1:17
- living
- April 16, 2018
A millennial's guide to filing your taxes
The deadline to file your taxes on April 17 is quickly approaching.
1:17
Greene-Lewis said some people think if they worked part-time and didn't make all that much last year, they shouldn't file, especially if it didn't reach the minimum requirement for a company to send you a 1099 or similar form.
\"But if you’ve had taxes taken out you should file. You may still get some of that money back,\" she said.
Furthermore, she says the IRS has reported that there's over a $1 billion of unclaimed tax refunds just waiting to be given back. And even better yet, she said you have three years to file your claim.
\"So people who have not filed their 2014 return, have until this April to claim for that,\" she added.
Katherine Pickering, vice president at H&R Block and executive director of the company's Tax Institute, said filing taxes is also especially important for professionals who might be making money online with Etsy, eBay or even Airbnb. Those professionals may not have taxes taken out of their payments from clients, like a company does for you if you work full-time.
#SelfEmployed and no time for #tax forms? You have enough to keep track of while running your own #business. Let us help out with the rest. ?? https://t.co/QIMYrtEO59 pic.twitter.com/zIsAy0gw8X
— TurboTax (@turbotax) March 31, 2018
\"You still have to report those earnings even if you don't have some kind of form from a company,\" she said. \"That's where people get tripped up, because they think, 'I can probably slide that by' and it usually comes back to haunt you.\"
In fact, she says if you do perform that kind of work, keep all your records and maybe put aside a portion of your earnings for tax time. Also, keep track of expenses you can deduct, which can often be a lot. Even taking pictures of your home or marketing your product can all be considered expenses to deduct from these earnings.
She said if you are just renting out your apartment on Airbnb for one weekend, you're fine and probably won't have to file. But if you do it often enough, you might become an \"accidental landlord.\"
Greene-Lewis says a deduction comes off your taxable income, while a credit comes directly off taxes you may owe and is worth more to you.
What does this really mean?
If you have $1,000 deduction, in the 25 percent tax bracket, then you get a $250 reduction in your taxable income. If you have a $2,500 credit and owe $2,500, that would come directly off what you owe and cancel it out!
There are many different types of deductions, but some examples include if you donated clothes, mileage and gas for your job and some education expenses.
If you are paying off student loans currently, well, you can get a deduction for the interest you've paid on those loans this year. There's also credits for going back to school and deductions if you have kids or are supporting a family.
No #joke: you can still boost your #refund with these 5 #tax breaks! https://t.co/x7jFU4vn4x pic.twitter.com/FzRF1p5do0
— TurboTax (@turbotax) April 1, 2018
And remember those part-time jobs we spoke about earlier, like tutoring and dog walking. There are deductions involved with those jobs too, especially if you work from a home office of some kind. Based on the square footage of your office compared to your residence, you can deduct things like Internet, rent, utilities and more if they were actual work expenses.
From tattoos and clarinet lessons to cat food and broken china, we’re sharing some of the weirdest tax deductions real taxpayers tried to claim – see which unusual expenses were deemed legit. https://t.co/qW1UPXJ7FF pic.twitter.com/J0uDlV8TlP
— H&R Block News (@HRBlockNews) March 30, 2018
Any professional can guide you through what deductions and credits you might qualify for, which could equal big money back!
Here's a list of the \"10 Most Overlooked Tax Deductions\" from TurboTax.
Pickering said if a couple is just married and filing together for the first time, \"It's really important to understand your filing status.\"
If you file a joint return, it's one tax return for the family and your filing status is now \"married, filing joint.\"
![\"PHOTO:](\"http://a.abcnews.com/images/Business/money-gty-er-180404_hpEmbed_9x8_384.jpg\")
There's also the question of who goes first on the return, the husband or the wife. Well, it doesn't matter. Just be consistent and have the same order every year, Pickering said. You don't want to confuse the IRS if you switch them around, because it could come back as an error.
Also important is if the wife decides to change her last name legally. When you change your name, you change it with Social Security, and the IRS uses that office to validate names.
