One would think that the tax situation for the younger generation, mostly millennials as we call them, is not very complex. Thus traditionally, this demographic is not the target market for the majority of tax firms. Taxpayers under the age of 35 don’t usually seek services of tax professionals or tax preparers.
However, it might happen that in the present day scenario, millennials (those born between the early 1980s to late 1990s), may encounter a flabbergasting magnitude of complexities related to tax that the previous generations did not face. Thus, contrary to the popular belief, making them the ideal client for tax preparers can prove to be a gold mine for the tax industry to serve.
Guide the Millennials
As per studies and reports, the millennials now comprise the most sizeable portion of the workforce in the United States. This ultimately makes them the largest portion of active taxpayers. There have been extensive talks about millennials being the shaping edge and how they are transforming the American economy and society.
The millennials’ affinity towards technology, voting, recreation, and their spending habits have given a whole new face to how money is used. Embracing this change, tax professionals can gear up their firms to welcome millennials as they face unique and new tax issues today, and develop those relationships for future wealth growth.
To prepare a tax firm for a sporadic wave of millennial clients, it would be a good idea to take steps in this regard now and to fully understand their concerns, issues, obstacles, and achievements. If a firm is making a mistake of not paying much heed to the millennials and their needs, it could take a toll on the client base. One could stand a chance to miss out on some excellent clients and damage the pan-age appeal.
Let’s take a looks at few of the potential tax and financial concerns that millennials would face:
1. Millennials Transitioning from Dependence to Independence
The metamorphosis from a young dependent to an adamant independent adult is always a tricky one. It can be pretty challenging for young individuals to come out of relying on their parents to strike out on their own. As per the current tax laws, parents can claim their kids as their dependents until they are 19 years old, or till the age of 24, in case they are a full-time student.
When starting on their own, young adults have vague ideas on how their parents dealt with taxes on their behalf. This may cause them to make simple mistakes during this transition.
This is where a professional tax preparer comes into play. In the event of mistakes on a millennial’s tax return, they would be needing a tax specialist’s assistance.
Of course, the IRS doesn’t differentiate between a millennial and an older taxpayer. For the IRS, all citizens stand equal, and the authorities would end up imposing penalties in case of any discrepancies or errors in filing. It’s common for these youngsters to end up with a tax bill they are probably unable to pay.
Helping millennials sort out such errors, by offering tax resolution services, can only prove beneficial for a tax firm. This could help to sow the seed for the beginning of a long-term professional relationship.
2. MillennialsEmbrace the Gig Economy
Freelancing and the gig economy on a whole is a big hit with millennials. Be it freelance design work or offering driving services for a cab or carpool company, many millennials are lured towards the freedom that contract work or gigs as we call them offers. A recent study conducted, states that millennials would constitute around 42% of the gig economy in 2020. This number is of a larger share than any other generation, and this percentage is only expected to grow in recent years to come.
While taking on extra contract work might seem appealing to those who may be struggling beyond the bare minimum. This can be said regarding the payment of rent or repaying student debt. Millennial taxpayers aren’t always aware of what they are getting themselves into from a tax perspective.
When onboarding employees on a contractual basis, the companies don’t withhold taxes or pay into social security or medical insurance. Now, initially contract jobs might seem promising to millennials, as it means extra cash. But what they may not understand is the result that they might be required to pay quarterly taxes and a self-employment tax, too.
It is expected from millennials who are not so well acquainted with tax laws, to be shocked as April draws by. They might end up spending the money that now needs to be contributed towards tax because they were earlier unaware of all these nuances.
To avoid such a situation, they should take the guidance of a professional tax resolution service. A tax preparer could clutch this very moment and help millennials by estimating their tax burden and managing their money better. They can provide their aide to millennials to be well prepared in advance for what they owe as taxes.
3. Millennials are less likely to receive IRS sent Notices
As we are already aware that the IRS sends out notices and penalty messages in case of any tax discrepancy. Now, millennials are less likely to receive these notices sent out by the IRS due to a couple of factors. Given the fact that the younger generation is more affiliated with electronic mail and are a lot less dependent on physical mail. The IRS sends most of its notices via the US post.
Now, with the majority of the transactions shifting online, millennials don’t have a habit of checking their physical mailboxes. Thus, we see that it is easy how people may completely miss any notices or issues that the IRS is trying to bring to their attention.
Another factor that hits the bull’s eye for millennials is renting a place without a permanent mailing address. They tend to move and change addresses frequently, making physical mail communication all the more difficult.
When they’re finally on track with their physical mail, the IRS might be a little too late to follow up to them and the tax problems would have grown over time. This where a tax resolution expert could be of help. Tax professionals can help millennial clients with IRS communication and help them get back on track with their taxes.