What are tax returns?

Jingle jangle jingle jangle gather round children young and old vermillion bazillions holly jolly tax station Premier Spectacular, starring Bridget and Ryan, with special appearances by Skimbleshanks the Cat. Ryan! Ryan, I just picked up the tax day tree. I got the most expensive one they had on the lot. It's a tree, not a climbing toy, Skindle Shanks. Shoot! Well well, is it April 15th already? Yeah.

Yes, it's our favorite holiday here at Million Bazillion, Tax Day. And what better way to kick off our tenth season of Million Bazillion? Wow, this podcast has been on for ten years. No, we've been on for six years, but we've done ten seasons in that time. So usually like eight episodes a season, so like twelve to sixteen episodes a year, plus the bonus episodes. Anyway, point is.

It's our tenth season and it's tax day. Let's decorate the tree. It's an eight foot Fraser fir named after TV's most beloved therapist, Frasier Crane. Wait a minute, shouldn't we take a kid question? We do that at the beginning of every episode. Oh, yeah. I was so excited. I nearly forgot about that. Let me just select a question from these tapes, the totally at random. Hi, I'm Kate and I'm from Michigan. I heard my parents talk about tax returns and I wonder what they are.

So how do we answer this great question from Cade? Well we've talked about taxes before, season two, episode two, and we learn taxes are money we pay the government, which it then spends in a lot of different ways. In fact, it needs taxes to operate. The government collects lots of different types of taxes. Sales tax, payroll tax, tariffs are a type of tax, but the government makes its biggest chunk of revenue from Income tax.

Income tax is a share of your earnings that you pay to the government each year. As a moneymaker myself, I'm very familiar with this whole process. And today, to answer Cade's question, we're going to talk specifically about tax returns. A tax return is a worksheet you fill out that helps determine how much you owe the government for income taxes for the year or if they owe you a refund.

Yeah, it's like a math assignment. Do every April where you have to show your work. You turn in that worksheet to the IRS, that's short for internal revenue service. And then they tell you if you did the math right. It's really that simple. Really? I mean no, taxes are extremely complicated, but also yeah, it really is that simple. If this is your first tax filing season, let me tell ya, this time of year is stressful and full of

obligation. If you owe taxes, you have to pay them. But hey, when else am I gonna hang up my tax day garlands made from returns over seven years? I hope I get money back this year. I never get money back, but this year I've been such a good boy, or man as it were, and when I file I'm really pulling for a refund. Wait, you haven't finished your taxes yet? No, I haven't started them yet. Ryan. Today's the deadline.

Yeah, so I still have time. I'm a responsible adult, even if I'm not first in line at the post office on january first to mail my return like you. Please, you can't even file your taxes on january first. The government didn't even start accepting them until january twenty sixth, this year. And I'll have you know I wasn't first in line at the post office to mail my return. I was third.

Okay, well still that's pretty early. Okay, look, I have an idea. Why don't you help me file my tax return today? But I don't wanna do taxes on tax day. I wanna sing Tax Day Carols and drink the traditional tax day nog by the blazing tax day fire log on TV. But don't you see? By helping me get a nice big refund, we can all learn about the process of filing a tax return and answer Cade's question, starting season ten off on the right foot. Or the right note. Or well the right footnote.

Well uh okay, you twisted my arm. We're gonna file Ryan's tax return right after this.

I'm Daphne from Baltimore, Maryland. Asking Ray. Not so random questions. Today's question is fill in the blank. Money can't buy you happiness, but it can buy you Money can buy you food. There he goes. Money can't buy you happiness, but it can buy you an education. But it can buy you ten thousand. That was Trey in Virginia, Emiliano in California, Sadie and Jerry in Indiana, John in North Carolina, Lucia in Chicago. And Liam in Maryland. This has been Asking Random Kids Not So Random.

Welcome back to Million Bazillions, Holly Jolly Tax Day Season 10 Premiere Spectacular. We are answering Kate's question today: what is a tax return? Even though I already finished my return for the year quite some time ago, I have agreed to help Ryan finish his before the deadline, which is at midnight tonight. But I want to finish early so that we still have time to decorate our tax day tree, roast our traditional tax day goose, and attend the big tax day parade with the rest of the tax.

