Talking to a Millennial Taxpayer
Taylor is a 23-year-old tech worker living in Boston.
So, Taylor, where are you in your 2014 tax process?
I already finished! I submitted my taxes about a month ago, in February. So my return’s already been processed and everything.
You pay a lot of money in taxes, right? Are you comfortable sharing how much?
So I ended up paying $38,800 in taxes for 2014. That breaks down to $23,878 for federal income taxes, $5,955 for state income taxes, $7,254 for Social Security, and $1,713 for Medicare.
That’s incredible. I suspect that $38K is more than some of our readers make in a year.
Yeah, I feel pretty guilty-fortunate about it.
I mean, paying your fair share of taxes is a pretty fortunate-fortunate thing for both you and for the rest of us, but I understand the feeling.
Do you get tax refunds? Or do you end up paying more when you file your return? Or at this point is it all “congrats, you’ve paid the exact right amount in taxes?”
I did get a modest tax refund for my federal return and had to pay a little bit this year for my state taxes. Part of that is due to the way I’m paid (a lot of my compensation is through bonuses). The numbers I cited earlier are what I actually paid in taxes at the end of the day, even though my withholding was larger.
Got it. Do you do your taxes yourself, or work with a CPA?
Just myself. Well, and TurboTax. I have a pretty simple financial situation so I’ve never tried the CPA route.
Do you get to also factor those fun things like bank interest and investment dividends into your tax return?
Oh yes, I do! A lot of my investments are in non tax-advantaged accounts, and I moved some things around last year, so I ended up getting a number of 1099s.
Nice! 1099s are a lot of fun. What about deductions? How do you keep track of your various charitable or other deductions throughout the year? Do you have a system?
I don’t get a lot of deductions since I’m unmarried, childless, and don’t own a house. I think my biggest deductions (for federal, at least) were charitable givings and how much was withheld for my state taxes. Charitable givings I track by putting all my tax-related items into a special folder in Gmail.
I’m starting the “Special Gmail Folder” system this year because my previous “Make A List” system isn’t as efficient as I would like. Good to know it works for you!
So you’ve got your big W-2, a handful of 1099s, your deductions folder, and TurboTax. How long does it take you to complete your taxes?
I think I ended up spending 1-2 hours actually doing my taxes. Most of that time was spent logging everything in the 1099s, though I did spend an additional 15 minutes making sure I didn’t miss anything each time I got a tax-related document I’d already received digitally through the post.
Making sure you haven’t missed anything is always the most nerve-wracking part of the process. It seems like your taxes are pretty straightforward, then. Is there anything that surprised you about your taxes or the tax process in general?
Not really, at least not while filing. I think I was most surprised when I started the job and found this large chunk just gone from my first paycheck. Like, I knew it was coming, but it was always felt like an abstract thing until I actually saw on my pay stub how much had been withheld.
It’s a rite of passage, I tell you. Everyone has that feeling, no matter how big or small their paycheck is.
I have another, probably more interesting tax anecdote that might be cool. So in college I was in kind of the opposite tax situation I am in now. My family was pretty poor so I ended up getting a lot of financial aid through my university. Which was great, except then tax time came.
Little known fact: scholarship and grant money that goes toward non-tuition expenses—so, room, board, planes to and from home, that sort of thing—are all taxable. Which meant that, as a college student with essentially zero of this money actually flowing through my hands, I ended up having to pay something like $1.5K on taxes.
Were you able to deduct items like textbooks? I remember having scholarships and having to figure out how my educational expenses could deduct from my scholarship received.
Yep, textbooks and, I think, “required fees” were also deductible.
So how did you handle that unexpected tax burden?
Well, luckily I had figured this out before I started university. I had a part-time job in high school so it was already on my radar once I got my financial aid package for college. What I ended up doing was signing up for a bunch of psychology experiments on the weekend and taking any money I received from graduating high school and Christmas that year and dumping it toward taxes. And then in sophomore year I signed up to be a tutor, expressly for the purpose of tax-paying.
NICE! Of course, you’d have to pay taxes on that income too. It’s like a Zeno’s Paradox of taxpaying.
Haha, YES! It was an annoying problem, but I figure overall a good one to have since it meant I was coming out of college debt-free.
And ready to earn even more taxable income!
This story is part of our Tax Month series.
Photo credit: Daniel Ramirez