I Asked ChatGPT About the Biggest Tax Mistakes 20- and 30-Somethings Make — and How To Avoid Them
When you’re young, you’re convinced you know everything. And with the plethora of information available at their fingertips, today’s 20-somethings and 30-somethings know a lot more than their parents and grandparents might have known at their age. However, that doesn’t mean they’re not prone to their fair share of mistakes — even when it comes to their taxes.
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As newer tax filers — or even first-time tax filers, in some cases — younger adults might be vulnerable to making common and potentially costly errors. Though I am, ahem, not in my 20s or 30s, I wanted to help this cohort. So I asked ChatGPT to identify the biggest tax mistakes many 20-somethings and 30-somethings make — and how to avoid them.
Mistake No. 1: Not Filing at All (or Filing Late)
Younger tax filers, especially those who are still newer in their careers and not earning much money, might skip filing because they think they don’t owe anything. Navigating the tax system can also be overwhelming for newer filers — and, frankly, even for experienced ones.
But ChatGPT is direct about why they must file, regardless of their income level or anxiety: “You can face penalties, miss refunds and lose out on credits.”
In fact, many low- and moderate-income filers are owed refunds — but they can’t get that money unless they file a return.
How to avoid it:
File every year — even if your income is low
Use free tools like IRS Free File if you’re eligible
Set a calendar reminder well before the deadline (usually April 15)
Mistake No. 2: Missing Valuable Tax Credits
When you’re relatively new to filing your taxes, the sheer volume of terms and information can be overwhelming. Some 20-something and 30-something taxpayers get so overloaded that they shut down — and never learn about the tax credits they may qualify for.
For anyone unfamiliar, the IRS website defines a tax credit as follows: “A tax credit is a dollar-for-dollar amount taxpayers claim on their tax return to reduce the income tax they owe. Eligible taxpayers can use them to reduce their tax bill and potentially increase their refund.”
ChatGPT emphasizes that credits directly reduce your tax bill. Failing to learn about the credits you’re eligible for can mean leaving real money on the table — sometimes hundreds or even thousands of dollars.
How to avoid it: ChatGPT advises filers to check their eligibility for the Earned Income Tax Credit and the American Opportunity Tax Credit. It also suggests using tax software or a professional preparer to help surface credits automatically. Keeping records related to education and child care expenses is also key.
Mistake No. 3: Ignoring 1099 Income (Side Hustles)
Many younger tax filers may simply not be aware that they must report the money they’ve earned from freelance or gig work. But ChatGPT points out that the IRS often receives copies of 1099 forms, meaning unreported income can trigger penalties, interest or audits.
It’s also important to note that you’re required to report income even if you don’t receive a 1099 at all.
How to avoid it: ChatGPT offers several practical suggestions:
Track all income, even if you don’t receive a form
Set aside roughly 25% to 30% of earnings for taxes
Pay quarterly estimated taxes using IRS guidelines
Mistake No. 4: Not Taking Deductions You Qualify For
Another common mistake is “taking the standard deduction without checking whether itemizing or specific deductions would save more.”
For anyone who’s puzzling over the term "standard deduction," it refers to a flat, inflation-adjusted dollar amount that reduces taxable income — and simplifies filing — by allowing taxpayers to avoid listing individual deductions.
However, some filers may benefit from claiming specific deductions instead, depending on their financial situation. Failing to explore those options can lead people to overpay their taxes.
How to avoid it: ChatGPT recommends tracking deductible expenses such as:
Student loan interest
Retirement contributions
Business expenses (for self-employed filers)
It also suggests comparing the standard deduction with itemized deductions each year, since the better option can change over time.
Mistake No. 5: Poor Retirement Tax Planning
Retirement may not be top of mind for 20-somethings and 30-somethings — especially when student loans, rent or family expenses feel more urgent. But ChatGPT warns that ignoring tax-advantaged accounts like a 401(k) or Roth IRA can mean missing out on long-term tax savings and compound growth.
How to avoid it: Start by contributing to a Roth IRA, which offers tax-free withdrawals in retirement, and a 401(k), which provides pretax contributions today. If your employer offers a match, aim to contribute at least enough to capture the full amount — otherwise, you’re leaving free money on the table.
The Bottom Line
ChatGPT encouraged 20-something and 30-something tax filers not to feel discouraged by how complex the process can seem.
“Most tax mistakes at this stage of life come down to not knowing what applies to you yet,” it wrote. “A simple system — tracking income, saving receipts and using good software — goes a long way.”
This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal, or tax advice.
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