Okay, here's what you asked for. All my tax documents from the last year. Phew, Skimble Shanks, this is a box of important documents, not a cat playground. Whoa, that's a big bath. Yeah, I'm always super conscientious. Any letter that comes in the mail with the word tax on it, I throw into this box and don't worry about until April fifteenth.

Okay, well, let me just open up this do-it-yourself tax filing software, speedy tax. And let's start by figuring out how much money you made this year. What was your income? For that, you're gonna wanna find all the forms you received with the words W2 or 1099 printed on them, and we'll use those to fill out your 1040, which is the US individual tax return form. W two ten ninety nine ten forty are we doing taxes or naming droids here? Okay, that was a very funny joke, but seriously let me look.

here. Uh okay. I found a couple of W twos and some ten ninety nines too. Hey, by the way, what's the difference between a W two and a ten ninety nine? Woo-hoo, button's here with a helpful tax tutorial. We've triggered buttons. Speedy Tax's digital assistant pop up graphic. He resembles a little calculator and he's always here to help. In fact, you can't disable him. I've really tried.

You're wondering about the difference between a W-2 and a 1099. Good on you, buddy. They're each a sort of report on how much money you made from a job or other form of income. But if you get a W-2, that means your employer has sent some of your income to the U.S. government to cover income taxes you owe. That W2 shows how much you earned and how much was already taken out in income tax. Already taken out.

Yeah, like this W two you got for being head chef at the International House of Clams for a while, it says you were paid four thousand dollars, but you took home only two thousand and eight hundred dollars. Yeah, I I remember opening up that paycheck and thinking, ah, where'd all my money go? The answer is tack.

In fact, it's not surprising when folks who file W-2s get a refund because sometimes their employer sent in too much income on their behalf. So the government returns some of that money. They refund it. Now, 1099's on the 1099s are forms to report income where taxes likely haven't been taken out yet. Would you like to input 1099 income?

Click yes there. Uh like look this ten eighty nine you got for winning the karaoke night contest. It says you got twenty thousand dollars? Hey, I thought the prize was bragging rights only. Oh right. Yeah. Well uh you know, I I'm still waiting for my Grammy. Uh okay. Well bad news is that taxes weren't taken out, so we're gonna have to do that now. Hi friend, it's me again.

If you are what's called self-employed or an independent contractor, it's your responsibility to make sure you send the government every penny you owe them. Oh yeah, we got that. Acknowledge. Uh okay, Ryan. It looks like you got a couple of these from when you were a freelance athletic talent scout, uh, your slime business consultant sidekig, and from that time as a mean stockbroker. And okay, we're finished adding up your income. That was fast. Tell me about it.

Now you're ready to add up your deductions. Let's do this! Oh yes, deductions. Okay, so for this next part, we're gonna figure out your deductions by first figuring out your business expenses. So let me explain. Since you were self-employed, there wasn't a big boss who gave you a computer and a desk. Nope, I I had to pay for everything I needed on my own.

Did you know the U.S. government lets you subtract or deduct some of that business spending from the income tax bill you owe them? That's called a deduction. Would you like to input deductions? Yes we would. Wait, so I can just add up the money I spent last year and take that off my tax bill? Not quite. It's spending that has to be related to the work you're doing. And that's why it's important to keep track of your expenses.

Ah, yes. And for that, I keep a separate box of all my receipts from the year. Oh a giant box of loose, unorganized receipts. Why am I not surprised? Okay, well to help narrow things down here, did you buy any specific items that helped you do your job? Hmm, well, uh I am a podcaster and I did buy a new microphone this year.

Okay, yeah, that's good. That's a really good example of a business expense. You can deduct the cost of that microphone because you used it for your job as the host of this podcast. Deduction microphone. Add to taxes. Are you sure? Yeah. really, really short? Mm. Yes, we're sure. Okay, what else? Uh I bought a book about the stock market. Perfect. That book would be considered research for our show, so let's deduct that. Deduction book. Add to taxes. Are you sure? Yes. Are you really

Really sure? Accurate accounting makes the government happy.

Ah and let's see, uh a foam dart board for when I really don't feel like working on an episode and just want to throw darts instead. Uh put that down as a deduction. Oh, I don't know. I it feels like a stretch to say your dart board is for work. I tend to err on the side of caution when filling out my tax return, you know, so I don't get audited. Wait, what's an audit? Buttons here. Sounds like you're worried about an audit. An audit!

