Glossary

An underpayment penalty is a fee the IRS charges when you don't pay enough of your taxes throughout the year. It's crucial to understand this penalty to avoid surprise tax bills.

Failing to file your tax returns can lead to a range of serious issues with the IRS, including penalties, interest, and even legal action. Understanding these potential consequences is crucial for every taxpayer.

A tax transcript is an official summary of your tax return information from the IRS. It's often required for loans, scholarships, or other financial situations.

Capital gains tax is the tax you pay on profits from selling assets, like stocks or real estate. It's important to understand so you can plan your finances effectively.

A capital loss carryover allows you to use investment losses that exceed your annual deduction limit to reduce your tax bill in future years. It's like a tax break that keeps on giving, helping you recover from a tough investment year.

The Child and Dependent Care Credit is a tax break that helps families offset the costs of childcare or care for other dependents, allowing them to work or look for work. It's a valuable resource for many households.

A dependent exemption was a way to reduce your taxable income for each qualifying child or relative you supported. This deduction has been replaced by the child tax credit, but understanding it helps put the current tax system in perspective.

Federal income tax brackets are the ranges of income that are taxed at different rates. Understanding them is key to knowing how much you owe in federal income taxes.

Your filing status determines which tax rates, deductions, and credits you’re eligible for. Choosing the right one is key to minimizing your tax bill.

The First-Time Homebuyer Credit is a tax break designed to help people purchase their first home. It can provide a significant reduction in your tax liability and make homeownership more attainable.