Why doing taxes in your 20s is harder than you think

If you don’t have property, kids, or investments, then doing your taxes is a breeze, right? Wrong. Taxes are complicated for many (single, broke) 20-somethings — especially the first time around. Unless your parents had Suze Orman on speed dial or you itemize deductions for sport, there are simply lots of things you don’t learn until that first reckoning with the IRS.

What’s more, 20-somethings are more likely to hold multiple jobs. Whether you juggle gigs out of passion or financial necessity, the bottom line is that multiple jobs equal multiple tax forms, which complicates the process.

We’re down to the wire (one week left!) so take a deep breath, gather your paperwork, and let’s get started. Here’s a list of things to consider as you file and money-saving strategies to put in place for next year.

W-4s: Am I Doing It Wrong?

Filling out tax forms correctly is the first step to maximizing your refund. If you’re single, have no dependents, and filled out one W-4, claiming one allowance is standard. If that’s what you did — great! If you filled out multiple W-4s, things get tricky. To figure out how many allowances you should claim, you can use the IRS withholding calculator. In brief, “if you have more than one job, you want to claim zero allowances on the lowest paying job, and one on the highest paying job,” explains Jill Gonzalez, a WalletHub spokesperson. More money per paycheck is withheld, which means you’re due for a bigger refund.

If you have multiple jobs and end up owing taxes on W-4 income, then you probably made the mistake of claiming one or more allowances on each job, thus withholding too little of your total income. However, if you’re due for a really big refund ($1,000 or more) then you’ve probably taken too few allowances. Essentially, you’ve given the government a free loan. Bigger isn’t always better — your refund money could’ve been accruing interest in a savings account or chipping away at high-interest student loans throughout the year.

Speaking of bigger refunds, where do I start?

One common mistake among novice taxpayers is not claiming all their deductions — the expenses you’re allowed to subtract from taxable earnings. Deductions are your basic tax hack to boost your refund. There’s a whole bunch, but here are some commonly missed deductions among young adults:

• Student loan interest
• Certification fees
• Moving expenses
• Trade publications expenses
• Classroom expenses for teachers who pay for supplies out of pocket
• Tip-outs for those in the hospitality industry

I repeat: Do not pass go, do not collect your refund until you’ve claimed all of your deductions.

I have to pay taxes — and I didn’t even earn that much. Why?

Like many millennials, you’re probably part of the freelance/gig/sharing economy. When you earn non-employee income (you should receive a 1099-MISC form for all jobs with $600+ in earnings), the client doesn’t withhold taxes — but you still have to pay them. For 1099 rookies, this may be a shock to the system. (Full disclosure: I angry-cried my way through taxes my first year freelancing). You can cut what you owe by carefully itemizing deductions, but here are a few pro tips:

• Work from home? Take a home office deduction: People tend to be gun shy about this for fear of an audit, but “if you meet the requirements as many freelancers do, take the deduction!” insists Victoria DiSalvatore, a certified tax planner who specializes in working with artists.
• Keep meticulous records of your work-related expenses: This can be tricky, since the personal and professional are intertwined in your 20s. (Were those drinks for business, pleasure, or both?) Some credit card companies provide an annual summary that breaks purchases down by category. Download yours and give it a once-over. To determine write-offs for next year, spreadsheets are your friend.
• Pay quarterly estimated taxes: “It’s feast or famine for freelancers,” says Gonzalez, but you still want to pay taxes quarterly to avoid getting saddled with a major tax bill at year’s end. Most online tax programs have formulas that can help.

This still seems really complicated. I need tax help from a pro but don’t have the dough.

Don’t fear. There are options:

• VITA, the Volunteer Income Tax Assistance program, offers tax help to anyone earning $53,000 or less — completely gratis. VITA volunteers usually work out of universities or libraries. Find one in your area here.
• DiSalvatore suggests asking an accountant for a brief consultation (before the tax season crunch starts). Many will do it for free or a small fee.
• Watch out for scams: “You want to stay away from illegitimate companies or anyone who says they can negotiate with the IRS on your behalf,” warns Gonzalez. “Don’t sign a contract that shields them [the accountant] from liability.”

I can’t pay my taxes. Should I still file?

Yes, absolutely. The IRS doles out two penalties, one for failing to file and another for failing to pay. At least do the latter if you can’t do the former.

So what happens if I don’t pay my taxes?

The IRS charges 3% for underpayments and a monthly late fee of 5% of unpaid taxes for each month. . You still have to pay eventually. Here are your options, says Gonzalez:

• If you just need a few weeks until that next paycheck rolls in, suck it up and pay the .5% late fee
• If you need more time, apply for an extension. You won’t be charged an application fee, and you may qualify for the IRS fresh start initiative.
• If you can find a credit card offering 0% interest and no fees, use it! By paying your taxes with plastic, you shift debt from the IRS to a credit card issuer, thus avoiding the IRS’s late fee and improving your credit. Have a high interest rate card? Then it’s not worth it.

About That Refund….

Dr. Brad Klontz, a financial psychologist, has one word for you: Retirement. Klontz says to consider your refund “found money” and suggests using a compound interest calculator like Moneychimp’s to determine how much it will grow by your target retirement date. “This makes a $1,000 decision into a half a million dollar decision,” says Klontz. That’s something we’ll bank on.

Alizah Salario is a journalist and writer covering finance, culture, and their intersection. In a past life, she was a teacher in Chicago and Istanbul. Alizah lives in Brooklyn, where she’s perfecting the art of the freelance hustle.