Tax! How a three-letter word can render so much anxiety is mind boggling. The U.S. tax code is extensive and it changes frequently. Its level of detail and expanse makes it impossible for any one person to grasp every aspect of the code. This may be the reason tax preparers often specialize in certain areas rather than presume expert knowledge in all areas. You should familiarize yourself with some key terms so that you can communicate with your tax preparer and tax authorities in Marin County. Always ask questions if there are items on your return or in your tax plan that you do not understand.
The ACH credit process allows you to move your money by telling your bank to debit your account and credit the state’s bank account.
Also known as: Automated Clearing House Credit
The ACH debit procedure allows you to move money by telling the state to electronically debit a bank account you own for the amount you owe to the state.
Also known as: Automated Clearing House debit
This is a child you have legally adopted. After legal adoption, the child is considered yours with equal status of a child related to you by blood. Before legal adoption, the child is considered yours for head of household purposes as long as the child was placed in your home by a legal organization.
AGI is the acronym for adjusted gross income. It is your net income from all sources minus all California payment adjustments.
Also known as: Adjusted gross income
Congress enacted AMT or Alternative Minimum Tax rules in 1969 to ensure that the rich people pay taxes even if they are eligible for enough deductions that lower or completely eliminate their tax liability.
Also known as: Alternative Minimum Tax
Annual reports summarize an organization’s activities that occur during the year. It can also be a statistical profile of California individuals and people in business who pay taxes.
If you were married in the year, but the marriage was later annulled, you will be treated as if you weren’t married during that year. Treatment of your marital status can greatly impact your tax liability.
Audits are official inspections of your return, typically by an independent group.
This process shields your info either via a login, or some other way, by authorizing the identity of groups on both parts of an internet trade before information exchange.
Back taxes are basically overdue taxes.
BOE is a California State agency that administers sales and use, property, and special taxes.
Also known as: Board of Equalization
CalFile is a free, direct e-file that California residents can use to file personal income tax returns.
california public records act
The California Public Records Act gives the residents of California access to information that is in possession of an authorized public group.
capital gains tax
Capital gains tax refers to the tax that businesses must pay on the profits they make from sales.
A casualty is a high amount of damage done when a large scale catastrophe hits such as tsunamis and tornados.
Credits are ways to reduce your tax amount. You can receive tax credits for payments such as tuition and energy conservation expenses.
customer service number (csn)
Assigned to taxpayers each year by the Franchise Tax Board, the customer service number is a combination of your social security number and a four digit number. It is used to authenticate taxpayers and ensure confidentiality.
Deductions lower the amount of payment on which tax is due. You may choose to itemize your deductions or take advantage of the standard deduction.
Dependent are people that depend on you for care. Claiming dependents on your return increases your personal exemptions. You also may qualify for certain tax benefits when you claim dependents.
Direct deposit is an automatic payment procedure that lets tax preparation companies deposit your refunded tax money into your bank account.
Disposable earnings are an employee’s total earned payment minus legal reductions, which can include social security, state and federal income taxes.
Earned income includes wages plus salaries, tips and professional fees, along with net self-employment income, and any other compensation that you receive for performing.
earnings withholding order
This order is a continuous levy on a portion of your earnings. Earnings Withholding Orders are issued to individuals who owe an unresolved debt rendered by the California courts.
earnings withholding orders for taxes (for employers)
An Earnings Withholding Order for Taxes is a continuing levy on a percentage of a taxpayer’s earnings. They are issued for taxpayers who owe an unresolved delinquent tax debt.
The California Employment Development Department is a state agency that manages California payroll taxes.
Also known as: Employment Development Department
The E-File process electronically transmits your tax report to the IRS.
EFT is an acronym for electronic funds transfer. It is a convenient method of payment that helps prevent defaults on installment agreement. The effieciency of the EFT process also contributes to cost savings.
Also known as: Electronic Funds Transfer
Encryption methods help to ensure that only those you authorize can view your personal information. Encryption changes info into a form that is securely sent via the Internet. Once the data has been moved, it is translated using an encryption key.
Taxpayers are grouped in one of five categories. These categories are referred to as filing statuses. Your filing status determines your tax bracket and how tax rules are applied to your situation.
Financial hardship occurs when you are experiencing extreme difficulties that prevent you from paying your tax bill. If you can’t pay your taxes upfront all at once, you may be able to claim financial hardship and make monthly payments to avoid back taxes.
