Most Millennials Fear Tax Season, Study Finds, But Filing Your Return Doesn’t Have To Be As Scary As It Seems
Spring brings a lot of welcome changes, but there's also a pretty big negative that arrives at this time of year: Tax season. And apparently, it's especially bad if you're a Millennial — a new survey from NerdWallet finds that Millennials dread tax season more than most other Americans, with 80 percent of us reporting anxiety over doing our taxes. (For comparison purposes, only 60 percent of adults ages 55 and older sharing this same worry). The mistakes that we worry over in preparing our returns include paying too much, making an error in our calculations, and not getting a high enough refund. This finding was part of a larger survey about tax attitudes from NerdWallet, who partnered up with Harris Poll to create an online survey that reached 2,046 American adults in the United States.
NerdWallet and Harris Poll found some interesting results in terms of how Millennials are preparing their taxes, too. Despite their worries, it doesn't seem that Millennials are doing much in the face of getting professional expertise, as only 17 percent of those in the 18 to 34 year old age group reported hiring a tax professional to help them to prepare their return. This is a much lower rate than it is for other Americans, with the average across all ages being 29 percent. This could be because of the potential cost of paying an accountant, as the average fee charged for 2014 returns was $273 — and with so many Millennials who entered the workforce during the recession, left school saddled with debt, or both, an extra couple hundred dollars can be difficult to find. (And for the curious, no, it's not because we're not trying to save. We are. We're just dealing with things previous generations didn't have to contend with.)
As such, Millenials are a lot more likely to use resources available to them for free for tax advice, with the most popular ones being family and friends. However, before you go asking your dad a question about deductions, be careful about the sources you trust regarding your circumstance — as NerdWallet writer and financial expert Liz Weston warns, this can set you up for failure. “Millennials have the most concerns about taxes, but unless their friends and family are accountants, turning to loved ones for tax advice is the least-reliable source for accurate, up-to-date information,” she writes in the study's report.
The good news is that there are many measures you can take to avoid a surprise from Uncle Sam, or worse, an audit. It's only February, guys, so there's still plenty of time to get yourself together for tax time. If you need some tips on how to prepare, here are four ways you can make tax season a little less anxiety-inducing.
1. Prepare, Prepare, Prepare
You can never be too prepared for tax time, so make sure to get all of your proverbial ducks in a row before you embark on the journey of preparing your return. According to Forbes, some of the best ways to prepare for taxes are to gather and organize all of your relevant receipts, create a list of your income sources, and most importantly, don't procrastinate! Pretending that tax time isn't happening won't make it go away; waiting until April 14 to think about doing your taxes is only going to lead to a filing frenzy. With that, they also advise putting a better system in place for the next year, so that gathering all of your tax information is a piece of cake.
2. Contribute To Your IRA
The last thing you might be thinking of doing right now is contributing to your retirement fund, but doing so can actually save you some money if you think you're going to owe a lot. Even though the 2015 tax year is over, you can still contribute to your IRA and Roth IRA accounts up until the tax deadline for 2016 (that's April 18, for the curious) and still have it count towards your 2015 tax return.
3. Understand Tax Credits Versus Tax Deductions
You might be looking for every possible deduction that you can use to lower your tax bill, but finding hidden tax credits may be more worth your while — every dollar you "earn" with tax credits counts as a dollar either towards lowering your tax bill or towards increasing your refund amount. A few examples of tax credits many people qualify for include the Earned Income Tax Credit and, if you're a student, the American Opportunity Tax Credit.
4. Hire A Professional
OK, so it might seem like a huge cost to actually pay someone to do your taxes for you, but in many cases, it's your best option. Especially if you are a business owner, have very complicated taxes, or simply have no motivation to do them yourself, do yourself a favor and just sock a couple of hundred dollars away over the year so you can pay someone to get them done professionally come tax time. Plus, you'll have the benefit of having a tax expert there to walk you through the process and maybe show you a few extra deductions while you're at it. Just make sure to hire someone who is legit and ask to see their certification, history, and service fees before hiring.