X out, X out, I got this one buttons. I'm a professional here. Okay, so an audit usually happens when the IRS is like, hey, we think you did your math wrong. They start an investigation, they make you go back and prove the income and expenses you listed were real and correct. Well I don't want an audit to happen to me. Okay, so let's stick to the genuine business deductions you have, like uh say the mileage you spent driving to and from the recording studio. Okay, fine. Deduct the Dartboard.

In the end, we need to total up your deductions and subtract them from how much you made, and that new number is the income that the government cares about when it comes to figuring out how much you owe in taxes. Right. Buttons here with an important tax lesson. In the United States, the percentage of your income you owe for taxes is based on how much you made, and it's designed to be progressive, which means the more you make, the more you pay.

And portions of your income get taxed a little more each time you hit a higher income milestone. The chart that lists the rates for each level of income is called a tax bracket. Would you like to see that? See it? Thanks buttons. I'm gonna click no for today, but hey listeners, if you wanna learn more about tax brackets, we're gonna have an explainer at our website, marketplace.org/slash million. Wow, so the more you make, the more you're taxed. Imagine what billionaires must pay in taxes.

Do you want to know what billionaires pay in income taxes? It might surprise you to learn that most billionaires pay a lower tax rate than average Americans who make way less money. Wait, what how can that be happening? Our tax system doesn't always recognize the kind of money a billionaire makes from company ownership, stocks, and property as taxable income. There have been many laws that have made it easier for billionaires to contribute less to tax.

But there has been some recent talk about a billionaire's tax, the idea not yet put into law that would try to tax some of that wealth. Let me tell you about it. Alright now, buttons. We can only have so much in this episode. Okay. Adding up all these income and expenses, let's see what buttons the calculator has to say. Looks like you're Oh,$500 in income taxes. Sorry you didn't get a refund. Oh well, better luck next year, pal. Okay. Let's go Caroline.

Wait, wait, wait, wait, I have to be able to do better than that. I mean, no offense, Bridget, but as much as you may like doing taxes, you're no professional at maximizing tax savings. Oh, this is just like the time you asked me to cut your hair and you didn't want to pay for a barber, so you asked me to do it and then you threw a fit'cause I didn't cut it right. I didn't throw a fit, I simply said the back turned out mulody. It wasn't melody, it was just regular no party hair back there, okay?

Let's not relitigate the haircut incident. If you don't like the way it did your taxes, what do you suggest then?

Well let's go to one of those professional tax places, a K and G block. There's one on this block. Okay, fine. Let's go then. I just want to get this over with. Now that's the tax day spirit. Amen. Candy block, how may I help you? Wow, it is packed in here today. Of course it is. Everyone's here trying to file their tax returns last minute, like you Okay, but someone here has to be available to help me. Uh excuse me, ma'am? Fangy Block, can I help you?

Uh yes, I need my taxes done before the midnight deadline, uh, preferably by someone who knows how to get me a big refund. Hun, all of our CPAs are booked solid until eleven fifty-nine p.m. How about I help you file off an extension and you can come back and do your taxes over the Ryan, maybe an extension's the smartest option for you. It can give you extra time to get your financial records in order. No, I want my taxes done today so I can get that sweet refund, A-SA-P.

Ooh, looks like we just had a cancellation. They can take you in cubicle number 17, but you gotta go like right now. OK, let's go Um they told us to come uh here to cubicle 17. I'm Ryan. I need your gross income for twenty twenty five. Oh yeah, well it may not be super impressive, but I wouldn't call my income gross.

Uh gross is in the amount of money you made before taxes are taken out, sir. Okay, it appears you're at the bottom of the middle of the highest part of the middle lowest tax bracket. If you have children, you may be eligible for a tax credit of up to twenty two hundred per qualifying child under age seventeen. I don't have children.

Then you won't be eligible for that credit. Moving on to expenses, or these are receipts. I do not go sifting through loose receipts, or you should have organized these expenses in quick books or at least a legible spreadsheet. Ugh. Sorry, I can uh Bridget, I don't get it. Why would I pay less in taxes if I had kids?

