Long stereotyped as the generation too coddled to leave home, Millennials are finally growing up as they as they gain employment, pay rent, buy homes, get married and have kids. That is to say: they're making adult decisions and contributing to the economy in new ways as Baby Boomers retire; and, as Millennials come of age, they face the rite of passage that is paying taxes.
Although Millennials are tech-savvy and well-educated, they aren't immune to making mistakes on their tax returns just as generations in the past. But, with every new generation comes new considerations when matching lifestyles to tax reporting requirements. If you are a Millennial, what should you watch out for when filing your taxes?
Forgetting to disclose income
The gig economy is growing, and you could be taking advantage of the countless opportunities to earn extra income through activities like writing freelance, trading cryptocurrencies, driving for Uber, delivering groceries and walking dogs.
If you work a gig economy job, it is important to remember that you are paid as an independent contractor via a Form 1099-MISC. However, all income may not be accurately recorded because you will only receive a 1099 from an organization after earning more than $600 in income.
Therefore, it is your responsibility to keep track of income as it comes in smaller payments throughout the year. Additionally, 1099 work is different from W-2 work because taxes are not deducted from your income, so it is on you to plan for and pay any taxes due at the time of filing.
Filing in the correct state
According to The Street, one in five Millennials has moved in the past year. If you moved from one state to another recently, you must pay taxes in each state in proportion to your income earned and time lived there. Further, you should always update your mailing address as soon as possible so you receive tax documents in a timely manner.
Your housing payment and student loan bills are probably your biggest payments each month. Keep in mind that interest paid on a mortgage and student loans are deductible from your federal taxes. Additionally, some rent payments are deductible at the state and local level depending on your jurisdiction.
What happens if I make a mistake?
If you make a mistake on your taxes in any of these areas, you have resources available to correct it. The good news is that the IRS treats a simple mistake differently than if you were to misreport your income intentionally. If the IRS catches an error, you could be required to pay a penalty and clarify your income and deductions. The attorneys at Goldburd McCone LLP are ready to address your concerns related to planning and responding to your tax concerns as a Millennial.