If you’re a twenty-something ready to face the big bad world of taxes, there’s plenty to learn—but there’s no need to stress!
Once you get the hang of it, filing your taxes is actually pretty straightforward. With these tips in mind, you’ll be more than prepared to tax on your first filing session head-on.
Discuss Taxes with Your Parents
If you’re recently out of school and filing independently for the first time, be sure to touch base with your parents first—especially if you’re under the age of 24. If your parents are planning to claim you as one of their dependents, that impacts your filing status, so it’s important that you’re on the same page.
The IRS says that parents can claim a qualifying child who is a full-time student under age 24—as long as you’re not above a certain income range.
Almost 90 percent of taxpayers file electronically each year, so make sure you follow suit. Filing online can help expedite the filing process, and has been proven to reduce the risk of errors.
You can file for free on IRS.gov with their online fillable forms, or apply for the Free File program from the IRS, so long as you make under $60,000.
File As Soon As Possible
It’s best to file your taxes as soon as possible. The IRS requires you file your taxes or request an extension by the tax deadline; in 2018, that’s Tuesday, April 17th. If you decide to file an extension, you have until October 15th to file your taxes.
Filing sooner rather than later also reduces the likelihood of fraudulent returns being filed in your name. Best practice? File your taxes as soon as you get the necessary paperwork and documentation from your employer.
Gather the Documents You Need
Speaking of documentation, make sure you gather the paperwork needed for your filing processes. Gather any paystubs and your W2 or 1099.
The first is employer-generated, and indicates your employer has already withheld taxes. The latter means you’re a contractor or self-employed, making you responsible for paying off all of your taxes.
If you decide to hire professional help to file your taxes, you’ll likely need to bring any receipts required to claim deductions.
Get Professional Help for Complex Filings
If your filing process is proving to be too complicated, especially if you’ve recently changed jobs, don’t be afraid of reaching out to a tax professional for help. While you’ll pay more upfront for their help, they could end up saving you far more than you expected, or garnering you more on your tax refund.
If you’ve fallen behind on filing in past years, or owe the IRS back taxes, you can’t forgo the help of a tax resolution specialist. Check out tax resolution by Community Tax to learn more about tax settlement options and how to take steps towards a stress-free, debt-free future.
Take Advantage of Available Credits and Deductions
Remember the old adage “ignorance is bliss?” When it comes to taxes, ignorance means leaving money on the table.
Many twenty-somethings overlook lucrative tax breaks simply because they don’t know about them. Don’t let that happen to you this year—here are some of the most valuable tax deductions and credits currently available to millennial taxpayers:
- Earned Income Tax Credit: This tax break can help reduce the amount of taxes you owe based on your income, filing status, and number of children you have.
- Savers Credit: This provides a tax credit of up to $1,000 if you put money into an IRA or an employer’s 401(k). You’re only eligible for this tax break if you make less than $45,000.
- Lifetime Learning Credit: This tax credit is worth up to $2,000, and is available to individuals that are currently paying for undergrad, graduate or professional degrees.
- American Opportunity Tax Credit: Undergraduates in their first four years of study may qualify for the American Opportunity Tax Credit, which reduces taxable income by up to $2,500.
And below are some deductions you can’t afford to forget:
- Charitable Contributions
- Moving Expenses
- Job Hunting Expenses
- Mortgage Interest
- Student Loan Interest
If this is your first tax season filing on your own, be sure to keep these tips in mind and make it a stress-free process.