It’s that time of year again: tax season.
If you love it for its refund potential or hate it for its tediousness and/or cost, knowing how to navigate it successfully is key to saving you money and time ahead of the April 18 deadline. What’s more, it’s important to keep in mind that some things about paying taxes remain the same year after year, while others look a bit different.
Stimulus payments and additional tax breaks introduced during the pandemic, such as the child tax credit and earned-income tax credit, have all but disappeared in 2023: That means many Americans can expect smaller tax refunds this year, The New York Times reported.
Additionally, according to a recent Bankrate survey, 69% of tax filers are anxious about their refunds this year, citing inflation and lower payouts. Compounding the issue is the fact that these refunds are essential for most Americans just to get by: 75% of U.S. adults who expect money back this year say it’s important for their overall financial situation, per the survey.
Related: 5 Steps to Tax Season Success | Entrepreneur
“Making sure that you get every credit and deduction is critically important this year — you want to make sure you get everything you’re entitled to,” Karen Orosco, president of global consumer tax and service delivery at H&R Block, says.
Even experienced taxpayers might find it challenging to stay up to date on those changing credits and deductions, but it can be especially difficult for those whose circumstances are no longer the same — say, they’ve started working an additional gig for extra income.
And it can get even more complicated for Gen Z, some of whom are filing for the very first time, and many of whom have already launched side hustles of their own: 52% of respondents to H&R Block’s 2023 survey, which was conducted among 1,000 U.S. adults, revealed they have at least one.
“Whether it’s to make ends meet or because Gen Z prefers financial independence — they love the variation in their types of work,” Orosco explains, “so they’ll stitch together many [different kinds].”
Entrepreneur sat down with Orosco to learn more about what Gen Z filers should be aware of this tax season. Read on for three tips that will make getting that refund easier than ever before.
Related: Handle Tax Season Yourself This Year | Entrepreneur
1. First and foremost: Know what you owe
It might seem obvious, but in an era of alternative income streams, it isn’t always — particularly for younger filers. Many Gen Z side hustlers aren’t aware of what activities require them to pay taxes on their earnings, according to H&R Block’s survey.
And that’s an issue considering how much they are making outside of a nine-to-five: The survey found that 39% of Gen Z brought in upwards of $600 in 2022 through selling items online, investing and more, yet the vast majority (70%) neglected to keep detailed records of how they made their additional income over the past year.
For many, that oversight includes ignoring sums received on peer-to-peer payment apps like PayPal, Venmo, Etsy and Facebook Marketplace; just 44% of survey respondents knew they had to pay taxes on those earnings.
Tracking these activities not only ensures you pay the required amount, but it also makes it possible for you to write off certain expenses, as the IRS considers side hustles small businesses.
“As such, you’re entitled to deduct different expenses that a typical employee would not be eligible [for],” Orosco says. “So it’s important to have all your receipts, that you are tracking mileage — where you went and why.”
Related: 14 Tax Deductions Your Small Business Might Be Overlooking
2. Explore your filing options — and choose the best one for you
Today, several paths exist for Gen Zers looking to file — from working with a tax pro in a brick-and-mortar office to using online software from the comfort of their couch.
And that ability to choose is as important as it’s ever been; approximately one-third of Gen Z plans to file via their mobile devices or computers, Orosco says.
Even a tax-preparation mainstay like H&R Block, which has been in the business for nearly 70 years, recognizes that the younger generation is consuming data and approaching taxes differently, Orosco says — which means that the companies that help them file have to rise to the occasion.
“It’s super important [Gen Z filers] get the expertise that they need,” Orosco explains, “and we’re prepared to meet them where they are — whether that’s completely digitally, working with a tax professional and anything in between.”
Related: These 11 U.S. States Are Reducing Individual Income Taxes
3. The earlier you file, the better (even if you’re short on cash)
It might seem counterintuitive for filers who expect a refund to procrastinate on their taxes.
“As someone said to me, ‘It’s my money that I’m getting refunded — I’d rather have access to it as quickly as I can,'” Orosco says.
Despite the seemingly straightforward logic, many Americans do put the process off.
A lack of critical information is part of the problem: Nearly one in three filers doesn’t know when tax day is, according to a survey conducted by Fidelity subsidiary Investment Property Exchange Services — and that figure jumps to 53% for Gen Z taxpayers.
Yet another contributing factor is the misconception that one has to have all the funds owed available to pay at the time of filing.
“Those things are completely separate,” Orosco says. “The best advice I can give is even if you find yourself in a situation where you didn’t set aside any money [for taxes], and now you’re going to owe, still file as quickly as possible because then you know exactly what that tax liability is. You can plan for it. There are payment options with the IRS. So the sooner you file, the more time you have to figure out how you’re going to make that payment.”
Related: Want to Lower Your Taxes? Make the Most of Retirement Planning.
