One would think that the tax situation for the younger generation, mostly millennials as we call them, is not very complex. Therefore, traditionally, this demographic is not the target market for most tax companies. Taxpayers under the age of 35 do not typically seek the services of tax professionals or tax preparers.
However, it may be that in the current scenario, millennials (those born between the early 1980s and late 1990s) may encounter a staggering magnitude of tax-related complexities that previous generations did not face. Therefore, contrary to popular belief, making them the ideal client for tax preparers can prove to be a gold mine for the tax industry.
Guide to Millennials
According to studies and reports, millennials now comprise the largest portion of the workforce in the United States. Ultimately, this makes them the largest share of active contributors. There has been extensive conversation about millennials being on the cutting edge and how they are transforming the American economy and society.
Millennials’ affinity with technology, voting, recreation and their spending habits have put a new face on the way money is used. By embracing this change, tax professionals can prepare their companies to welcome millennials as they face new and unique tax issues today, and build 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 action now and fully understand their concerns, problems, obstacles and achievements. If a company is making the mistake of not paying close attention to millennials and their needs, it could affect the customer base. One might stand a chance of losing some great clients and damaging the overall appeal.
Let’s take a look at some of the potential tax and financial concerns millennials might face:
1. Millennials transitioning from dependency to independence
The metamorphosis from a dependent youth to an inflexible independent adult is always complicated. It can be quite challenging for young people to let go of their parents to get by on their own. Under current tax laws, parents can claim their children as dependents until they are 19 years old, or 24 if they are a full-time student.
When starting out on their own, young adults have vague ideas about how their parents handled taxes on their behalf. This can cause them to make simple mistakes during this transition.
This is where a professional tax preparer comes into play. For errors on a millennial’s tax return, you’ll need the help of a tax specialist.
Of course, the IRS doesn’t differentiate between a millennial and an older taxpayer. For the IRS, all citizens are equal and the authorities would end up imposing penalties in case of discrepancies or errors in the presentation. It’s common for these young people to end up with a tax bill that they probably can’t pay.
Helping millennials resolve such errors by offering tax resolution services can only be of benefit to a tax company. This could help plant the seed for the start of a long-term professional relationship.
2. Millennials Embrace the Gig Economy
Being self-employed and the gig economy in general is a huge hit with millennials. Whether it’s freelance design work or providing driving services for a taxi or ride-sharing company, many millennials are drawn to the freedom offered by contract work or gigs, as we call them. A recent study conducted claims that millennials would make up about 42% of the gig economy by 2020. This number represents a higher proportion than any other generation, and this percentage is expected to grow in the coming years.
While taking on additional contract work may seem appealing to those who may be struggling beyond the bare minimum. This can be said about paying rent or paying off student debt. Millennial taxpayers are not always aware of what they are getting into from a tax perspective.
When employees are hired on a contractual basis, companies do not withhold taxes or pay social security or health insurance. Now, initially contract jobs may seem promising to millennials as it means extra money. But what they may not understand is the result that they could be required to pay quarterly taxes and also a self-employment tax.
Millennials who aren’t as familiar with tax laws are expected to be in for a surprise as April progresses. They could end up spending the money that must now be contributed to taxes because they were previously 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 take advantage of this very moment and help millennials by estimating their tax burden and better managing their money. They can assist millennials in being well prepared in advance for what they owe in taxes.
3. Millennials are less likely to receive notices from the IRS
As we already know, the IRS sends notices and penalty messages in case of any tax discrepancy. Now, millennials are less likely to receive these notices from the IRS due to a couple of factors. Since the younger generation is more affiliated with email and much less reliant on physical mail. The IRS sends most of its notices through the US mail.
Now, with most transactions online, millennials aren’t in the habit of checking their physical mailboxes. Therefore, we see that it is easy for people to completely overlook any notice or issue that the IRS is trying to bring to their attention.
Another factor that strikes millennials is renting a place without a permanent mailing address. They tend to move and change addresses frequently, which makes communication by physical mail even more difficult.
When they finally catch up with their physical mail, the IRS may be too late to follow up on them and the tax problems will have increased over time. Here, 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.
By focusing on developing millennials as clients, a tax company can not only generate more profit, but also do a good deed by reaching out to those struggling for a better life.
They can help them through the fight of the tax and financial burden. By paying attention to the puzzles, doubts and goals of this generation, a tax firm can be exquisitely positioned to develop millennial clients, with whom they can have a lasting professional relationship.