Millennials fear their taxes. Four out of every five young adults say they worry about making a mistake on their 1040. We continue with more tax tips this week from our Moneyman, Paul Fain, president of Asset Planning Corporation.
DO MILLENNIALS FACE A DIFFERENT TAX SITUATION THAN MOST FILERS?
Yes in some ways: they may be in college or starting out at a first job, paying down student loans, or looking to buy their first home. Filing a first tax return!
Who must file a tax return?
- Filing threshold: Everyone must file taxes if they meet what’s called the filing threshold, earned income over $12,000 for an individual.
- Disclose all income: Your Job + Airbnb, Lyft, Uber, Etsy. Multiple employers.
- Geography: Millennials are one of the most mobile demographics in the country. Someone who has lived in multiple states may owe taxes to each of those states.
- File if you get a refund of withheld taxes but are under the income limit.
DO MILLENNIALS HAVE SPECIAL TAX DEDUCTIONS OR CREDITS AVAILABLE?
- Student loan interest (front page of Form 1040 or Form 1040A).
- Lifetime Learning credits.
OUR GREATEST FEAR! HOW TO FILE?
- 1040EZ: Most millennials have relatively simple taxes and many can file Form 1040EZ.
- FREE: Don’t over pay to file your simple federal tax return, use free tax software- https://www.irs.gov/filing/free-file-do-your-federal-taxes-for-free
- Buy Turbo Tax or Tax Slayer. (watch for the upsell in some tax software).
- Hire a pro: H&R Block or CPA.
ANY OTHER MISCELLANEOUS TIPS?
- Get Organized: Get your documents together and be prepared, whether online yourself or with a professional. W2, 1099, 1098, receipts for expenses, bills that may be deductible.
- Audit: Don’t panic. Usually easily resolved in writing. Caution: the IRS doesn’t call!
Love and Marriage: Just Married in 2018? filing status will probably be “married, filing joint.” Who goes first on the return, the husband or the wife? It doesn’t matter. Just be consistent.
FAST MARKET FACT
The average retirement-account balance is just over $100,000 in a 401(k) or an IRA. A good rule of thumb is 1 x salary by age 30 and 6 x salary by age 50!
QUESTION FOR OUR MONEYMAN?
Send them to Paul@assetplanningcorp.com!
You can also reach Paul by using the contact page on APC’s website.