 Hello and welcome to the Communist Manifesto for Personal Finance, the only program that teaches you how to seize your means of production. I'm Comrade Rourke, and let me be the first to congratulate you. Yes, you, you plucky 18-22 year old. You've navigated the Mad Max Hellscape of high school. Perhaps some of you have even graduated from college. Hopefully you've moved out of your parents' house and are now gainfully employed. You're finally free to make your own way in the world, which means for the first time ever you get to file your own taxes. Because you're also no longer dependent on your parents' tax return. Upon learning that you had to file your own taxes, your first thought was probably No one ever taught me how to do that. And because you never learned anything about taxes, you've been putting them off. But now the day of reckoning is at hand, and in your desperation you have turned to the last place in the world you should ever go to for reliable information. The Internet. If you're watching this video in the hope that we'll explain how to fill out a 1040, unfortunately we have to do something communism hasn't done yet. Disappoint you. There are a few reasons why we won't be going into that much detail about the 1040. First, the 1040 which by the way is the form you need to file with the IRS by April 15th is simultaneously the most boring, confusing, and infuriating item ever created by the human race. Describing every detail of the 1040 would be the equivalent of bringing you face to face with an indescribable cosmic horror, and it would most assuredly drive you mad. And the basic information we're going to cover in this program might drive you to psychosis. Second, we don't want to go into too much detail about the tax code because every few years Congress gets together, strips naked, and performs a satanic hokey pokey while a goat is disemboweled in the center of the rotunda. The great whore of Babylon, known also as Mitch McConnell, divines these goats innards and proclaims his visions in ancient Aramaic, which is then translated into binary. And that's how Congress changes our tax code. Finally, we don't want to go into too much detail about taxes because we are not tax experts. We know as much about taxes as Congress which is to say very little. Our main goals for this program are to tell you about the best free methods for filing your taxes, give you a basic idea how federal income tax works, and explain what your tax refund really means. If you need help with your individual taxes, there are free resources you can use. And this brings us to the most valuable information in this program. You don't need to pay for tax help. At the beginning of every year, we see a lot of advertisements for tax software. Now, since the federal tax code is a Lovecraftian nightmare that drives rational people insane, we recommend using tax software. However, you don't have to pay for tax software. If you make $72,000 or less per year, you can get the software for free. And you can get it from the IRS if you visit their website at irs.gov. Of course you may not be computer savvy or you may want an actual flesh and blood certified volunteer to help you with your taxes. If that's the case, you can also get this help for free. The IRS has a program called Volunteer Income Tax Assistance or VITA. The VITA program is a group of IRS certified volunteers who can help you file your taxes for free. The main requirement for using this program is that your annual income has to be $57,000 or less. So apologies to all our millionaire viewers. The VITA program won't be much help. But also, what are you doing here? Do you not see the picture of Karl Marx? I mean, what are you expecting to find? If you aren't a self-loathing capitalist pig millionaire, you can find out how to use the VITA program by visiting the IRS's website. We'll post a link to the VITA program in the description down below. As you can see, if you're a working class proletariat with relatively simple taxes, you have free resources to help you file your return. And you should use these resources, whether it's the free software available at irs.gov or the VITA program. But what you should never do is hire a tax prepper. First of all, a tax prepper is not certified by the IRS. They're just a person who rented an office in a strip mall. Second, and as communists we never like to generalize, but 98% of tax preppers are hucksters who overcharge you to do the same thing you could do for free just by visiting the IRS's website. So again, if you need to file your taxes, use the free software available at irs.gov or find the nearest VITA program. Now if all you needed was for someone to tell you where you could get free and reliable tax help, you can probably stop watching this program now. Go forth and file your taxes before the IRS sends its agents after you. But for the rest of you deranged masochists, we're going to plunge into the abyss and explain in the broadest possible terms how federal income tax works. But in order to do that, we have to do something Congress never will. Simplify the tax code. Greetings most big bunny. Greetings comrade roark. Are you okay? You look stressed. I have to file my taxes for the first time. Have you tried using the free software available at irs.gov? I don't have a computer. Well, why don't I help you out? Let's start at the beginning. There was darkness. Then the older ones came and brought more darkness. No, not that beginning. Look, let's first answer the question. What is a tax? The technical definition is that taxes are transfers of private resources, your