Tax credits are the way the government encourages certain behaviors by giving money to you for doing them. In this case, Congress wants to give people extra money if they're raising kids. Instead of sending the money directly to your bank account, they say, don't worry, just pay me a little less in taxes and you keep the rest. Tax credits are another reason besides deductions that filing taxes can get so complicated. You have to sort through what you're eligible for.

Hmm, you think I could claim all our listeners as my children? I teach them and guide them in a sometimes fatherly way? Yeah, I don't think the IRS would buy that. And I'm done. Okay, whatever your name is, bald spot guy. Only a handful of these expenses seem legitimate, so I just went with the standard deduction for you. That's an amount everyone gets deducted from their declared income for just being alive and existing. Now adding up the amounts from lines number six and seven.

Six, seven. Sorry. Adding up those amounts, it appears you owe three thousand dollars in taxes this year. What? That's more than I owed using Bridget as my accountant. I told you I did a good job. This is the mullet situation all over again. Once I cut Ryan's hair and he accused me of leaving a mullet, but it was just like a little touch. I don't have time for this story. I finished your taxes. That'll be a hundred and seventy-five dollars, by the way. Cash work hard. What?

I I have to pay you too? If you want my help, that's how it works. Please, my one tax day wish is to get a refund this year, even if it's just one dollar. Don't you guys have like a don't you have like a guy who always hint hint? Finds more deductions, maybe with a little creative accounting hint hint, wink wink, Henry Winkler. I have no idea what you're talking about. I don't know anyone like that. Six o'clock. What did you say? How about don't worry about it. Mm-hmm.

Well I hope you're happy. You've dragged us out to this alley to meet some mysterious accountant, and we're missing the big tax day parade. I hear the fraggle rock eyes are on the FICA float this year. Sh. I hear something. Who is that dark figure approaching in a hooded cloak? Are you? Brian. I'm the guy you were asking about. Every year around tax time, everyone wants to know if you have a guy. I'm that guy. I'm an expert in tax loopholes, technicalities, and workarounds.

And I can help you get that refund you so desire. Really? That would be amazing. What'll it cost me? Thank you. Same as a regular accountant. But if you choose this Shadowy path, beware. You'll have to indulge in a creative interpretation of U.S. tax law. Ryan, I don't know about this guy. I know I say this about almost everything related to money on this show, but this time I really mean it. You need to be careful here.

Phew I'm not afraid if it saves me a lot of money. Besides, why is it my job to pay for what the government does anyway? I don't even like half the stuff the government does. Then you should let the government know with your vote. This is not the way. Come on. All right, shadowy accountant, let's do it. So it's been decided. There's no turning back now in your choice to forge a financial fiction, a distorted endure of I got a bad feeling about this. Okay. Uh why don't we start with your W-2s?

Shift overnight. You see where I'm going with this. Hello, I'm David Brancaccio, Special Correspondent for Marketplace, where we deliver economic news designed to keep you both sane and informed. One of my favorite ways to make sense of it all is with the Marketplace newsletter.

Our team curates must-read stories from the week and delivers explainers right to your inbox. So if you want the latest from me and our team of award-winning journalists, head over to marketplace.org slash newsletters and sign up today.

Billion Bazillions Holly Jolly Tax Day Season 10 Premier Spectacular. We're answering Cade's question all about tax returns, and before the break, I took my taxes to a shady back alley accountant who got me a sweet refund of Drew. please five thousand dollars read him in weepy Yippee! A little late with a drum roll.

And while I don't approve of Ryan's tax choices and think he might have creative differences with the US government, it seems like he's broadly followed the rules and I'm happy'cause I finally get to come home and watch the tax declamation classics on TV and cook my traditional tax day goose. Scamble shakes, get away from the goose. That's our dinner. Not cat food. Shoo! Who's that knocking at this hour? Hello? Governor, I'm a messenger with the Internal Revenue Service.

Oh uh thanks for the reminder, but we've already filed our returns. Uh be on your way now. Excuse me. Excuse me, but I regret to inform you your tax return has been flagged. For an audit. An audit? No! Something about your return didn't quite make sense to the IRS, and now they're gonna make you go back and prove everything's correct. This process can be a giant pain for a taxpayer. Anyway, have a happy tax day.

Or happiest can be, considering the news I just delivered. Goose smells delicious, by the way. Thanks. Bye. Uh, Bridget, this is bad. They're gonna send me to jail for tax evasion just like Al Capone, and it's gonna become the only fact people remember about me, just like the tax evasion thing is the only thing people remember about Al Capone.