So if you change it legally, change it on your taxes, too! That's another simple mistake that people often make.
Here's more from H&R Block on filing after tying the knot.
This is also complicated, but there are a few key things to know. If you are single but have kids, the \"head of household\" filing status gets you more tax benefits.
Pickering said only one parent (if there are two involved in the child's life) each year gets to claim a child. So some couples who co-parent will often trade off every other year to get that benefit.
![\"PHOTO:](\"http://a.abcnews.com/images/Business/gty_playground_parent_kids_swing_jc_140903_hpEmbed_2_3x2_384.jpg\")
\"The child tax credit is $2,000, so it's pretty rich,\" she said. \"But now you have to figure out who claims that.\"
Technically, your parents can help you out in any way they want, of course.
But if you receive a gift amount of more than $14,000 from one parent, the IRS might take notice. Now, this doesn't count for medical bills or tuition expenses, just straight \"gift money\" given to a child.
Furthermore, if your parents are still legally together, you can get double that amount.
You still might not get taxed on the money over the gift amount, but it's still good to disclose this to the IRS just in case.
You've probably heard of an IRA, but like your 401k, might not really understand what it is.
Well, an IRA is not given to you by your employer like a 401k, but is also a type of savings account for your retirement that you open up with a financial institution and it can help with taxes as well. Both Pickering and Greene-Lewis agree that it's NEVER too early to start planning for life after work.
The cool thing about an IRA is you have until the tax deadline, April 17, to contribute to it.
\"One more strategy to be able to reduce your taxable income if you haven't already maxed out your IRA for the year,\" Pickering said.
Plus you're contributing to your future, so it's a win-win.
Need more time? Well, you can extend a return and then have until October to file.
But Greene-Lewis warns that if you are holding off because you just don't want to pay the IRS your hard-earned money, this is not going to work. If you owe, expect potential penalties or interest that you'll owe on that money. Extending is for someone who really isn't ready to file or is missing crucial paperwork.
Amending is when you've already filed and one or two late items come in the mail or get to you after April 17. Don't worry if you find out later your return was not complete. In fact, you have three years to amend a return. This usually involves a form called a 1040X and is a pretty simple process.
First and foremost, don't panic! It's not necessarily the end of the world.
Greene-Lewis says less than 1 percent of people in this country get audited and 80 percent of that is simple correspondence. Basically, the IRS has a question for you and is asking for additional information. This is usually solved by calling the IRS to find out what they need and then sending that to them.
BUT it's very important to know that the IRS will never call you; they will send you official paperwork. If you get a threatening call asking for money, it's most likely a scam and you should alert the actual IRS immediately.
Also, NEVER share personal information unless it's through the proper, official channels. The internet has made the world a much more connected place, but people still try to use that to take advantage of unsuspecting, innocent people.
A lot is going to change due to the new tax bill, so you should start preparing now. Deductions like moving expenses for work, job search expenses and unreimbursed work expenses are all going away.
A9) The child #tax credit is now worth up to $2000 per eligible child, however the dependent exemption is gone. Education credits remain unchanged from prior years. 529s can now be used to pay for k-12 education expenses. #ReutersTax18 pic.twitter.com/uWJyVLmexA
— H&R Block News (@HRBlockNews) March 27, 2018
For a full list of what's going away, check out this blog from TurboTax.
Changes you can start making include revisiting your W-4 form, which deals withholding allowances, so that the company you work for can withhold the correct income tax from your pay. If you've noticed a slight increase in your bi-weekly pay, it's because of the changes.
Pickering said you can always bump up your withholdings, then you either might have to pay less down the road or receive a greater return if you like getting one big lump sum at one time for vacations or some other kind of personal treat.
\"Who doesn't mind getting a little bit extra money in your paycheck?\" she said. \"But if you get like $3,000 in your tax refund every year and that's how you fund your vacation, and next year you only get $1,000, you've still ended up paying the same amount of taxes. You just got it throughout the year ... It's just important to know what's going on and then you can make adjustments.\"
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