Are you getting ready to file your taxes? If so, you may be wondering what all of those tax terms mean. Don’t worry! You’re not alone. Each tax season, many people get confused by tax jargon. After all, tax law isn’t exactly the easiest to understand. Luckily, I’m here to help make understanding your taxes easy! In this blog post, we will explore 10 common tax terms in easy-to-understand language. By understanding these terms, you will be able to file your taxes with confidence!
Without understanding these terms, filing for taxes may feel like an impossible task. As a certified public accountant in Colorado Springs, I know firsthand how confusing taxes can be. That is why at Bennett CPA, simplicity is one of my core values. I am committed to simplifying the complexities of taxes to help you better understand and be prepared for filing. With my personalized tax services, I will partner with you to ease any confusion and file your taxes correctly and on time!
Ready to know more about the 10 most common tax terms? Keep reading!
10 Most Common Tax Terms
The tax industry comes with its own language, including an array of terminology and jargon that is not used in day-to-day life. Even if you have filed your taxes before, some of the language may be confusing. To help make things easier, below are explanations of common terms that you may come across when filing your taxes.
Certified Public Accountant (CPA)
A CPA is a professional who has passed an exam and met other requirements set by their state in order to provide tax and financial services. A CPA can help you with your taxes, bookkeeping, financial planning, and more.
Taxable Income
Your taxable income is the amount of money you earned during the year that is subject to income tax. This number is calculated by subtracting any deductions or exemptions from your gross income.
Gross Income
Your gross income is the total amount of money you earned during the year before taxes or other deductions are taken out. This number includes all forms of income, such as wages, tips, interest, and investments.
Audit
An audit is a formal review of your tax return by the IRS. The IRS may select your tax return for an audit if they believe you have made errors or if your return is unusual. Having a certified public accountant handle your taxes can help reduce your chances of being audited.
Depreciation
Depreciation is an accounting method that allows businesses to write off the cost of certain assets, such as buildings or machinery, over time.
Withholding
Withholding is the amount of money that is taken out of your paycheck by your employer to go towards your taxes. The amount withheld is based on the information you provide on your W-2.
Filing Status
Your filing status is used to determine which tax bracket you will be in and what deductions you are eligible for. There are five different filing statuses: single, married filing jointly, married filing separately, head of household, and qualifying widow(er).
Capital Gains
A capital gain is the profit you make from selling an asset, such as a stock or piece of property. Capital gains are taxed at a lower rate than ordinary income.
Deduction
A deduction is an amount of money that can be subtracted from your taxable income. There are many different types of tax deductions, such as charitable donations or business expenses.
Exemption
An exemption is a deduction that is available to certain taxpayers, such as those who are blind or have dependents. Exemptions lower your taxable income and can result in a lower tax bill.
Now that we’ve gone over the definitions of some common tax terms, you should feel more prepared to file your taxes!
Get Expert Tax Services with Bennett CPA
Tax language can be confusing. If you haven’t filed taxes on your own before, or if it’s been a while, understanding what is being asked of you can leave you feeling lost. At Bennett CPA, I can help make tax season less daunting. I will work with you one-on-one to ensure that your taxes are filed accurately. Have questions about your taxes? No problem — I’m here to help. Contact Bennett CPA today to get all of your tax needs taken care of!
