As a millennial, you might have a surprisingly complex tax situation. Owing student loans, working multiple side hustles, and investing at a young age are all complicated scenarios come tax season.
Because of this, filing your own taxes often comes with added stress and unknowns. To help streamline this chore, here are eight tax tips for filing taxes when you have multiple streams of income and various financial responsibilities.
1. Don’t miss the tax deadline
The most important part of filing your taxes is doing it by the deadline. The IRS doesn’t mind if you need more time or you don’t have the funds to pay the entire tax bill right now, but you must take the proper steps to alert them.
Decide which route to take: Either file your taxes completely, request an extension, or apply for a payment plan. Whatever you do, don’t ignore the situation and hope it will just go away.
If you miss the tax deadline without requesting an extension, you could be subject to penalties, interest, and late fees.
2. Choose the right tax software
If your tax situation is fairly simple, you may feel comfortable filing your own taxes using a DIY tax software program. There are many reputable programs available, so shop around to find a good deal.
You may even qualify for free filing services. If you earn less than $64,000 a year, the IRS offers free software to help you file your taxes at no charge.
3. Write off side hustle expenses
Sure, you know how to file taxes for the income from your day job. But if you also earn money through a side hustle, you may have extra considerations.
For example, you may be able to write off certain expenses you incurred through your side hustle. If you purchased equipment or office supplies, these costs can be deducted on your tax return. Doing so reduces your taxable income, meaning you would owe less to the government.
4. Maximize education tax savings
If you have student loans, you could save money come tax time. Nearly all education costs, whether it’s interest paid on your student loans or additional classes you’ve taken for continuing education requirements, are tax deductible. See a full list of education credits and deductions here.
List out all of your higher education expenses to see which ones you qualify for. If you’re unsure, speak to a tax professional who can offer additional tax tips, or follow the prompts in your tax software.
5. Inquire about the Saver’s Credit
The longer you wait to start saving for retirement, the less time compound interest will have to work on your behalf. To encourage people to stash away money in a retirement account, the IRS offers a tax credit called the Saver’s Credit.
The Saver’s Credit is often overlooked even by tax professionals, but it can greatly reduce your tax bill at the end of the year.
The amount of the credit is 50%, 20%, or 10% of your retirement contributions up to $2,000 (or $4,000 if married filing jointly). The amount you qualify for depends on your adjusted gross income.
6. Deduct job hunting costs
Did you know that you can deduct any costs related to hunting for a new job? It’s true. If the new job is in your current career field you can claim this tax deduction. Job search costs that you may be able to claim on your taxes include:
- Resume copies
- Dry cleaning
- Employment agency fees
- Certifications or classes
- Business travel expenses
7. Block out time to file
Scheduling time to actually file your taxes is one of the most important tax tips. Block out time in your calendar to work on your taxes so you don’t have to rush through the process. Pretend it’s a regular appointment, and vow to keep it no matter what else comes up.
The tax filing process may take a few hours, so it’s not something you want to save until the last minute. Schedule time in your calendar sooner rather than later so you don’t feel as stressed.
8. Double check your calculations
Even the smallest calculation errors can prove to be big mistakes when it comes to your taxes. Take time to double check your work: Have you listed all the deductions and credits you qualify for? Did you include all your income sources from various jobs? What about your higher education expenses and retirement contributions?
Nearly all DIY tax programs come with built-in features to ensure that your tax information is correct. The tax software will make sure your math is correct, but nothing is better than your own two eyes — especially when inputting your Social Security number, address, income figures, and expense costs.
Doing your taxes is never a fun task, but taking the time to do them correctly can save you big bucks. Educate yourself on the deductions and credits you may be eligible for, and lean on free resources to help you file. Need help preparing your taxes? These tax apps will make your life easier.