspect they owe more money than they can pay. For the record, avoiding your taxes is never a good idea. It can lead to penalty fines, refund forfeiture, property seizure, and even jail time. (Breathe. That’s worst-case scenario.) If you’re feeling the tax dread setting-in, instead of sweeping it under the rug, go to a professional to help get your affairs in order. Someone with tax law experience can help you find legal workarounds like filing an offer in compromise (oic) or seeking hardship/cnc status. These actions will help keep you from drowning in IRS debt. Sure it’s a lot of paperwork, but it’s much better than the alternatives.
The best way to prepare yourself for the future — to become part of the 8% over 35 who aren’t worried about losing out on their taxes — is to find a certified public accountant who specializes in income tax and ask them as many questions as possible.
Start by learning just enough of the lingo to be able to communicate effectively with your accountant. Be prepared to talk about assets, depreciation, equity, and investments.
In addition, bring a folder with the following:
Here are some important questions from Nerdwallet to ask your CPA before entrusting them with your financial information:
..simply because their relative youth means they have less experience with financials. After all, tax code is a complicated beast. And even though the friendly user interface of tax programs like TurboTax and H&R Block make it all feel simple, millennials aren’t fooled.
In short, yes, it’s wise to utilize online tax programs when your taxes are straightforward. But remember, every filing experience is training for the future. Taking care of business this year will only serve to make you better equipped to handle whatever life might throw your way next year.
Guest Blog: Brooke Faulkner