Original Source: Forbes
By William Craig, Contributor
It’s hard to believe, but April 15th is almost upon us once again. And if you’re gainfully employed in these United States, that means it’s almost time for tax day.
Millennials aren’t really at an inherent disadvantage when it comes to filing tax returns, but it’s fair to say you’re less likely to be familiar with the process and its nuances, since you haven’t been doing it for quite as long as some of us veterans.
If you’re a millennial yourself, or if you’re doing taxes for the first time ever, it probably feels like there’s a lot to learn. Not to worry, though: with just a bit of planning, you can be a tax-season expert in no time. Here are a few pointers to get you started.
1. Get (and Stay!) Organized
Each year you file your tax return, you’ll be left with a stack of records and other paperwork. Keep these things neatly filed away for reference later on, since it’s likely you’ll be referring back to some of this material when the next year rolls around.
This also means keeping on the lookout for W-2 and 1099 forms in the mail, and downloading the ones that aren’t physically mailed, either from your employer’s payroll site or from HR. Keep these things in a safe place until you’re ready to use them.
2. Learn the Process
Although it’s possible your financial life is a complicated one, it’s much more likely that your taxes as a millennial will be relatively straightforward. As a result, it makes sense to familiarize yourself with the process and do this yourself, rather than relying on (and paying) someone at a tax preparation service to do it for you.
And that goes for TurboTax as well. Lots of people pay good money each year for tax preparation software, but this isn’t strictly necessary. Take a look around online for free tax preparation tools, like the one offered by the United Way.
3. Find Out About Relevant Deductions
As a millennial, you may qualify for a number of lovely tax breaks that will reduce your final tax bill. For households with married couples and/or children, there’s the Earned Income Tax Credit.
And if you’ve taken advantage of an employer’s 401(k) or IRA, you may qualify for the Saver’s Credit, which could provide a credit of up to $1,000.
And then there’s the Student Loan Interest Deduction, which should be of particular interest to current millennials. If you’ve been paying monthly toward your student debt, you can deduct up to $2,500 in interest.
There are many more deductions, but you may not qualify for them all. Make sure you have the full story.
4. Check, Double-Check, and Settle Up
Finally, although modern tax prep software tends to thoroughly check for inaccuracies and contradictions in your submitted paperwork, you’re also legally obligated to make sure everything you’ve provided is accurate. Before you officially file your taxes, look over what you’ve recorded and make sure everything’s in order before you hit the File Now button
5. Special Cases: Doing Your Taxes In The “Gig Economy”
One big point worth mentioning here is how the tax process changes according to your employment status. If you’re employed full-time, the process is relatively straightforward: you work from your W-2 form and pretty much just fill in the blanks.
But if, on the other hand, you’re considered a freelancer or independent contractor — that is, a member of the “gig economy” — the process requires a bit more legwork on your part. Here’s how it works:
Withholding your own taxes. Since full-time employees have their federal income tax (including Medicare and Social Security) automatically deducted from their salaries, independent contractors must do this for themselves.
Paying income tax quarterly. To do this, you must, four times per year, estimate how much money you’re likely to make in the next quarter, and then pay your taxes on that amount. Payment dates are as follows:
January 1 — March 31 Payment Period: April 15th
April 1 — May 31 Payment Period: June 15th
June 1 — August 31 Payment Period: September 15th
September 1 — December 31 Payment Period: January 15th
Download the forms and file your taxes. If you’re an independent contractor and you’ve made $400 or more during the previous year, you’re required to file these quarterly tax returns. You can see a fairly comprehensive overview here, including a link to the 1040 form you’ll need. And that brings us to the most important point:
Keep detailed records. Since you’ll be estimating your income on a quarterly basis, you really need to keep records for yourself. While filing taxes in this way constitutes little more than filling out a form four times a year and making a payment, you’ll want detailed income records so that you can accurately estimate how much money you’re making.
The more records you have, the more accurate your quarterly tax payments will be, and the less likely you’ll be to over- or under-pay.
6. Keep Your Cool!
If there’s one note to end on here, it’s simply this: don’t panic! Doing your taxes might feel like a headache the first time you do it, but with a year or two of practice, you might actually come to appreciate it. Remember: you have until April 15th to file and make your payment, so there’s plenty of time to reach out to family, friends, and tax authorities if you need some help along the way.