According to new data from Intuit Credit Karma, 30% of American taxpayers dread filing taxes to the point of tears. That number jumped to 40% when they polled Gen Z and self-employed filers.
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Considering 105 million Americans (roughly two-thirds, according to NPFG.org) received a tax refund in 2024, and there were no major tax law changes this year that would shift these numbers significantly, there may be nothing to fear for taxpayers but filing itself.
In fact, 45% of Gen Zers said that filing taxes causes more stress than actually paying a tax bill, according to the Intuit Credit Karma survey. Courtney Alev, Credit Karma’s head of tax and consumer financial advocate, said that’s understandable. “Many aspects of the filing process can be overwhelming,” she said.
Decide How You Want To File
Even the act of choosing how to file can be daunting for young filers, Alev acknowledged. “Do your research to understand what the best tax filing option is for you. Regardless of which option you go with, you should know there are free options available.”
Ascent Funding CEO Ken Ruggiero added that anyone with an adjusted gross income of $84,000 or less can use the IRS Free File Guided Tax Software. “A lot of Gen Z will fall into that category, so they don’t have to pay a software provider for something they can get for free,” he said.
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Gather the Right Paperwork
Whether you use the IRS Free File option, tax software or hire a professional, you’ll want to gather all the information you need in advance. If you’ve only worked one job, this might be easy. But, Ruggiero said, “members of the Gen Z population often have a set of jobs or side gigs, so they’ve got multiple W-2s or 1099 forms. Keep track of that paperwork, because it makes life easier.”
Alev added, “Filing taxes is way easier when you’re not scrambling for missing documents.”
Realize that some employers or clients send W-2s or 1099s electronically. “You’ve got to know what email you used when you signed up,” Ruggiero said. “If you don’t receive your W-9 or 1099 by February, you should reach out and ask the employer when you will be receiving your documentation.”
Ensure All Income Is Accounted for and Start Planning if You’ll Owe Money
Tracking paperwork and income, and ensuring you have enough money to pay taxes, gets even trickier for Gen Z members who embraced the gig economy, Alev added.
“Self-employed individuals often have more nuanced and complicated tax situations that can result in a bigger tax bill since their taxes are not automatically withheld throughout the year,” she said. “The onus is on self-employed Gen Zers to stay on top of their estimated bill, and set aside money so they can pay their tax bill by the April 15 deadline.”
Speak With Your Parents if You Are New to Filing Your Own Taxes
As you get ready to file, speak with your parents if you are still living at home (even part-time) and could be considered a dependent. “You have to find out if you’re going to be claimed as a deduction on your parents’ taxes,” Ruggiero said. “That’s an adult conversation that many students or new employees are not used to having with their parents.”
It’s important to run the numbers to find out the best way to minimize tax liability for the whole family. Likewise, new adults may have dividends or interest in an account from their childhood they didn’t know about. As adults, it’s important they declare this income to avoid under-reporting.
Understand How Student Loan Debt May Affect Your Refund
Student loan debt adds more complexity to Gen Z taxes. “Young student loan borrowers may not be aware of the tax deductions that exist for their situation, and how they can best take advantage of it,” Alev said.
“As long as the loans that you took were for educational purposes, and usually a loan from the federal government or a bank that provides student loans, the interest is tax-deductible,” Ruggiero added.
Enlist the Help of a Professional if Necessary
If you still feel nervous about making an error on your tax returns, as 26% of Gen Z said they do, hire a tax professional to help. It might be easiest for Gen Z to work with their parents’ tax accountant (if they have one), because that professional will understand the nuances of their family situation. But if that’s cost-prohibitive, consider expert help available through tax software.
“Consulting a qualified tax professional is always recommended if you have any questions,” Alev emphasized.
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This article originally appeared on GOBankingRates.com: 40% of Gen Z Cry Over Filing Their Taxes — 6 Ways To Avoid Tears
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