It can be a really daunting task when it comes to learning tax "lingo;" one of the hardest things about taxes is understanding the jargon used.
There is no need to be stressed about it though.
With the help of a tax lawyer, you can manage to learn and grasp the tax language at your fingertips.
1.
Credits: These are much similar to the credits you get at a local store.
Once you have computed your tax bill, you can use the credit to reduce the total amount on the check you will "grudgingly" write to Uncle Sam.
Credits are generally better than deductions because they directly subtract the amount of tax you are required to pay as opposed to reducing the total some of taxed income.
2.
Progressive Taxation: This is a method whereby as earning levels increase, so do the rates of taxes.
3.
Adjusted Gross Income (AGI): This refers to all earnings that you receive during one whole year.
It includes wages, dividends, and interest.
4.
Deductions: These refer to the costs that the IRS allows you to subtract from your AGI so that you may calculate your total taxable income.
Generally, the lower your income, the lower the amount of tax bills you have to pay.
5.
Standard Deduction: This refers to a fixed amount that the tax payer can subtract from his/her earnings.
It is determined by the status of the individual's filing position.
Due to fluctuation in inflation, the rates change each year.
This method eradicates the necessity to itemize specific deductions.
6.
Exemption: This is the total sum from which you subtract your earnings to reveal everyone who counts (or depends) on your income such as your spouse, children, or relatives (such as parents).
7.
Withholding: This is a system whereby taxes are deducted from earnings before you receive your paycheck.
8.
Taxable Income: This refers to your total income, trimmed down by all permissible deductions and exemptions.
It is what you use to determine how much tax you need to pay.
9.
Voluntary Compliance: This is a system where individuals report their income, file their tax return, and pay their tax debt on time.
10.
Itemized deductions: These are costs that can be subtracted from your AGI to assist you in getting a lesser amount of your income on which you must in calculating your tax bill.
They include mortgage interest, medical expenses, casualty, theft loss, gambling losses, and charitable contributions.
Some of these deductions must meet the IRS regulations before they are claimed, so check to make sure they fall under their guidelines.
Now that you've familiarized yourself with some of these tax terms, it's time to file away!
There is no need to be stressed about it though.
With the help of a tax lawyer, you can manage to learn and grasp the tax language at your fingertips.
1.
Credits: These are much similar to the credits you get at a local store.
Once you have computed your tax bill, you can use the credit to reduce the total amount on the check you will "grudgingly" write to Uncle Sam.
Credits are generally better than deductions because they directly subtract the amount of tax you are required to pay as opposed to reducing the total some of taxed income.
2.
Progressive Taxation: This is a method whereby as earning levels increase, so do the rates of taxes.
3.
Adjusted Gross Income (AGI): This refers to all earnings that you receive during one whole year.
It includes wages, dividends, and interest.
4.
Deductions: These refer to the costs that the IRS allows you to subtract from your AGI so that you may calculate your total taxable income.
Generally, the lower your income, the lower the amount of tax bills you have to pay.
5.
Standard Deduction: This refers to a fixed amount that the tax payer can subtract from his/her earnings.
It is determined by the status of the individual's filing position.
Due to fluctuation in inflation, the rates change each year.
This method eradicates the necessity to itemize specific deductions.
6.
Exemption: This is the total sum from which you subtract your earnings to reveal everyone who counts (or depends) on your income such as your spouse, children, or relatives (such as parents).
7.
Withholding: This is a system whereby taxes are deducted from earnings before you receive your paycheck.
8.
Taxable Income: This refers to your total income, trimmed down by all permissible deductions and exemptions.
It is what you use to determine how much tax you need to pay.
9.
Voluntary Compliance: This is a system where individuals report their income, file their tax return, and pay their tax debt on time.
10.
Itemized deductions: These are costs that can be subtracted from your AGI to assist you in getting a lesser amount of your income on which you must in calculating your tax bill.
They include mortgage interest, medical expenses, casualty, theft loss, gambling losses, and charitable contributions.
Some of these deductions must meet the IRS regulations before they are claimed, so check to make sure they fall under their guidelines.
Now that you've familiarized yourself with some of these tax terms, it's time to file away!