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Taxes: 10 Terms You Should Know If You Want to File By Yourself This Year

Taxes: 10 Terms You Should Know If You Want to File By Yourself This Year

If you want to prepare and file your own tax return, you’re not alone. More than 27 million people did their own taxes[1] in 2014, a nearly 6 percent increase from the year before.

However, joining the 27 million-person-strong tax preparers and filers around the United States doesn’t mean that understanding your taxes is easy. Taxes can be daunting, especially if you don’t know the terms.

To help, here’s a list of 10 tax terms that you need to know if you’re doing your taxes yourself this year.

Adjusted Gross Income

Your adjusted gross income (AGI),[2] sometimes referred to as gross income, refers to all the income you’ve received in the year. This includes income you’ve earned, such as wages and income you may have received because of owning stocks, bonds or money market accounts. Interest, dividends and capital gains all fall into this category.

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The “adjusted” part of AGI comes in because you can subtract certain items from the income you’ve received. Contributions to an IRA, for example, might be subtracted, along with alimony costs. Be sure to read the fine print for what you can subtract. AGI is an important step in determining how much you owe.

Tax Deductions

Deductions are amounts of money that you can subtract from your AGI. They come in two forms: standard and itemized. The key to deductions is that they lower your AGI so that you do not have to pay as much tax. In general, the lower your income, the less tax you have to pay. So if, for example, you’ve earned $40,000 in a year and have a $9,000 tax deduction, you’ll only pay tax on $31,000, not the entire $40,000.

The Internal Revenue Service (IRS) lists a certain number of deductions right on the Form 1040A or longer and more detailed Form 1040. These include student loan interest, deductible individual retirement accounts contributions, alimony payments and moving expenses.

Standard Deductions

The IRS is the agency that determines tax code. Every year, all tax filers get a standard deduction. The standard deduction is an amount that you can deduct from your AGI to lower your taxes. The amount of standard deduction for the year will be given in the IRS instructions for 1040 and 1040A. The standard deduction depends on your income and is usually given in a table. The IRS adjusts this figure every year for inflation.

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Itemized Deductions

You can deduct items such as mortgage interest, state, local and property taxes, medical expenses, travel expenses if for work or medical needs, charitable contributions, casualty and theft losses and more from your AGI as well.

Note that in some states, medical expenses must exceed a certain percentage of your AGI. It’s a good idea to keep track of your expenses[3] so you know what your medical expenses, including health insurance deductibles, totaled for the year. These are called “itemized deductions” because they need to be itemized, on Schedule A of Form 1040.

If your itemized deductions equal more than the IRS’s standard deduction in a given year, it’s good tax news for you, as you’ll have to pay tax on less of your AGI. You can take itemized deductions or the standard deduction in a given year, not both. Be sure to read the fine print about what’s allowed as an itemized deduction and how much.

Exemption

An exemption is an amount the IRS allows you to subtract from income to reflect people who share your household and may depend on you for income. You can take exemptions, for example, for yourself, any dependents and your spouse. A fixed amount of money is provided for every exemption. You’ll subtract the amount of all exemptions, including for yourself, from your AGI to arrive at your taxable earnings.

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Withholding

Withholding refers to the amount of money taken out of your wages or other income as you earn it, but before you get your paycheck. Paycheck stubs will list the amount of withheld money and what it’s for. Employers withhold taxes for Federal, state and local tax, as well as Social Security.[4] The withholdings go  to your tax accounts. For example, your Federal taxes go into an IRS account.

When you calculate your taxes, you’ll arrive at the taxes you owe for the year. The final step is to subtract any taxes that have already been withheld. These are given on your W-2 and other income forms. If you owe $10,000 in Federal tax, for example, and have had $9,800 in Federal tax withheld from your paycheck, you’ll owe just $200 when you file. If you owe $10,000 in Federal tax and you have $10,100 withheld, you’ll receive a Federal tax refund of $100.

Tax Credits

You can compare tax credits to credits from a store. After you calculate your tax bill, you can use tax credits to reduce the amount you owe.[5] They’re more valuable to the individual taxpayer than deductions because they reduce the amount of tax itself, rather than just the amount of taxed income.

If you have a $1000 tax credit and owe $10,000 in taxes, you’ll end up owing $9,000 instead. You may receive tax credits for some educational programs and home solar power installation, for example. These are revised every year, so be sure to read the IRS’s information about available tax credits carefully.

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Taxable Income

Taxable income refers to your total before tax — or gross — income with every allowable deduction, exemption and adjustment subtracted. Taxable income is the final step in determining how much you owe in taxes.

Basis

If you have stocks, you’ll need to know its basis. Any asset’s basis is the value original paid for it. If you’ve sold stocks this year, you’ll need to know what you paid originally, in order to calculate the gain or loss upon sale. You’ll then use those gains or losses to calculate your tax.

Capital Gains

Capital gains refer to any profit you made from selling a capital asset. Real estate, stocks and bonds are all examples of capital gains. You’ll have to pay capital gains tax on the profit from sale. If you sold at a loss, the loss can generally be deducted.

