Traditionally, younger generations are not the target market for most tax firms. Because their tax situations are generally not as complex, taxpayers under the age of 35 are usually not seeking out the services of tax professionals. However, in today’s market, millennials (those born generally between 1980 and 1995) may encounter a surprising amount of tax-related complexities that previous generations did not have to deal with. That’s why millennial clients can be a tax resolution gold mine for you to serve.
Millennials now comprise the largest portion of the workforce in the United States and therefore the largest portion of active taxpayers. Much has been said about how millennials are transforming American society, such as how they use technology, vote, recreate, and spend money. As a tax professional, you can prepare your tax firm to welcome millennials as they face new and unique tax issues today and develop those relationships for the future as their personal wealth grows.
To prepare your tax firm for an influx of millennial clients, it’s a good idea to take steps now to fully understand some of the concerns, obstacles, and achievements of this generation. If you make the mistake of ignoring millennials and their needs, you could be missing out on some excellent clients and damage your ability to appeal to them as they age.
Here are just a few of the wide variety of potential financial and tax-related concerns facing millennials:
1. Millennials transitioning from dependents to independence
It’s always tricky for young adults to transition from a place of relying on their parents for things to striking out on their own. Because current tax laws allow parents to claim dependents until they are 19 years old, or 24 if they are a full-time student, often young adults are not sure what their parents have done for them in the past regarding taxes and make simple mistakes during this transition.
In the event of mistakes on a millennial’s tax return, they will certainly need the expertise of a tax resolution specialist. Of course, the IRS will want their money back and the taxes and penalties can add up quickly. It’s not unusual for these young taxpayers to end up with a tax bill they are unable to pay. Helping millennials sort out such errors via your tax resolution services can be the beginning of a long-term professional relationship for you.
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2. Millennials embrace the gig economy
Whether they're doing freelance design work or driving for a ride-sharing company, many millennials are drawn to the freedom that accompanies contract work. According to a recent study, millennials will comprise about 42% of the gig economy in 2020, more than any other generation, and that percentage is expected to grow in the coming years. While taking on contract work is appealing to those who may be struggling to pay rent, buy a home, or pay down student debt, millennial taxpayers don't always know what they're getting themselves into from a tax perspective.
Doing contract work for a company means that they are not employees. Therefore, the company doesn’t withhold taxes or pay into things like social security or Medicare. Millennials may not understand that they may be required to pay quarterly taxes as well as a self-employment tax. It’s all too common for millennials who are unfamiliar with tax law to be shocked as they get to April only to find that they’ve already spent the money that should have gone to taxes. When they work with your tax resolution firm to estimate their tax burden, they can manage their money better and be prepared for what they owe.
3. Millennials are less likely to receive notices sent out by the IRS
Millennials are less likely to receive notices sent by the IRS for a combination of two factors. First, younger people are far less dependent on physical mail. Most—if not all—of their bills can be paid online, so millennials who check their email religiously may only rarely check their physical mailbox. Because the IRS depends most heavily on mail communication, it’s easy to see how people may completely miss any messages, instructions, or issues that the IRS is trying to bring to their attention.
Similarly, millennials often don’t have a permanent address as younger generations are more likely to rent rather than own a home. Millennials in particular may struggle to achieve home ownership and move more often, or may just prefer to rent. When the IRS catches up to them, it’s not uncommon for their tax problems to have grown over time. As a tax resolution expert, you can help millennial clients with the IRS and get them back on track with their taxes.
By focusing on developing millennials as clients, you can reach out to those who are striving for better lives but may be struggling with tax-related and financial burdens. By paying attention to this generation’s hopes and fears, your tax firm can be perfectly positioned to develop millennial clients that can last a lifetime.
Wondering what you should be charging for your tax resolution services? We have a blog post for that. Read How To Price Your Tax Resolution Services.