New to taxes? We’re here to help!

What do you know about filing your taxes? You hear about people waiting for their refunds and most everyone knows you have to file by Tax Day (it’s April 17 this year) or you’re in trouble with the IRS. Before you file, you should become acquainted with some of the tax lingo so you and your tax preparer are speaking the same language. Below we’ll quickly talk about some basic tax terms.

Adjusted Gross Income (AGI) – The modified version of your total income from various sources such as wages, salaries, dividends and capital gains. This can affect your deduction amount as many states base your tax liability on your AGI.

Tax Credit – A direct reduction of taxes owed. This is a way to reduce your owed taxes based on your situation. Considerations include Low-income earner, Child and Dependent Care, American Opportunity, etc.

Tax Deduction – Come in two basic styles: Standard or Itemized. These lower your taxable income which lowers your tax liability.

Standard Deduction – This is an amount set by the IRS that all tax payers are expected to pay depending on their filing status. It is regularly adjusted for inflation.

Itemized Deduction – It can take extra effort to file this way but it may pay off if you have larger deductions like mortgage interest. If your total amount of itemized deductions exceeds the standard deduction, this will typically give you a greater refund.

Filing Status – You must choose the one that applies to your situation. This determines which tax bracket will be applied to your return. The options are: single, head of household, married filing jointly, married filing separately, or qualifying widow(er) with qualifying child.

Tax Refund – This is based on how much extra tax you paid over the year.  Some people use this to make large purchases and pay off bills while some put this towards retirement.

Withholding – This is the amount you have deducted from each of your pay checks through as the year as you earn income. If you over-deduct from your paychecks you will end up with a refund. This over payment through out the year can be looked as like a loan you are extending but not collecting any interest on.

While filing taxes can be a daunting experience for most of us, there are many options available to help you, especially if you’re a beginner. You can make an appointment with a qualified tax preparer or you can opt to purchase one of the various programs available such as TurboTax.

Note: Members 1st members can purchase TurboTax at a discounted rate. Click here for details for our current offer.


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