How well do Americans understand their taxes?
Millennials and Generation Z were the most likely to express confidence in their knowledge of the tax code, but how much do they know?
Taxation may be one of only two certainties in life, but many Americans know very little about how it affects them.
In a recent survey of 1,000 U.S. adults conducted by Betterment, an online financial broker, 85 percent of Americans said they felt at least somewhat confident about their knowledge of taxes.
And yet, half of respondents said they didn’t know how much tax was withheld from their paychecks and therefore probably wouldn’t be able to say how much they pay in taxes each year.
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Nearly as many—48 percent—weren’t able to say whether their tax rates changed in the past year. Thus, they are unaware of how the tax overhaul approved by Congress at the end of 2017 affected them. Despite this, 18 percent of respondents say they increased their 401(k) contributions as a result of the reform bill.
Finally, 23 percent didn’t know that the filing deadline was April 15. One can only hope they believed the deadline was earlier and haven’t been paying late fees.
Millennials and Generation Z (those born after 1997) were the most likely to express confidence in their knowledge of the tax code. But that same group was also much more likely than their elders to not know when the filing deadline was.
There are some who do seem to get it when it comes to income taxes. Forty percent of respondents say they sold stocks for a tax benefit, and an third made charitable donations.
Roughly a quarter of respondents said that they had been negatively impacted by the government shutdown earlier this year, with one-third saying they had to tap emergency funds as a result.
While 28 percent said they planned to file taxes earlier than usual because of the shutdown, 10 percent said they planned to file later. Most of those paying earlier said they felt additional pressure to file because they worried the government would take longer than usual to get them their refund, while late-payers largely said they felt less pressure to pay on time because they figured there would be less accountability due to the turmoil caused by the shutdown.
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