The IRS is excited to provide a series of videos with tips to help deaf and hard of hearing taxpayers. This series will help you become familiar with the free tax preparation programs in American Sign Language or ASL. Today, we’ll focus on the Federal Tax Return, known as Form 1040, and go through some of the income tax-related terms.
First, let’s discuss some basics to help you better understand how to prepare your taxes. The first tax term is “filing status”. Think of it as a tax break allowing you to reduce your income. The amount to reduce income depends on what filing status you have.
There are five filing statuses:
Single, Married Filing Jointly, Married Filing Separately, Head of Household, and Widow or Widower with Qualifying Child.
Let’s take a look at a few other terms.
First, Claim – as in, “Can someone claim you on their income tax return?” or “Can you claim someone on your tax return?” Claim means putting information on your tax return that will be of benefit to you. For example, parents can lower their taxes by claiming their children
Exemption – Exemption is how much you can deduct from your income for each person you claim on your tax return. You can claim yourself, your spouse (if married) and other persons including children if certain requirements are met.
Standard Deduction – This is a specified amount you can subtract from your income, depending on which of the five filing statuses you qualify for.
Refund – This is a word many people like. A refund is the money you will get if the tax on your income is less than the amount of income tax withheld by your employer plus any tax credits you are entitled to. You must file a tax return to get a refund.
Withholding or Estimated Tax Payments - Your employer holds back some of your paycheck money to pay the government. You get credit for it when you file a tax return. The same is true for those people without employers who make estimated tax payments to the IRS during the year.
Tax Credits - A tax credit means you can reduce your tax or increase your refund if you meet certain requirements. The government creates tax credits to help people with low- to moderate-income.
Some examples of tax credits are:
Earned Income Credit – This is for working persons having low income. The amount depends on your filing status and how many children live with you;
Child Tax Credit – This is a great tax break for people who have children under 17 years old. If you meet the criteria, a refund can be increased by as much as $1,000 per child;
Child and Dependent Care Credit – If you pay for someone to take care of your child or disabled spouse so you can work, you may be able to put those expenses on your tax return;
And, finally - Healthcare Law or Affordable Care Act- Most people, who had health insurance coverage for everyone on their tax return, will simply check a box to report that coverage.
We hope this will help you better understand the tax terms when you file tax forms.
Now let’s go over Form 1040, U.S. Individual Income Tax Return, to explain how your taxes are figured.
The top section of Form 1040 asks for your personal information like your name, address and Social Security number.
The next section is where you claim your filing status.
The Exemptions section is where you claim your dependents like your children.
Income is a very important section. This is where you report your wages and other income such as interest received and Social Security benefits. Some types of income require an additional form to be attached.
Below the Income section is where certain deductions can be claimed to reduce income. Page 1 will end with Adjusted Gross Income at the bottom of the page. This amount gets carried over to line 38 on the top of page two.
On page two, your adjusted income is further reduced when you subtract the amount of your standard deduction or your itemized deductions; you also get to subtract the total amount for all your exemptions.
That will leave you with Taxable Income. The tax applicable to this amount is entered onto the tax return.
There are several other items that may increase your total tax. These include: self-employment tax, or the tax for taking money out early from your retirement account. Also, the Affordable Care Act rules may change on your taxes . However, there are many tax credits on page two for which you may qualify that will help you reduce the tax on your return. And there are some credits that can increase your refund even if you have zero tax.
If you are liable for any other taxes, it will be added to the income tax amount.
Let’s look at the Payments section. In this section, you report actual payments to the IRS. You also include any tax credits that are treated the same as making payments to the IRS. The actual payments include withheld federal income taxes;
Among these are the Earned Income Credit, Additional Child Tax Credit, and the education credit known as the American Opportunity Credit. To find out if you qualify, complete the related form and attach it to the tax return. The Premium Tax Credit may be available for those who purchased health insurance through the Marketplace under the Affordable Care Act.
Now, after all the amounts in the Payments section are totaled, it will be compared to the Total Tax amount. If you have more payments than the Total Tax, the difference is entered on the Refund line. If Total Tax is more than the payments, that difference is entered on the Amount You Owe line.
If you do owe taxes, the instructions to Form 1040 will give details on how to pay.
Finally, you (and spouse, if married) must sign and date the tax return. Or, you may be asked to sign a different form if someone else is e-filing your tax return.
Direct Deposit is safer than having a refund check mailed to you, and you will get the refund faster.
To check on your refund, check the Where’s My Refund? tool at www.IRS.gov.
There is also an IRS2Go application that can be downloaded to your SMART phone. IRS2Go has ASL videos linked to YouTube. Both are available 24 hours a day, 7 days a week.