Tax Glossary

The form used to report non-employee compensation (freelance or contractor income) of $600 or more.

Your gross income minus specific adjustments (like educator expenses, student loan interest, or retirement contributions). AGI is used to calculate your taxable income.

A review/examination of an organization's or individual's accounts and financial information to ensure information is reported correctly according to the tax laws.

The profit from the sale of an asset (like stocks, crypto, or real estate). Short-term gains are taxed at ordinary rates; long-term gains have preferential lower rates.

Periodic advance payments of income tax that are required for people who have income that is not subject to withholding (like freelancers).

A request for more time to file your tax return. Note: It is an extension to *file*, not an extension to *pay*.

Your tax filing category (Single, Married Filing Jointly, Head of Household, etc.) which determines your standard deduction and tax brackets.

Expenses you list on Schedule A (like mortgage interest, state taxes, medical expenses) to reduce taxable income, instead of taking the Standard Deduction.

The tax rate paid on your *last* dollar of income. This is often higher than your effective tax rate (average rate).

A tax credit that can reduce your tax liability below zero, resulting in a refund.

The tax form used to report profit or loss from a business you operated or a profession you practiced as a sole proprietor.

A specific dollar amount that reduces the income you're taxed on. You choose between this or itemizing deductions.

A dollar-for-dollar reduction of the income tax you owe. Credits are generally worth more than deductions.

The total amount of tax debt owed by an individual, corporation, or other entity to a taxing authority like the IRS.

A form completed by an employee to indicate his or her tax situation to the employer. The W-4 form tells the employer the correct amount of tax to withhold from an employee's paycheck.