Tax season is upon us, but that doesn’t mean that you have to panic. If you are contemplating working with a professional for tax services in Jamestown, ND, scheduling an appointment as soon as you can will help to ensure your taxes are finished on time and accurately.
You can also ease your stress about filing your taxes by making sure you’re familiar with some essential tax-related terminology. Reviewing key definitions will help make tax filing less overwhelming and provide you with the knowledge to follow along as you work with a tax services professional.
Here are some helpful terms and their definitions:
- Dependent: A dependent is someone other than the taxpayer or their spouse who depends on the tax payer’s income and for whom a tax filer can claim an exemption that is subtracted from income. To be a dependent, the person must meet IRS requirements for being a qualifying child or qualifying relative.
- Adjusted gross income: Your adjusted gross income is the first piece of information needed in determining the final amount you will be responsible for at tax time. It incorporates all of the income you receive in a year, including wages, interests and dividends. To arrive at your final adjusted gross income, various business expenses, IRA contributions and other expenses are subtracted from your income.
- Deduction: A deduction is an expense that you can eliminate from your adjusted gross income as you work to determine your taxable income. If you qualify for any, they will help lower the amount of taxes you owe. There are two types of deductions: standard and itemized.
- Standard deduction: A standard deduction is a set amount that a tax filer can subtract from their income total. Anyone filing taxes has the option of subtracting a standard deduction. The amount of the deduction is based on an individual’s filing status. It is adjusted annually based on inflation-related shifts. Tax forms will list the specific deduction available for a particular year. The majority of taxpayers choose the standard deduction method, which removes the need to list itemized deductions.
- Itemized deduction: These expenses that you can subtract from your adjusted gross income include, but are not limited to, mortgage interest, charitable contributions, medical expenses and gambling losses.
- Credit: Once the tax services professional you are working with determines the credits you are eligible for, they are used to lower the amount of your tax bill. While deductions lower the amount of income you are taxed on, credits decrease the amount of tax that you will owe. Examples of possible tax credits a taxpayer might receive include expenses related to higher education and childcare.
Now that you’ve brushed up on some of the important concepts related to filing your taxes, you might be feeling ready to book an appointment for tax services in Jamestown, ND. Craig S. Hanson, CPA simplifies your tax season by offering tax preparation and e-filings for your individual, corporate or estate tax returns at the local, state and national levels; audit-related support and representation; tax planning; accounting services and payroll services. Contact us today—we look forward to working with you!