Money Rehab with Nicole Lapin - Taxes: Everything You Need to Know

Episode Date: April 11, 2022

It's tax season, Money Rehabbers! And you know what that means: it means it's time to call Nicole Lapin. Tune in for her tax tips! You can learn more about the adjustments you quality for here.  See omnystudio.com/listener for privacy information.

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Well, it doesn't. Charge for wasting our time. I will take a check. Like an old school check. You recognize her from anchoring on CNN, CNBC, and Bloomberg. The only financial expert you don't need a dictionary to understand. Nicole Lappin. If you heard our recent episode on the 2022 financial deadlines,

you know that you need to file your taxes by Monday, April 18th. I know that filing taxes can be daunting and stressful, but this year you have me in your corner and we can do this. People come to me with tons of questions about taxes, and I've found that at the heart of these questions, there is fundamental confusion about the purpose of filing a tax return in the first place. And why wouldn't there be? I mean, we don't learn this stuff in school. Thank you for the parallelogram lesson, but what the F is a W-2? Anyway, so here's the taxes 101 class you should have had in school, but didn't. I break this down into three steps you should take, but only if you want to maximize the amount of money you get back on your tax refund. If you don't want more money,

I guess just stop listening now. If you're still with me, here's number one. Find your AGI. At the most basic level, when we file a tax return, we're telling the government how much money we earned the year prior so that we can be taxed appropriately, or at least what the government has determined to be appropriate. But the government doesn't get to tax all of your income. Think of it like this. Say you have a piggy bank that holds all of the income you made in 2021. When you file your tax return, you're handing over your piggy bank to the government, and the IRS shakes out a percentage and uses that money to fix roads, build bridges, and all that jazz. But you get to take some money out of Miss Piggy before handing it over to Uncle Sam.

So then, by the time Uncle Sam gets your piggy bank, he has less to shake out and you have more in your pocket. Quick dictionary note here, the total amount of income that Uncle Sam does get to tax is called taxable income. In order to maximize what stays in your pocket, the first but often overlooked step is to understand your AGI, or adjusted gross income. Your AGI is calculated by taking the total income in your piggy bank, aka gross income, and shaking out qualified expenses, aka adjustments. In some cases, qualified adjustments are student loan interest, alimony payments, or contributions to a retirement account. I linked more information on how to tell which adjustments you're qualified for in the show notes. Number two, deduce your deduction. Once

you have your AGI, you can calculate your deductions. This is another group of expenses that you can subtract from your taxable income. Some common deductions are medical expenses, charitable contributions, and property taxes. There are two ways to calculate your deductions. You can opt for a standard deduction, or you can decide to itemize your deductions. With the standard deduction, the IRS is basically saying, okay, you probably have some eligible deductions, but it's too complicated to parse out all of it, so let's just create a flat amount that everyone in the entire country can choose to take. This year, that standard deduction is $12,550 for individuals. So that's one option, but if you look at the list of eligible deductions and you see that you've

spent a lot on qualified deductions, so much that it's totaling more than the standard deduction, you should itemize your deductions. In other words, add up all of your deductions and show Uncle Sam the receipts. Again, I hooked you up with the link to read more about common deductions in the show notes. And please, please, please do check that list out. So many people miss out on deductions that they're qualified for and lose out on money in the process. I do not want that to happen to you. Number three, file and save. When it comes time to submit your tax return, you want to choose the best filing method. You want to make sure you're not missing out on any deductions or credits, but you also want your filing experience to be easy and affordable so you

don't rip your hair out. When it comes to filing, you have three different options. First, you could file on your own for free. Second, you could file through an online software. Or third, you could hire a pro. If you don't have a particularly tricky tax situation, and you would know if you do, and you're opting to do the standard deduction, I'd recommend just using an online software or filing on your own. If you run a small business or have one of those tricky tax situations,

you might wanna hire a pro. For today's tip, you can take straight to the bank. I have good news. You may actually qualify for free help with your taxes. To see if you qualify, check out the last link in the show notes. Happy filing, everyone. Money Rehab is a production of iHeartRadio.

I'm your host, Nicole Lappin. Our producers are Morgan Lavoie and Mike Coscarelli. Executive producers are Nikki Etor and Will Pearson. Our mascots are Penny and Mimsy. Huge thanks to OG Money Rehab team, Michelle Lanz for her development work, Catherine Law for her production and writing magic, and Brandon Dickert for his editing, engineering, and sound design.

And as always, thanks to you for finally investing in yourself so that you can get it together and get it all.