7 Common Mistakes Millennials Make When Filing Their Taxes
Money is a feminist issue — and yet, women are still reluctant to talk about it. According to a recent Bustle survey of more than 1,000 Millennial women, more than 50 percent of people said they never discuss personal finances with friends, even though 28 percent reported feeling stressed out about money every single day. Bustle's Get Money series gets real about what Millennial women are doing with their money, and why — because managing your finances should feel empowering, not intimidating.
Aside from spring being in the air, taxes are, too. After all, it's probably happened to many people at some point, so that's why I decided to go to the pros and get their advice. Yes, some people have professionals do their taxes, but if you do them solo — which more and more people seem to be doing — keep on reading.
"We're seeing a huge trend among Millennials filing their taxes themselves, and with a mobile device," Lisa Greene-Lewis, Lead CPA at TurboTax, tells Bustle. "More than 60 percent of Millennials use mobile apps for banking and money management, and now we're seeing explosive growth for taxpayers filing from a mobile device. For instance, downloads of the TurboTax mobile app grew 85 percent last tax season, with nearly six million TurboTax customers doing their taxes on a mobile device."
W-o-w, right?! Whether you're using TurboTax or another tax preparation software package, or using your good old-fashioned math skills, accounting for all your income can be intimidating — especially if you're filing taxes as a freelancer. BTW, don't forget that this year's deadline to file is April 18, so at least there's a silver lining to anyone's oh-my-gosh-I-haven't-filed-taxes-yet issue. It's not too late! As I said, I spoke to some experts to help guide you along this tax season, and, below, they'll help clue you in as to common tax mistakes Millennials make.
1*Not* Filing Taxes At All Because They Don't Think They Have To
"Some Millennials believe they don't need to file since they make under the IRS filing threshold ($10,350 single and $20,700 married filing jointly)," Mike D'Avolio, CPA and Senior Tax Analyst, Intuit ProConnect Group, tells Bustle. "But the IRS reports they are holding onto close to $1 billion every year in unclaimed refunds. Some of these refunds belong to Millennials, and if they had federal taxes deducted from their paychecks and may be eligible for refundable credits (like the earned income tax credit), this means they should definitely file their taxes. The IRS states that the average unclaimed refund is about $700 — it's possible some Millennials might not even know if they’re owed this money."
All I can say is, $1 billion in unclaimed refunds is a LOT of money. And if you're in doubt about whether or not you need to file, ask someone. You don't want the unclaimed money to just sit there, far, far away from you, do you?!
2Not Filing Taxes Because They're Overwhelming
"If filing seems daunting for Millennials who don't have much experience with tax forms, they should know they're not alone," Greene-Lewis says. "For example, TurboTax SmartLook allows customers to connect live via one-way video to a credentialed CPA or enrolled agent to get their toughest tax questions answered when they need it. A SmartLook expert is able to draw on your screen and walk through the entire process with you."
Is anyone else as impressed as I am about technology these days?! The TurboTax people can ~draw on your phone~ as they help you?! Yep, no excuses to not get your taxes done!
3Waiting Till The Last Minute To File
"There's no reason to procrastinate with your taxes," D'Avolio says. "When you wait until the last minute, you could forget certain things. It's possible you might leave out a form, like a 1099-MISC or a W-2, which are essential for filing your taxes. You may also forget to include an expense you can deduct, which means less money in your pocket. Last season, close to 75 percent of taxpayers received a tax refund of about $2,800. The sooner you file, the sooner that money goes into your pocket!" Point taken!
4Missing Deductions They May Not Be Aware Of
"Millennials tend to miss deductions they’re unaware of," D'Avolio says. These are some he points out.
- The dependent exemption: This is worth up to $4,050 if you supported a boyfriend, girlfriend, or friend that crashed on the couch the entire year.
- The earned income tax credit: You don't have to have kids to take the credit; if you earn less than $14,880, you can get a credit worth up to $506.
- The Saver's Credit: This is another little-known credit worth up to $1,000 if you’re single, or $2,000 if you're married filing jointly. This is a credit you get just for investing in your retirement, and is the only place the IRS allows you to double-dip. You could actually invest in your IRA up until the tax deadline, reap the benefit of a tax deduction on your 2016 taxes, and collect this additional credit.
Greene-Lewis adds a few items to the list, too. "There are many aspects of growing up that offer tax deductions," she says. "Any Millennial making the transition into adulthood should definitely be taking advantage of these deductions."
- Moving expenses for your first job: You may be able to deduct the cost of storage, the moving truck, travel, and moving your pet.
- Traveling to volunteer: If you traveled to volunteer for a recognized 501(c)(3) organization, you may be able to deduct your mileage, tolls, parking, even airfare and lodging, from the trip.
5Missing The Student Loan Interest Deduction
"If you've just graduated from college, you may be eligible for the Student Loan Interest Deduction, worth up to $2,500," Greene-Lewis says. "One thing to remember, though, is that Mom and Dad can no longer claim you as a dependent if you want to take this deduction."
6If They Are Self-Employed, Forgetting To Deduct Everyday Expenses
"If you are one of the 55 million self-employed individuals, don't forget you can deduct expenses from your car that are used for business purposes (like mileage from travel time to and from seeing clients), portions of rent used for a home office, and supplies and equipment used for your business," Greene-Lewis says. "New this year, TurboTax has a product called TurboTax Self-Employed, designed specifically for these folks to uncover all of these deductions and get the help they need." I'm sure I'm not the only freelancer excited by this, right?!
7Not Asking For Help
Yes, some people are whizzes when it comes to filing their taxes themselves, deducting everything they can — and should — possibly deduct, and so on. But if you have any doubts, there’s no shame in asking for help. You can even call the IRS for help (1-800-829-1040) — though wait times will probably get longer and longer since April 18 is just a few weeks away.
OK, there you have it, common tax mistakes Millennials make — I know I learned a lot from the above. But there's one looming question: After filing taxes and receiving a refund — if that's the case, that is — then what? Book a trip to Hawaii?! While some people might, financial experts have other advice. "While it may be tempting to splurge, your lump of cash can be used to help pursue financial goals, such as paying off debt, starting an emergency fund, or saving for goals — like booking a vacation or investing in your retirement," Anna Colton, Merrill Edge executive, tells Bustle. "If you're looking to pay off high-interest, non-tax-deductible debt and create an emergency fund, think about putting half of your tax return or bonus toward your debt and the other half toward your emergency fund. This way, you'll likely be more equipped to fund any times of financial trouble and on your way to potentially paying off your debt."
Great advice, right?! Though Hawaii certainly sounds temping... But, like Colton said, if some of the refund goes toward retirement and/or an emergency fund, some can also go toward a vacation fund. That way, it's a win-win for your savings account as well as your future vacation account.
Check out the “Get Money” stream in the Bustle App for more tips and tricks on how to save and spend your money.