Doing your taxes yourself may seem like a daunting task, but understanding the language is half the battle. Now you’re ready to get a head start on tax season!

Reference

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Anum Yoon

Writer & Journalist

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Last Updated on February 11, 2021

Want to Get Free Product Samples Like Bloggers and Beauty Gurus Do? Read This.

Want to Get Free Product Samples Like Bloggers and Beauty Gurus Do? Read This.

Imagine receiving a regular supply of free samples through your letterbox?

These free samples by mail could include things such as cleaning products, cosmetics and packaged food.

Free samples are a great way to try out some of the latest products. One week you may have a new toothpaste to try – the next week you may be snacking on a delicious chocolate cookie sample.

As the saying goes, variety is the spice of life. And by requesting free samples by mail (I’ll show you how shortly), you’ll have not just variety – but fun too!

Tell Me More About Getting Free Samples Sent to My Door!

So, it looks like I’ve caught your interest. That’s great news!

Just before I introduce you to 10 places where you can get free samples by mail, let me clarify a couple of things.

Firstly, all the places I’ll talk about are currently active in sending out free samples to consumers. (In other words, no links to out-of-date or dead pages!)

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Secondly, location is key. If you live in North America, then you’ll have a wide selection of places to sign up to. In other locations (for example, Africa, Asia and Europe), you’ll have fewer choices – but free samples by mail are still a possibility.

Lastly, to whet your appetite for the freebies, here’s a short list of product examples:

  • Pet food.
  • Beauty products.
  • T-shirts.
  • Greeting cards.
  • Wallets.
  • Snack bars.
  • Vitamins.

Free Samples by Mail… Tell Me Where to Get Them!

It’s now time to share my recommendations for the best sites to claim free samples from.

Let’s start with…

#1 SampleSource

    This company sends out boxes of 6-12 free samples about four times a year. Products include baby wipes, cereals and tissues. Register with SampleSource to be notified of the availability of their free samples. (Canada and U.S. only.)

    #2 Influenster

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      As their name suggests, Influenster wants to send free samples to you in exchange for you sharing about the products on your social media accounts. Once you’ve become a member (join for free!), they’ll send you a box of free goodies every few months. The more you share pictures and reviews of the products – the more free samples they’ll send you! (All major territories.)

      #3 PINCHme

        This organization will send you free samples in the hope that you’ll then go out and buy the equivalent full-size products. To receive regular boxes of free food, drink and cosmetic samples (and sometimes coupons), then sign up and create your profile. (U.S. only.)

        #4 House Party

          Thinking of throwing a house party? If yes, then be sure to sign up with this company. They’ll send you a box of ‘themed’ products and services that you can hand out at your party. Register with House Party. Wait for the fun freebies to be mailed to you. And then start sending out your party invites! (Worldwide.)

          #5 YoFreeSamples

            This site is a great resource for a whole host of free samples that can be mailed directly to your door (with no survey requirements!). You’ll find anything from books to perfume, with new offers listed daily. Head over to their site to see what’s currently available. (Mostly U.S., with occasional offers for other countries.)

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            #6 Magic Freebies

              The U.K.’s most popular freebie site. Register for their email newsletter, and they’ll send you a daily email with eight free sample offers. These include products such as disposable razors, dog bowls, and even fake tan! So, what are you waiting for? (U.K. only.)

              #7 SweetFreeStuff

                Since 2002, this simple site has been linking to the best free sample offers currently available. To get started, sign up to their daily email newsletter, which contains links to the latest offers. As well as free samples, SweetFreeStuff also gives information on coupons and deals. (Worldwide.)

                #8 Sample A Day

                  Would you like to receive a notification of a new free sample every day? Well, that’s the promise from this site. They claim to thoroughly research all offers, ensuring there are no catches or hidden surveys! From baby products to socks, this site is sure to have something for you. Registration is super-easy. Simply enter your email address. (Australia, Canada, U.K. and U.S. only.)

                  #9 Pretty Thrifty

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                    This site specializes in free beauty products, but also lets you claim free samples such as energy drinks, snack bars, and even magazine subscriptions. Pretty Thrifty has more than 85,000 followers on social media, so clearly knows how to attract free sample hunters. One thing that makes Pretty Thrifty stand out from most of their competitors, is that their email newsletter is available in daily, weekly and monthly formats. (Mostly U.S., with occasional offers for other countries.)

                    #10 CrazyFree

                      My final tip for getting the best free samples by mail, is Australian company CrazyFree. Their funky website offers big brand free sample offers, which currently include items such as Dolce & Gabbana perfume, Coke Zero, and Happy Dog pet food. To claim the offers, select the free samples you would like, and then complete their registration form. (Australia, U.K. and U.S. only.)

                      Receiving regular free samples by mail is a fabulous way of testing out the latest products on the market (and some that aren’t even on the market yet!)

                      You’ll impress your friends and family with all the free stuff you’ll be receiving. And take it from me… it’s a fun, free and rewarding hobby.

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