Form 1040 is the standard form that individuals use to file their annual tax report.
Form 1099-Misc is used to report miscellaneous income. Self-employed workers and workers who are not employees typically receive Form 1099-MISC from their clients.
Employers issue Form W-2 to their employees. It reports the employee’s annual income and any taxes or other deductions that reduced the employee’s income.
FTB is an authorized organization of California that is responsible for collecting the state’s personal and business income taxes.
Also known as: Franchise Tax Board
Gross earnings include wages, plus salary, commissions, and bonuses, vacation pay, or, basically, anything an employer pays an employee for personal services.
Gross income includes all payments you received from wages and salaries, market products, land, and services from all sources. Your gross income includes no deductions or adjustments.
head of household
You can claim the head of household status if you have dependents that depend on you for at least 50 percent of their care.
Income refers to monies you receive from investments and for services rendered.
For joint return filers, the spouses are normally equally responsible for all tax liabilities, penalties and interest. You or your spouse may qualify for innocent spouse status if you meet certain legal requirements. This status relieves you of your responsibility to pay joint tax liabilities, penalties, and interest.
You may request to pay your tax liability in monthly installments if you cannot pay your taxes upfront.
International taxes are taxes levied by foreign countries for conducting business in that country.
Itemized deductions are expenses that you claim to reduce your tax liability. Some itemized deductions must meet IRS limits before they can be claimed, and your itemized deduction should be greater than the standard deduction to warrant itemizing in the first place.
A levy is a legal order from the court that compels a third group to withhold a portion of your payments to eliminate a debt.
Also known as: wage garnishment or wage assessment
liens are authorized claims against personal property to eliminate a debt.
The modified adjusted gross income is used to limit tax reductions or credits. Modified adjusted gross income can be confusing because its definition changes depending on the tax credit or deduction in question.
nonrefundable renter’s credit
The Nonrefundable Renter’s Credit is a personal income tax credit that you can use to to offset your tax liability; however, you must have a tax liability to claim the credit.
For any period that you are neither a resident alien nor a U.S. citizen, you are a nonresident alien. Nonresident aliens typically cannot claim the head of household filing status and they must file form 1040NR or 1040NR-EZ to report U.S. income and pay applicable taxes.
OIC is an acronym for offer in compromise. The offer in compromise program allows taxpayers to pay a lower amount of their non-disputed tax liability. To qualify for an OIC, you cannot have income, assets or means to pay the tax bill now or in the foreseeable future.
Payroll taxes include the amounts that your employer withholds from your wages to pay for federal income taxes. Your portion of the FICA taxes that allocates to social security and Medicare also are included in payroll taxes.
Personal exemptions help to reduce your tax bill. Each taxpayer is alloted a personal exemption plus one exemption for each dependent.
phase-in and phase-out limits
Phase-in and phase-out limits are the dollar thresholds in the tax law at which you as the taxpayer become eligible or ineligible for credits and deductions.
power of attorney
Granting power of attorney to someone allows that person to legally make decisions on your behalf. You can also use power of attorney documents to allow a designated person to communicate with tax authorities regarding issues that impact your tax liability.
Property is local tax assessed on property that you own.
Residents in San Rafael, Novato, Mill Valley and all of California can file their state taxes via Ready Return without incurring filing fees. The state uses information from your last return to prefill the state tax return.
Tax preparers in San Anselmo, Larkspur, Corte Madera and throughout the state of California who prepared at least 100 California income tax returns per year must e-file the returns they prepare. Beginning in 2011, the IRS also has enacted a similar e-file requirement for tax preparers.
Separate property refers to property that a couple owned separately before marrying. It is also property that each spouse owns obtains after marriage and own separately. The spouse who owns the property may acquire the property through inheritance, bequest, as a gift or may purchase the property with separate funds.
Standard deduction refers to the basic deduction that taxpayers may subtract from their incomes. You may choose to take the standard deduction rather than itemizing expenses. Your standard deduction is determined by your filing status.
The portion of your income on which tax is applied is referred to as taxable income
States that charge a sales tax apply a use tax when residents purchase goods via the Internet or out of state where no sales taxes apply. This means that you may pay a use tax if you purchase goods for use in the San Francisco Bay Area from a state that does not charge a sales tax.
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Withholding refers to the amounts that your employer retains from your earnings. The employer uses this portion of your earnings to pay taxes on the amount you earned.