so this is not going to be a crazy 5H hour long video that goes over every single tax law and how to escape taxes by transferring your corporation's intellectual property into an offshore British Island subsidiary where you claim seagulls as dependents instead all I want to do is show you how easy taxes really are for most people and even if you're not old enough to have to pay taxes it's still good to know because they don't teach it in school apparently schools don't think teachers are qualified enough to teach taxes which is a shame because
when you get your first summer job as a lifeguard making $5,000 a year and you have to pay taxes for the first time it's nice to get advice from someone who makes a similar income either way for most people in the USA doing taxes is actually really easy nowadays there's plenty of free IRS approved websites like Free Tax USA where you can just put all your info in and you'll do all the calculations and submit all your taxes so you really don't have to know any of the math but it does help to understand understand
what taxes are so that you know what you're doing you owe income tax on money you make during the calendar year so from January to December something like 20% of all your income you have to pay to the government and the payment is due by April of the next year the actual percent you pay depends on how much you make and what state you live in but again there are websites that'll do all that math for you during the year if you just mold Lawns or tutor middle school kids for cash and only made a
few hundred you realistically aren't going to do taxes but if you had a job or did something else that made a lot of money legally you have to pay taxes this is how you do it if you worked the job during the year chances are instead of giving you your full paycheck every payday your employer took out a percentage of every paycheck and gave it straight to the government as tax so they're basically taking your money and using it to pay your taxes for you this means that if your job pays $50 ,000 a year
your employer will look at your income and your situation and estimate what rate you should be taxed at let's say they estimate that your tax rate is 10% in that case they'll withhold 10% of your salary which is 5,000 and they'll give that to the government which leaves you with only 45,000 this is actually pretty helpful because now you don't have to worry about setting aside part of your salary to pay taxes your job just does it for you so for most of the year you you don't actually have to worry about paying taxes and
once the year is over you still don't have to worry remember taxes aren't due until April the next year in fact to even do them you have to wait until January when you'll receive all your tax documents in the mail sometimes through email when you go through your mail you'll usually know when it's important tax information because on the front it'll say important tax information so usually this will be a W2 form from your job or if you if you had multiple jobs you'll get multiple W2 forms and sometimes other forms depending on your situation
but whatever forms you get you still don't have to do anything with them yet just keep them safe and maybe scan them and store them on your computer just so you don't lose them then later in March or April when you're watching Youtube and you get an unskippable Turbo Tax ad that probably means it's time to do your tax return the goal of a tax return is to report all your income and then claim as many deductions and credits as possible deductions are expenses like your medical expenses or your business expenses that the government actually
allows you to subtract from your total income so even if your salary was $50,000 after deducting all these expenses your actual taxable income might only be 35,000 otherwise if you don't qualify for that many deductions everyone gets to claim something called the standard deduction which is around $3,850 for single people like you and you can just subtract this number from your total income to get your taxable income the catch is if you claim the standard deduction you can't claim the individual ones and vice versa but the website you use to file your taxes will always
make sure to calculate everything and claim whichever deduction is bigger once you've claimed all your deductions the website will calculate how much tax you should have paid and compare it with how much tax your employer withheld from your paycheck during the year in other words it's going to tell you if you overpaid your taxes last year or if you underpaid if you overpaid then when you submit your tax return the government will realize that they owe you money and they'll send you a refund if you didn't pay enough you'll have to send the government the
rest of what you owe and that's really it as you can see the hardest part about this is just knowing what deductions you can claim and what taxes apply to you but as long as you just upload all your tax forms correctly and answer all the questions the website does all the work for you and anyone can do it for free or for very cheap accountants always want you to pay them money to do your taxes but unless you got 10,000 forms in the mail and you own eight hedge funds and you have crypto invested
into the Somali pirate exchange your taxes probably won't be that complicated and you probably don't need an accountant if I were you I'd probably just use what the IRS recommends which is freetaxusa.com freefile once you're on there you pretty much just up load pictures of all your forms or you can manually enter the information then you just answer all these really specific but easy questions if you get to something and you don't know if it applies to you you can just Google it and if that doesn't help you can add Reddit to the end of
the search and you'll find someone who had the exact same question and some NPC taxpayer reply to it with a perfect and simple explanation then at the end you just hit submit and it'll send you a link where you can pay whatever taxes you still still owe If instead the government owes you then you'll get a refund and it'll come within a few weeks if you messed up something and accidentally claimed a deduction you weren't supposed to claim and it was an honest mistake the IRS will just send you a polite letter telling you what
you owe them if you commit a tax fraud and failed to report millions of dollars of income they'll send you a letter nominating you to run for Congress now at this point you probably want to know if there are any tricks you can use during the year to pay less tax taxes legally and while you have to be pretty rich to start using some of the better methods there are a few decent ones that most people can do for example many companies offer a retirement account like a 401k where you put in money to save
for retirement and while the money is inside that account you use it to buy stocks hopefully the stocks will go up and they probably will unless it's me buying them once you turn exactly 59 1/2 years old you can take out the money tax-free however there is a limit to how much you can put in the account every year there's also stock losses if you lose money trading crypto or stocks then you can actually claim that as an expense and then lower your taxable income another way to avoid taxes legally and the way lots of
billionaires do it is by investing in stocks and holding on to them for more than a year at which point they become long-term stocks you don't get taxed on the profit you make from stocks until the year you actually sell the stock and even then the tax rates for these stock stocks are really low sometimes even 0% for people with a low income another tip is that if you run your own business or side hustle like a cleaning business even if you make a lot of profit you can reinvest that money back into the business
and deduct it as an expense for example if you make $55,000 in profit vacuuming for people you can use that money to buy a brand new state-of-the-art $5,000 vacuum and because that's a business expense your total profit is now zero and you'll pay very little tax if any plus your new vacuum is going to get you way more customers lastly some other things you might want to look into or a Roth IRA a traditional IRA a health savings account or a college 529 plan now of course you might be wondering what if I'm not American
well in that case some countries also have a tax return you have to fill out like India but most countries actually have a much simpler tax system where the government just tells you how much tax you have to pay so why doesn't the US just do that there's a common misconception that the US tax system is complicated on purpose so that companies like Turbo Tax can keep making money and while that's part of it the main reason is that the US government creates complex tax laws to encourage and discourage certain behaviors for example if the
government wants people to use renewable energy they'll give tax benefits to people who buy and use solar panels they want people to buy homes and start businesses they'll make tax laws to favor people who buy homes and start businesses and if the government wants more people to subscribe they'll make the button [Music] glow
