Millennials and taxes: 3 reasons why young adults are wary of the IRS
Regardless of age, few people enjoy paying taxes.
Did you know, however, that there are generational differences in the degree of discomfort that people experience in relating to the IRS? A recent survey showed that fully 80 percent of people between 18 and 34 are anxious about possible errors in filing taxes.
In this post, we will offer three reasons why millennials are more fearful about tax compliance than any other generation. We will also offer a reason to hopeful, even if you have run into tax trouble.
Young workers are not only new to the tax-filing game; many of them work in the 1099-economy, which can make tax compliance trickier.
As a millennial, you are more likely than members of older generations to work as a contractor rather than aW-2 employee.
There are complicated reasons for this. You may prefer the freedom of working as an independent contractor rather than as an employee. Or maybe work in the so-called “gig economy” is what you could get, given how hard it is to get one of those old-fashioned jobs with employee status and full benefits.
In any case, when you get a 1099 rather than a W-2, it can be more difficult to keep up with taxes. Nothing is withheld from your paycheck and you have to pay your own Social Security and Medicare taxes. You are supposed to make those payments quarterly, estimating how much you owe, but that is of course hard to do when nothing is withheld.
Millennials are often reluctant to get tax help.
The IRS’s problems with offering good customer service to taxpayers are notorious. Under the pressure of years of budget cuts from Congress, the IRS has had to cut back on the assistance it provides.
This has resulted in extremely long waits for customer service by phone and fewer office hours for in-person assistance. Though these delays and cutback impact all generations, millennials in particular are not used to dealing with such long waits. After all, a generation raised on online availability often lacks the patience to navigate such slow systems.
It can take hours on the phone to try to reach someone at the IRS in a position to address your issue. That is really a stretch for millennials who are used to taking care of things with a few clicks.
Millennials are mobile and may miss out on receiving IRS notices.
The IRS generally deals with taxpayers by letter, not by phone. Generally this is a good thing. It means the IRS doesn’t engage in high-pressure phone calls trying to collect tax debt.
But if the written notices don’t reach you, it can lead to problems. A notice of unpaid taxes, if left unanswered, can become a deficiency – and eventually subject you to collection actions such as liens and levies.
This can be a problem for millennials because they are less likely to be homeowners than previous generations. If you move to a different apartment or rented townhouse, it can lead to tax trouble if IRS notices don’t reach you at your current address.
Why you should stay positive
Overall, then, millennials face some significant challenges in staying out of tax trouble. As we explained in a previous post, however, there are also good reasons not to be afraid.
One of those reasons is that a knowledgeable attorney can help you figure out a plan to tackle your tax troubles. This could take the form of an offer in compromise, an installment agreement or some other payment plan. The main thing to realize right now is that you have options for dealing with your tax debt.