Taxes are confusing enough without all the convoluted terminology. If you’re trying to fill out your return this year and keep coming across words that look like gibberish, we’re here to help! Use this cheat sheet to get you through tax season like a pro.
Your filing status determines several factors of your return, including your standard deduction and the specific tax rates that apply to your income. You can choose between single, married filing jointly, married filing separately, head of household or qualifying widow/widower. Whichever label best describes your situation is what you should mark on your return.
Deductions are expenses that can be taken out of your adjusted gross income to help you reach a smaller taxable income. Certain deductions, like charitable donations, medical expenses, and theft losses, can be itemized to help you lower your total income.
This is an amount specified by the IRS that you’re allowed to subtract from your income. It’s meant to reflect the amount of people who rely on your income so you can lower your adjusted gross income for a final, smaller salary on which you pay taxes.
Adjusted Gross Income:
Also known as your AGI, this is the total of all the money you receive over the year. This includes your job wages, capital gains, interest, and dividends. Once you know your adjusted gross income, you can then calculate your tax refund.
This is a someone who acts on behalf of another person as their guardian, executor, trustee, administrator, etc.
When you are married, you can file a joint tax return which allows you to combine your income and deductions. Not only can this make it easier for married couples, but it can also help bring down your adjusted gross income for a lower taxable income.
This is the most common form of taxation, and it refers to how taxes are taken out of your wages as you earn it before you receive a paycheck. The IRS deposits these taxes that are withheld from your income as payment but you may receive a refund when you file your tax return.