A
Adjusted Gross Income (AGI)
Your total gross income minus specific deductions (above-the-line deductions). AGI is used to determine eligibility for various tax credits and deductions.
Amended Return
A form (1040-X) filed to correct errors or make changes to a tax return that has already been filed with the IRS.
Audit
An examination of your tax return by the IRS to verify that your income and deductions are reported accurately.
C
Capital Gains Tax
A tax on the profit from the sale of assets such as stocks, bonds, or real estate. Long-term capital gains (assets held over one year) are taxed at lower rates than short-term gains.
D
Deduction
An expense that can be subtracted from your gross income to reduce your taxable income. Common deductions include mortgage interest, charitable contributions, and state taxes.
Dependent
A person (usually a child or relative) who relies on the taxpayer for financial support, qualifying the taxpayer for certain credits and deductions.
E
Earned Income Tax Credit (EITC)
A refundable tax credit for low-to-moderate income working individuals and families, designed to reduce the tax burden and supplement wages.
Estimated Tax Payments
Quarterly tax payments made by self-employed individuals or those with income not subject to withholding to cover their expected tax liability.
Extension
A request (Form 4868) to extend the deadline for filing your tax return by six months. An extension to file is not an extension to pay.
F
FICA
Federal Insurance Contributions Act tax, which funds Social Security and Medicare. Both employees and employers pay FICA taxes.
Filing Status
A category that defines the type of tax return form a taxpayer will use. The five statuses are: Single, Married Filing Jointly, Married Filing Separately, Head of Household, and Qualifying Surviving Spouse.
Form 1099
A series of tax forms used to report various types of non-employment income, such as freelance work (1099-NEC), interest (1099-INT), and dividends (1099-DIV).
Form W-2
A tax form issued by employers reporting an employee's annual wages and the amount of taxes withheld from their paycheck.
G
Garnishment
A legal procedure where the IRS or a court orders an employer to withhold a portion of your wages to pay a debt, including unpaid taxes.
I
Installment Agreement
A payment plan with the IRS that allows taxpayers to pay their tax debt over time in monthly installments.
Itemized Deductions
Specific expenses (medical, taxes, interest, charitable contributions) that taxpayers can list on Schedule A instead of taking the standard deduction.
L
Levy
A legal seizure of property or assets by the IRS to satisfy a tax debt. This can include bank accounts, wages, real estate, and other assets.
Lien
A legal claim by the IRS against your property when you fail to pay a tax debt. A federal tax lien affects your credit and attaches to all your assets.
O
Offer in Compromise (OIC)
An agreement with the IRS that allows taxpayers to settle their tax debt for less than the full amount owed, based on ability to pay and other factors.
P
Penalty Abatement
A request to the IRS to remove or reduce penalties assessed on a tax account. Common types include first-time abatement and reasonable cause abatement.
Q
Quarterly Taxes
See Estimated Tax Payments. Due dates are typically April 15, June 15, September 15, and January 15.
R
Refund
The amount returned to a taxpayer when their total tax payments (withholdings and credits) exceed their total tax liability for the year.
S
Standard Deduction
A fixed dollar amount that reduces the income on which you are taxed. For 2025, the standard deduction is $15,000 for single filers and $30,000 for married filing jointly.
T
Tax Bracket
A range of income taxed at a specific rate. The U.S. uses a progressive tax system with seven brackets: 10%, 12%, 22%, 24%, 32%, 35%, and 37%.
Tax Credit
A dollar-for-dollar reduction of your tax liability. Credits are generally more valuable than deductions because they directly reduce the amount of tax owed.
Tax Liability
The total amount of tax you owe to the IRS for a given tax year before credits and payments are applied.
W
Withholding
The amount of federal income tax withheld from your paycheck by your employer based on your W-4 form elections.