resources to the government. That makes sense. Of course the anarcho-libertarian definition is that taxes are the government extorting you with the threat of state-approved violence. That also makes sense. Regardless of the definition, the fact is 98% of us have to pay taxes. And taxes come in a variety of forms. What we're talking about today is income tax. Income tax? Income tax is when the government takes a percentage of your annual income. Is that what these forms are for? So I can pay my income tax? No, but also yes. You see Bolshevik Bunny, you already paid your income tax. I did. Yes. When you started working at, uh, who's your employer? Oink Brothers Agricultural Industries. Right. So last year, when you started working for the capitalist pigs, you had to fill out something called a W-4. The W-4 is the form that tells the U.S. government how much money it should tax from your income. Comrade Rourke, I have a question. Yes, Bolshevik Bunny? Um, are we in the United States? Are we in Soviet Russia? Also, what year is it? It's never been clearly established, and it's probably best we don't get hung up on it. Okay. Moving on. The federal government used your W-4 to withhold taxes from your paycheck. So you already paid your income tax for last year. Then why do I have to fill out and turn in this 1040 to the IRS by April 15th? Because the 1040 is what you need for... Section 2, filing your taxes. By April 15th, you need to file your taxes. The 1040 is how you do that. Filing your taxes basically consists of three steps. One, declaring your income. Two, applying your deductions. And three, finding your tax rate. Understand? No. Well, why don't we start with the first step? Subsection 2A, declaring your income. In order to start your taxes, you need an important form from your employer called a W-2. The W-2 has two important pieces of information. One, how much income you earned last year, and two, how much the government took in taxes. So let me get this straight. The W-4 tells my employer how much it should withhold from my paycheck to give to the government. Yes. The W-2 is the form my employer sent me, and it tells me how much money I made and how much income tax I paid last year. Exactly. And the 1040 is the form I sent to the IRS to file my taxes. Correct. Are those all the forms I'd need for my taxes? Absolutely f*****g not. There's no way we could cover every single form used by the IRS without driving someone insane. We're just talking about these three forms because they're the main ones you need. Now Bolshevik Bunny, on your W-2, it should say what your annual income was. Looks like I earned 500 potatoes last year. An above average yield. So on the beginning of your 1040, you would declare 500 potatoes as your income. 500 potatoes. Now that you've declared your income, we move on to the next step. Subsection 2B, applying your deductions. What are deductions? A deduction is an amount of money subtracted from your taxable income. It's basically money that doesn't get taxed. Understand? No. Of course not. Let's use an example. Last year you earned 500 potatoes. Because you're a poor yokelrub, you would take the standard deduction. Now the standard deduction is the deduction the government gives everybody. Most of us poor or working class people take the standard deduction because, like you Bolshevik Bunny, most of us are trash. Yes. Let's say, hypothetically, the standard deduction is 200 potatoes. On your 1040, you would subtract 200 from the 500 potatoes you declared, which equals 300 potatoes. This is your taxable income. And now that we've found your taxable income, we move on to the third step. Subsection 2C, finding your tax rate. This is the IRS's hypothetical potato tax table. Bolshevik Bunny, last year you earned 500 potatoes. So the government took 20% of your income or 100 potatoes. But after we applied your deductions, we found that your taxable income was really 300 potatoes. So, looking at the table, we see you only owed the government 12% of your income or 36 potatoes. So, on the 1040, I first have to declare my income from last year. Yes. Subtract any deductions from my declared income to find my taxable income. Yes. Then I have to look up a tax rate, apply it to my taxable income, and find out how much I really owe the government. Yes. And that's all there is to filing my taxes? Absolutely f*****g not. Why's that? Bolshevik Bunny, what we just went over and we cannot stress this enough, is a very simplified version of income tax. We left out a lot of details you really need a certified expert to help with. Don't you think you should try and go into more detail? Bolshevik Bunny, if we tried to explain the entire tax code to you, you would go insane. No, I wouldn't. Yes, you would. No, I wouldn't. Yes, you would. Yes, I would. No, you wouldn't. Yes, I would. No, you wouldn't. Yes, I would. And I'm going to prove it by explaining every last detail of the tax code to you. Ain't I a stinker? So at the beginning of the 1040, you first have to calculate your adjusted gross income. You do this by adding any extra income that wasn't on your W-2, such as taxable interest or dividends or capital gains from the stock market. Of course, you can also subtract things from your adjusted gross income, such as student loan interest. All of this can be found on Schedule 1 of the IRS tax code. And we haven't mentioned anything about credits. You can get a credit for owning a home, having a child, or paying a foreign tax. You can find out how to get these credits on Schedule 3. That's absolutely right. Even a woe's eggs to not an