Tax-time Strategies for 20- and 30-Somethings
Remember your first paycheck? How surprised you were at all the taxes that came out of your pay? And then, when you had to start filing taxes, somehow you got a refund! What the what? Money back? You started looking forward to filing your taxes, didn't you? You did the little "I'm gonna get a tax refund check" dance, didn't you? And then you made more money, kept filing the short form, and within a few years...no refund. In fact, you owed money to the IRS!
Welcome to the Other Side.
Just like the rest of us, Millennials worry about taxes.
"The thing that I am most worried about when it comes to taxes is how much more I going to have to pay each year," says Elizabeth Samolis, a student in Maryland and graphic artist for 20Something Magazine. "I have always paid my taxes and on time, but my taxes just keep going up. And for what? As my taxes continue to rise, we hear more and more about billion dollar corporations paying zero taxes and getting a refund. What is fair about that?"
Oliver Gray is another Gen-Yer who worries about taxes.
"From personal experience, a lot of my friends seem really concerned about filing incorrectly and getting in trouble -- or even audited," says Gray, 27, a contract employee working with the U.S. Treasury. "Taxes seem pretty overwhelming before you get acclimatized to all the little boxes on all those forms, and I think a lot of young people quit before they begin. They just throw some money at TurboTax or H&R Block and hope the problem fixes itself."
The good news: most Gen Y filers don't have to worry about math mistakes or getting audited by the IRS. Maybe your parents have to sweat the possibility of an IRS call, but you - not so much.
"The IRS routinely sends out notices for math corrections and omitted items," says Tim Abbott, a CPA in Lombard, Illinois. "This is much more common than people realize, and it rarely triggers an audit. The biggest factor in being selected for examination by far is still a taxpayer's adjusted gross income. Those earning more than $200,000 a year have a substantially higher chance of being audited than those earning $1 to $200,000."