Ryan, stay calm. It's okay. An audit isn't the end of the world. Usually you just email some documents to clarify the questions the IRS has, and either they accept your explanation or you pay the extra you owe. Well that may be how it works in reality, but we're in a holiday special where everything is heightened for dramatic effect. I better resolve this audit tonight or I'm gonna be in big trouble. Can you come with me? I'm not talking to you, Skimble Shanks. I'm talking to Bridget Shoo.

Bridget, please! I need your help! I can't do it without you! Okay. Sorry, I know this is annoying.

No, Ug. I'm looking for my Ug boots. It's cold outside. Happy tax day! Happy talks. Yay! I'm glad that's done. We did it. Ah, isn't this just the most wonderful time of the year, Ryan? Ryan? I gotta say, I'm not feeling the tax day merriment I usually do. This audit has put me in a bad mood. If I hear one more person wish me happy tax day, I'm gonna lose it. Bridget, Ryan, happy tax day! Educational YouTube host Borpo. What are you doing out here tonight?

I'm the celebrity grand marshal of this year's annual Tax Day Parade and tree lighting. Wow, congratulations, that's huge. Interesting'cause uh we host a money podcast and no one called us about doing it. Yeah, I feel so humbled by such a huge, important honor. We're about to light everything up. You wanna come watch? I have come. Uh we would, Barpo, but uh I gotta go deal with an audit.

Ooh, sorry to hear about that. The opposite happened to me this year. The IRS called me up to say, hey Borpo, you did such a good job on your taxes. We're gonna send you some kids. Uh I just don't understand why we do taxes this way. Like on some level the IRS knows what I actually made, but they don't add it up and tell me how much I owe. I have to go through the trouble of adding it up myself.

And if I don't do it perfectly, they go, hmm, this doesn't look right. And they come down on me like I did something wrong. Why does it have to be so complicated? Well, sure, taxes don't have to be this complicated, but if we want to make them simpler we'd probably need to make some big changes. Like the government could just tell us what we owe, make it free to file. Maybe taxes would be easier without so many deductions and tax credits. Yes, at this point, it's tradition, right?

Okay, well we don't wanna keep you Borpo. You you got some Grand Marshalling to get to. Okay, best of luck making it through that audit, and remember you have fun. Yeah, yeah, Borpo, whatever, bye. In the hallowed halls of the IRS. It's cold and spidery in here. And it's eleven fifty five, only five minutes until midnight. Hello? Are you adding even more echo to your echo? Yeah, I thought it would make us sound more desperate. Good idea. May I help you?

Uh yes, my name is Ryan. Uh are you an auditor? Yep. That I am I'm here to throw myself on the mercy of the Internal Revenue Service. Hear my confession, Grand Inquisitor. I am guilty of fudging figures on my tax return. I didn't drive ten thousand miles to and from the studio to record Million Bazillion. I drove like forty miles total. I don't have twelve dependents.

I simply have one cat. I didn't buy thousands of dollars in recording equipment this year. I bought one microphone for eighty dollars, and it works pretty good. The eight thousand dollars in seven dollars. Takeout food I deducted? Well, I actually did eat that much takeout food, but it wasn't work-related. I realize it doesn't matter in the grand scheme of things if one person cheats on their taxes, but now that I've been caught doing it, I'm so sorry for cheating on mine.

Because if everyone cheated on their taxes, we wouldn't have money for the things we And some things we don't need. Honestly, whether or not the government spends our tax money wisely is Could debate my ps. Ryan, Ryan, probably quit while you're ahead. Okay, uh First things first, may I see the audit notice you received? Yeah, uh sure. It's right here. This audit is addressed to the To bridge it. Are you No. Wait, what? I'm Bridget. Do you mean to say You're the one who's being audited.

But I filled out my tax return honestly, not to mention early. Ryan lied through his whole return and he gets away with it. But I'm being audited? This seems completely random. So you wanna take care of this tonight or come back tomorrow? I'm tired. I'll just start dealing with it tomorrow. I'm sorry, Bridget, but remember what you said to me people made. Big a deal out of audits. It might turn out to be a really simple fix. No, it won't. It's the IRS. Nothing simple. Let's just get out of here.