IFP makes it more. Let's spot next turn. Point is, you shouldn't fill out your 1040 by yourself. You should either use the free software available at IRS.gov, or find the nearest VETA program if you make $57,000 or less. So now that we figured out how much you really owe in taxes, we can discuss Section 3, Tax Refunds. Now, going back to our very simplified example. After we applied our hypothetical, standard deduction, and found your real tax rate, we figured out that you only owed the government 36 potatoes. But last year, you paid 100 potatoes in taxes. Now, we also used the 1040 to figure out your tax refund. Since you only needed to pay 36 potatoes, we would subtract 36 from 100 and get 64. Your tax refund, Bolsterick Bunny, is 64 potatoes. Are you saying I'm getting 64 potatoes this year? Yes. Whoopee! I get a bonus from the government! That's not what that means. But you just said the government is paying me potatoes. The government is refunding you potatoes. Those potatoes were yours already. A tax refund does not mean the government is giving you bonus money. A tax refund means you gave the government free money. How? So, in our episode about credit, we explained that creditors give out loans so they can collect interest when you pay them back. Remember? Yeah. Last year, when you paid too much in taxes, you gave the government a loan. Now it's paying you back, but without interest. Are you saying it's better to get a small tax return? I'm saying it's better to give the government as little free money as possible. How do I do that? Well there are ways to lower your taxes. A lot of them are illegal, but we have a few legal means at our disposal. Like what? Well, I guess now is as good a time as any to talk about your 401k. Bolsterick Bunny, when you started working at your job, did they mention anything about contributing to a 401k? I think so. I'm not sure. My job orientation was boring, and I was stoned. Okay, we'll put a pin in that. What I'm getting at Bolsterick Bunny is that depending on which evil, soul-sucking corporation you work for, they may offer you a 401k, which is a retirement plan you can contribute to. How does contributing to my 401k affect my taxes? When you put money into a traditional 401k, your contributions are pre-tax. Pre-tax? That means your 401k contributions are taken out of your paycheck before the government taxes you. So, 401k contributions are like deductions. Absolutely. Let's go back to our example. Last year, you didn't contribute anything to your retirement. So the government took 100 potatoes from your income and you overpaid in taxes. If instead you had contributed 100 potatoes to your 401k, you would have lowered your taxable income to just 400 potatoes. Wouldn't I have lowered my tax rate, too? Precisely. Instead of owing 20% of 500 potatoes, you would owe 16% of 400 potatoes. So already, you saved income in taxes. Plus, historically, retirement accounts grow at an average annual rate of 7%. So, theoretically, if you put 100 potatoes into your 401k, you would have earned an extra 7. Wow! 7 whole potatoes! Yes. And the potatoes in your 401k will compound over time. How would potatoes compound in a 401k? Don't question the metaphor. Point is, by contributing to your retirement, you can reduce the amount of interest-free income you loan the government. But Comrade Rourke, we're communists, aren't we? I certainly hope you're a communist, Bolshevik Bunny, otherwise we'll have to re-educate you. Then if we're communists, don't we want to fully support the federal government with our tax dollars? Five military coups later. Uh, thank you, Bolshevik Bunny. That was the funniest joke I've heard in a long time. I wasn't joking. Oh, you were serious. Okay, maybe I was wrong to laugh at your civic attitude. After all, there are excellent government programs we should support. Plus, we communists may need to exploit, I mean, encourage that attitude when our fiscal policies turn America into a workers' paradise. I guess the best way to determine if the federal government deserves our interest-free money is to see how it spent our tax dollars. Let's see here. Let's see, in 2019, the federal government spent over $2 trillion on entitlements. Well, a lot of baby boomers do need financial support after squandering their parents' money. $654 billion was spent on the Department of Defense. I mean, how else is our military going to overpay for shoddy equipment? Ba-ba-ba. Oh, it looks like we paid $423 billion on the national debt. Bolshevik Bunny, how long will it take you to pay off your debt to capitalist pig? Probably until I'm dead. Probably after. Anyway, you also get to pay off the government's debt. Oh, I'm sorry, just the interest on the debt. And it looks like the remaining $1.2 trillion was spent mostly on corporate subsidies to capitalist pigs. So, Bolshevik Bunny, I guess it comes down to your personal preference. You can either reduce your taxes by contributing as much as possible to retirement, then retire early and use your resources to support worthy organizations. Or you can give an interest-free loan to the government and, by the transit of property, Monsanto. Either way, the choice is yours. I'm Comrade Rourke and you are the Revolution. Produced in collaboration with Fort Collins Public Media, if you have comments, questions, or suggestions for future episodes, please email us at communistfinance at gmail.com or follow us on instagram at comrade Rourke. Hi, what are you and arms doing? We're discussing taxes. Do you need help with your taxes capitalist pig? My taxes? Ah, the middle class is dying.