Tax season happens to be one of those seasons that will just creep on you out of nowhere without any warning and it’s easy to fall behind. In addition, you know what that means, a whole bunch of confusing tax terms to learn! Don’t worry though, we have your back with another 10 key tax terms that you must know for tax season.
Tax Bracket – A tax bracket is a range of income that is taxed at a specific rate. There are seven different tax brackets. Your classification is determined by your filing status and taxable income. (This is where deductions actually are beneficial. More deductions might push you into a lower tax rate, lowering your tax payment.)
Dependent – A dependent might be a kid, an older parent, or another relative who lives with you and is financially reliant on you. You might declare dependents on your taxes to receive an exemption.
Loophole – A loophole is a legal technique to lower the amount of taxes you owe due to a discrepancy in the tax code. Some loopholes, such as refundable credits, disproportionately favor lower-income taxpayers. Others, like the mortgage interest deduction, frequently favor higher-income individuals.
W2 – A W-2 is a tax form that your employer typically sends out at the end of January. It displays how much money you earned and how much tax you paid the previous year.
W-4 – A W-4 is another form that you submit when you begin employment (or alter later) that notifies your employer of how much tax to withhold from each paycheck.
Alternative Minimum Tax (AMT) – If you make a great amount of income but do not pay enough in taxes, the alternative minimum tax rules may apply. It requires you to calculate your tax burden (or how much tax you owe) using both ordinary income tax laws and AMT regulations.
Audit – The IRS will evaluate your tax return and require you to show that you have accurately recorded your income and deductions. The majority of audits are performed by mail and focus on individual concerns rather than the whole return.
Short-Term Capital Gain – Profit from the sale of assets such as stocks, mutual fund shares, and real estate is capital gains. Gains from the sale of assets held for less than a year are considered “short-term capital gains” and are taxed at your highest tax level, much like salary.
Long-Term Capital Gain – Profits on most assets held for more than a year are considered “long-term capital gains” and are taxed at 0, 15, or 20%. Taxpayers who are otherwise in the 10% or 15% tax bracket receive an even better bargain. Their tax rate on long-term gains is 0%.
Depreciation – Depreciation is a deduction to account for the steady loss of value of the commercial property as it ages. The law gives certain forms of property a tax life, and your value in such property is reduced during that time period.
Now that you’ve freshened up your tax lingo this year, it’s time to go out there and get to filing! These terms are very vital to know, but in terms of relieving your current tax debt, the only term you really need to know is the IRS Fresh Start Program.
IRS Fresh Start Program
There are many programs that are offered in order to solve your tax-related issues in some sort of way. But there is a new and improved relief program that consolidates many major relief programs into a one-size-fits-all assistance program; The IRS Fresh Start Program.
This program is designed to relieve not only the IRS but also your back taxes. It does this by making sure you are filing accurately and gives up-front payment options solutions for those who can’t afford their tax debt payments. This relief program utilizes four of the major tax resolution strategies into one consolidated program!
How Simple Is Qualifying?
Considering that the Fresh Start Program is a federal program, you would think meeting the qualifications may be very difficult, but really, it’s a lot simpler and quicker than you think. Take the following steps in order to find out if you are eligible in as little as 3 minutes.
- Fill out some basic information about yourself and your back taxes here.
- Have a representative reach out to you to discuss your eligibility.
- Go through the enrollment process and finally reduce or eliminate your tax liabilities.