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I thought we should start off going over some basic tax terms to help you navigate the site. There are so many terms- lets just start off with a few. I’m suspecting I’ll eventually get around to a blog for each one…
Let me hear any that you would like me to add!
Form 1040: Personal tax return – this is where you report all your income, deductions, and credits for the year. This lovely lady is due April 15th.
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Form W-2: This is your wage statement. It states your wages and withholdings for the year. You will receive this from your employer in January. Keep this sucker! Don’t lose it. Your employer will send a copy of this to the IRS. Soo it is very important that you report this on your Form 1040 (see above).
Form 1099: This will report your self-employment income, interest, dividends and more. Side hustling? You will get one of these from any source you earn income from. So again, keep this sucker! Don’t lose it. A copy of this is sent to the IRS. Soo it is very important that you report this on your Form 1040.
Adjusted Gross Income; This is just a common term that references a line on the 1040. Basically, it’s your annual income received (minus some certain special deductions.)
Itemized Deductions: This means you have more Schedule A deductions than the standard deduction. Schedule A deductions are mainly medical expenses, charitable contributions, mortgage interest, property taxes, and state taxes.
Capital Gains: This is a gain/profit from mainly investment income sources. This is taxed at a lower rate than ordinary income- 20% or less! Ordinary income could be up to 37% or more.
Schedule C:This is for my side hustlers. This is a schedule on the 1040 for profit/losses from businesses (sole proprietorships). Here you report all income related to your business and all business related expenses. This is a super simple explanation of something that is not super simple. More to come.
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Single: Ready to mingle… but really in the tax world its just a filing status if you’re not hitched.
MFJ: Married Filing Joint. If you’re married your filing status is MFJ. Unless…
MFS:Married Filing Separate. If you’re married but for some reason you don’t want to file together you can file separate. Most of the time there is no tax benefit. Normally people do this for reasons not related to tax.
HOH: Head of Household: the confusing filing status and not related to Big Brother. To qualify, you must pay for more than half of the household expenses, unmarried for the year, and must have a qualifying child or dependent. We can talk more about this later.
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