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Here Is Your Tax To-Do List For Young Professionals

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Young professionals often use technology to manage their hectic lives. Tech tools can be especially useful at tax time, given the advantages of filing taxes electronically.

But while choosing the best tax software for your needs is an important part of tax season, no program can teach you all the ins and outs of the filing process. In fact, some vital steps occur before you sit down at your computer. 

Young professionals should have the following six tasks on their to-do lists to make sure they come out on top with taxes.

1. Talk to your parents

No, your mom didn’t suggest this step. But it's good family (and tax) advice regardless of who offers it. Many of the popular tax breaks you might claim as a young adult can disappear if Mom and Dad can still claim you as a dependent.

This issue often arises with education tax deductions and credits. If your parents can claim you as a dependent on their tax return, for example, you cannot take the tuition and fees deductionor thestudent loan interest deduction, even if you paid those bills with your own money.

 So talk to your folks before you file. When a tax benefit can be claimed by either you or your parents, it might be better for Mom and Dad, whose higher earnings mean abigger IRS bill, to get the tax break. If they've done a lot for you over the years, it's the least you can do for them.  

2. Collect your W-2s — all of them

Finding the perfect job is hard. If it took you several tries last year to land the best position, you should get earnings statements from all the firms where you worked and made at least $600. 

Watch for a W-2 from all those employers, past and current. The IRS requires these to process your return, even if you file electronically. 

3. Report your side earnings

If you had a side job to supplement your wages, or you're making a full-time living through a variety of gig-economy enterprises, you'll likely get tax documents for this money, too. This includes traditional side jobs like tutoring and house sitting, as well as sharing economy options like renting your apartment to vacationers or driving for Uber or Lyft. 

In some of these instances, you'll get an earnings statement, usually a 1099-MISC or 1099-K. Like the W-2 data, the IRS will be copied on the 1099 information, so make sure you include it. But even if you don’t get a 1099 — they're not required if you made less than $600 — you still are legally required to report all your side earnings.

If those earnings were substantial, you may also wish to deduct expenses you incurred in running those business ventures. 

4. Do your homework on education tax breaks

School is behind you, but it still might offer some tax breaks. If you're paying off a student loan, you might be able to deduct up to$2,500 of the interest on those payments. Again, do this after your tax talk with Mom and Dad. 

If you took a course to improve your skills at your new job, check out the Lifetime Learning tax credit. It could be worth a $2,000 tax break. 

5. Tally moving costs

So your perfect job was across the state? Don't worry. Uncle Sam can help cover those costs. When you relocate for a job, many expenses are deductible, as long you moved 50 miles or more from your former home. 

You can even claim moving expenses to get to your first job. Even better, unlike job search costs, you don't have to itemize to claim these expenses.

6. Take credit for retirement savings

If you’ve signed up for your company's 401(k) plan, kudos to you for thinking ahead. Now be sure you get even more credit when you file your taxes: Your tax software should help you determine whether you're eligible for theSaver's Credit, which could be worth up to $1,000 off your tax bill.

Tracking tax information can be tough, but don't panic. You've got time. And if you’d like a quick way to calculate your tax burden, check out NerdWallet’s federal tax calculator. Compare that figure to the withholding amount on your W-2 to see whether you’ll get a refund or write a check to the IRS.

And when you’re ready to begin the filing process, don’t forget to check out NerdWallet’s round-up of the best tax software of 2017.

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