KGWN –Cheyenne, WY– Scottsbluff, NE News,Weather, SportsHow to Better Understand Your Tax Form

How to Better Understand Your Tax Form

Now that the new year has started it's time to start thinking about tax season.

Taxes and it's list of terms can be confusing that's why many of us hire a professional to do them for us.

Tax terms can be like a foreign language, but to understand your taxes there are some terms you should familiarize yourself with.

AGI is your adjusted gross income and it's the first step in calculating your final federal income tax bill.

There are two types of tax deductions that you can use to subtract from your AGI to arrive at your taxable income.

"A standard deduction is something that everyone's authorized to have. It's based on a single status, married status, head of household or qualifying widowers. Your itemized deduction is when you can break it down and claim like home mortgage interest and big purchases like buying a car," said LeAnn Dooley, H&R Block.

Another amount you can use to subtract from your income is an exemption.

"An exemption is anyone in your household that you can legally take as a dependent. Usually you get a personal exemption and each person is allowed only one," Dooley said.

All these deductions and exemptions help you arrive at your taxable income, the final amount of income you use to calculate what you owe in taxes.

Pay as you earn taxation or withholding is another method of tax payment.

"Withholding is a based amount that you can have withheld from your paycheck and you can adjust that in several different ways. By numbers or by status so you can have the correct amount withheld," Dooley said. 

Taxpayers will have until Tuesday, April 17 to file their 2011 tax returns and pay any tax due because April 15 falls on a Sunday, and Emancipation Day, a holiday observed in the District of Columbia, falls this year on Monday, April 16.