The Most Confusing Money Task for Gen Z
Tax filing can be an overwhelming process, especially for first-timers. For this reason, it comes as no surprise that the youngest generation in the workforce, Gen Z, is finding tax filing to be an unintuitive process.
Advice: Suze Orman Cautions Against Investing Emergency Funds in Two Common Places
Learn: How To Build a Financial Plan From Zero
According to a recent survey conducted by GOBankingRates, 36% of 18- to 24-year-olds found taxes to be the most confusing financial task. While Gen Z is the generation most confused by taxes, more than one-fourth of all Americans are struggling with this financial task.
With tax day fast approaching, here’s a closer look at tax confusion numbers and experts’ insights into why Gen Z is struggling so much with taxes. Plus, keep reading for some basic starter tips to streamline the filing process.
Taxes Are the Most Confusing Financial Task for Gen Z
GOBankingRates asked over 1,000 Americans which financial task they found most confusing, and 27% said taxes.
When looking at the generational breakdown, Gen Z was most confused; 36% of 18- to 24-year-olds said doing taxes was more confounding than buying a car or a home or planning for retirement.
Older generations are not feeling the mental strain of taxes quite so heavily, with only about 25% of older Gen Z and millennials (ages 25-44) finding the task difficult.
Gen Xers were the least likely to find taxes confusing, with a mere 23% to 24% of people aged 45 to 64 feeling challenged. Among those over 65, 27% found taxes to be the hardest to understand among taxes, car buying, homebuying and retirement planning.
Why Is Gen Z So Confused by Taxes?
There are a few reasons that more than a third of Gen Zers struggle to understand the tax system.
“As a whole, we do a lousy job in our country of educating people on taxes that they’ve been paying through their paychecks as well as the tax returns that need to be filed at the end of the year,” said Cara Macksoud, CEO of financial assessment provider Money Habitudes.
This lack of education is having a particularly harmful impact in today’s digital age.
“Gen Z is really having an issue with this,” Macksoud said. “One, because the education is just not there, and second, because many Gen Zers are gig economy workers — and that sets them up for disaster for a multitude of reasons by not understanding how the tax system works and how they’re expected to participate.”
5 Tax Basics Every Gen Zer Needs To Know
When it comes to achieving tax literacy, financial experts have some key tips that can help the process go as smoothly as possible for young Americans.
You Have To Pay Taxes on All Income
In order to properly file taxes, you must disclose all earnings, no matter where they are from.
“If you are paid by an employer (W-2 income), they will take income taxes out for you,” said Jay Zigmont, Ph.D., CFP and founder of Childfree Wealth. “If you are working a gig job (1099 income), you are responsible for making estimated tax payments and paying your own taxes. You are also required to report any cash or tip income.”
Cash App Payments Also Need To Be Reported
If you earn money on payment apps such as Venmo or CashApp, prepare to pay taxes on those funds as well.
“In 2023, all cash apps are required to report when you receive more than $600 across the year,” Zigmont said. “That means if you cover dinner and your friends Venmo you to cover your part, you could end up paying taxes on it. Keep good records of all money coming in and where it goes.”
Tax Filing Happens Every Year
“You need to file your taxes each year,” Zigmont said. “You can use software or work with a CPA/EA or another tax preparer, but the bottom line is you need to file each year. Don’t skip years, as you are likely to get dinged for fees and interest.”
You don’t need to feel alone or overwhelmed during tax season. In addition to tax-assisting software, you can reach out to financial experts, your banker or your employer for help.
Keep Your Receipts
It’s far more difficult to file for taxes if you don’t know where your money is going.
“Keep track of everything and save receipts,” said Clarisa Lee, a tax preparer with GOD Counts Accounting. “Sometimes it’s hard to understand what needs to be reported on taxes but if you track everything you can’t miss it.”
Keep Good Tax Records
While there are many excellent tips for Gen Zers to take advantage of during tax season, if there’s one thing we hope you take away, it’s the importance of keeping your financial habits organized.
“You need to keep your tax returns and supporting documents for at least three years,” Zigmont said. “You can use secure storage and keep everything in electronic form. The best bet is to download all of your bank and credit card statements each year, add them to a folder, and you will have them if you need them.”
More From GOBankingRates
This article originally appeared on GOBankingRates.com: The Most Confusing Money Task for Gen Z