Hi, I'm Avery from Arizona and I've got a muddy joke for you. What do you call an ant who is great with money? A tax account ant. If you have any money joke you'd like to share, let us know. Visit marketplace.com. org slash million bye bye.

The conclusion of Million Bazillions Holly Jolly Tax Day Season 10 Premier Spectacular. We just witnessed a true tax day miracle. See, I thought I was gonna get audited, and turns out it was Bridget who's gonna be audited. Life can be so that way. Yeah, yeah. Hardy har how it's real funny. All right, I'm ready to wrap up this tax day. What what did we learn about tax returns? Uh I learned that But you barely learned anything. I'm gonna sum this one up. Thank you, Kate, for your

Today we learn tax returns are paperwork we fill out that confirms how much we owe an income tax to the government. It's a math problem we do every year, where we add up the money we made from our jobs. And tax credits. Those deductions and tax credits are the government's really complicated way of trying to give us some extra cash. But really, a gift card would probably make life a little easier this time of year.

Depending what kind of job or employer you have and whether any of your income was sent to the government to pay for taxes on your behalf, you may owe money at the end of the year, or you might get some money back. Oh, and also completely random audits can come out of nowhere. There's a lot of debate about how to make our taxes simpler and also fairer, but most people agree taxes are worth paying so we can have a functioning society.

Even if you don't always love the way it functions. Remember, tax money is your money, and a good reason to pay attention to what your government is doing. And when you're old enough to vote, vote in every election you can. Vote for the people and laws you like and Vote to get rid of the ones you don't. In America, there's no kings, no dictators, no all-powerful.

sits on a throne and gets to tell you how your money is spent, all those leaders in Washington, D.C. take money out of your paycheck to pay their paycheck. In return, you get a little say in what they decide. So use Shh! Stop blabbing about democracy. What's that sound? I think they're still celebrating in the town square. Let's go see. Oh, they are still celebrating tax day. Look, the whole town is here.

Alright everybody, it's midnight. Gather around Borfo As President Benjamin Franklin once said... Yeah. The only Taxes today you all paid your income taxes and that's a super duper whether or not With a refund, you made it through the It's over, and we don't have to do it again until next year. So let's keep the party going with a special performance by the one and only Wow, it they got Michael Bublet? I know his music from the Americana. And the grove. Jazzy little too. Yeah. I R S C

That's all for this episode of Million Bazillion. Thanks for sticking with us to the very end. Yeah, and since you stayed to the credits, we'll let you in on a little secret. We're gonna release a whole new episode next week all about gas prices. It'll be exciting for kids and parents alike, so meet us back here next week. If you still have questions or an idea for an episode, send them to us. We are at marketplace.org slash million. That's our website.

While you're there, sign up for our newsletter. It's better than those other newsletters out there because we send you new million bazillion episodes as they're released, along with a tip sheet. And the tip sheet is great. It's gonna give you a bunch of fun conversation starters and more. to help get the whole family smarter about the money topic of the day.

It helps to have help. Speaking of which, we had help from the experts for this episode, including Lee Frasari, co-founder at Hell Yeah Taxes, and Raynou Zoretsky at the Urban Brookings Tax Policy Center. Bazillion is produced by Marketplace from American Public Media. I, Ryan Perez, wrote and hosted this episode along with Bridget Bob. Our senior producer is Norissa Cabrera, our editor is Jasmine Romero, and our intern is Iyun Chan.

This episode was sound designed by Sam Bear and mixed by Charlton Thorpe. Our theme music was created by Wonderly. And special thanks to the folks who lent their voices to this episode. Jay Siebold, Megan McCarty Carino, Courtney Bergseeker, Daniel Shinn, Dylan Mietinen, and Richard Parris. Bridget Bodner is the director of podcasts at Marketplace. Joanne Griffith is the chief content officer. Neil Scarborough is the VP and General Manager.

Million Brazilian is funded in part by the Cy Sims Foundation, partnering with organizations and people working for a better and more just future since 1985. And special thanks to the Ranzetta Family Charitable Fund and Next Gen Personal Finance for providing the startup funding for this podcast and continuing to support Marketplace and our work to make younger audiences smarter.

If Million Bazillion is helping your family have important conversations about money, consider making a one-time donation today at Market. org slash give me