Here's How To Get Serious Cash Back On Your Taxes, According To An Expert
Guys, it's already March 9, which means one thing: You only have a few weeks left to file your taxes. Sure, that seems like a lot of time, but if you're like most people, you're probably going to stall until the very last minute.
In fact, you may be procrastinating because you're downright afraid to file your taxes.
According to a NerdWallet poll of more than 1,600 adults in the US, 80 percent of taxpayers in the 18-34 demographic say they're fearful about preparing their taxes. Nearly a quarter of those Millennials say their biggest fear is making a mistake on their returns.
Fear not, Millennials. We reached out to the experts at TurboTax to find out where Millennials often go wrong and how you can maximize your return.
For answers, we turned to Lisa Green-Lewis, a CPA and tax expert with TurboTax. She's hella cool and has been doing taxes for more than 14 years.
First off, Lisa says, "A lot of Millennials only have a W-2 and they are paying hundreds of dollars to get their taxes done,” which is a huge no-no. With a few preparation steps, you truly can tackle this like the smart, capable adult you are.
What's the first step all Millennials should take in preparing their taxes?
The first step is, organize your documents; have all your forms together. I always recommend putting a folder where your mail comes in, so you can collect your forms like W-2. I know a lot of Millennials now are doing side jobs, so look for 1099 miscellaneous forms to have everything ready to go.
What are the biggest deductions Millennials tend to miss?
There are quite a few deductions. Millennials, a lot of them go through a lot of life changes and those life changes can be worth big tax deductions. Maybe they changed jobs, or looked for a job so their job search expenses could be tax deductible or if they moved for a job and they moved 50 miles further than their previous job, their move could be deductible, so there's a lot that they can deduct. Education is a big one. I know a lot of Millennials, whether they've gone to college for four years and are finishing up or go back to school to take that one class to get that promotion they wanted, there are education benefits that they can take. The American Opportunity Tax Credit is one for the first four years of college worth up to $2,500. Even if you just take one class that's worth up to $2,000... As long as the class you're taking is to improve your skills at your present job. And then, new this year, there is a new law that if you drive from your office to school, whether your employer said you need to take the class or you just decided to take the class, you can deduct your mileage.
Any advice for what Millennials should do with their refunds?
There is something called The Saver's Credit and it's the only place that the IRS allows you to really double dip because if you contribute to your IRA, if you're within a certain income, you also get the Saver's Credit worth up to $1,000 and $2,000 if you're married and filing jointly. So you're getting the benefit of the deduction and also the Saver's Credit. And I know a lot of Millennials think they don't make enough money to save for retirement, but there's a new retirement called “myRA” and it allows you to contribute small amounts automatically from your paycheck, as low as $20 and you still get the deduction and the benefit of the Saver's Credit.
What about young people with student loans?
The Student Loan Interest Deduction, that is for the interest only, and then the other benefits that I mentioned -- the American Opportunity Credit or the Lifetime Learning Credit and then there's also the Tuition and Fees Deduction -- those will be for actual costs, like tuition, your books, that are related to you going to school. And then one thing that happens with Millennials, their parents may have been claiming them for a while. I always recommend that parents and students discuss who's going to get this deduction… Because only one person can take it and it's the person that's claiming the deduction. If the parent is claiming the child as a dependent, then they would get the education benefits. But if now the Millennial is working and going to do their own taxes and they claim themselves, then they are able to take the deduction for the education benefits.
How about unemployed Millennials? Can they deduct job hunting expenses?
You can deduct job search expenses even if you don't secure the job, but it does have to be related to your former position that you were in or the present position you are in. It can't be that you just got out of college and then you're just out in the job market and you're looking for a job for the first time. Even travel; if you fly somewhere to interview for a job and you don't get the job, you can deduct that, it just has to be directly related to you looking for a job.
What about health care?
For 2015 [the penalty] is $325 or 2 percent of your income, but there are exceptions to the penalty, and we are finding a lot of people do qualify for those exceptions and one of the main exceptions is for your income. If your income is below the IRS filing threshold of $10,300, you're exempt from the penalty.
What if you're running late?
You can file an extension with TurboTax, but last tax season, believe it or not, about 75 percent of taxpayers received a refund close to $2,800. And then another thing I see with Millennials, ones that only work part-time, or think they don't make enough to meet the IRS filing threshold, a lot of them are eligible for a refund because they've had several taxes taken out. If they are eligible for any, what they call 'refundable tax credits,' like the Earned Income Tax Credit, they may see a bigger refund. Every year, the IRS reports that about 900,000 people don't file their taxes, and they are holding onto refunds close to an average of $600 per person.
When should we do taxes?
I would say to file as soon as possible with the average refund being close to $2,800 and 75 percent of people getting a refund; the sooner the better. With all the deductions and credits available, Millennials would probably see a refund.
So there you have it: Nothing to fear except losing out on some cold, hard cash.
Still not ready? I'd totally recommend using TurboTax (I'm not getting paid to say this; I've genuinely used it for the better part of a decade and love it). New this year, TurboTax is also allowing users to video chat with tax experts to help answer all your questions.
Happy tax season!
*NOTE: This interview was condensed for length.