10 tax form abbreviations you should know

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Boyle/Getty Images

• Tax season
  brings with it a deluge of acronyms that you need to be
  familiar with.
• Here, we break down 10 of the major abbreviations
  you’ll encounter when filing your taxes.

 

This year’s new federal income tax form may be the size of a
postcard, but that doesn’t mean filling it out will be a
snap.

One of the less amusing parts of
doing your taxes is getting through the alphabet soup it
presents: AGI, EIN, EIC — what do all those abbreviations mean?

To help you navigate your tax forms,
here are definitions of common abbreviations you may encounter
while doing your taxes this year.

AGI

Adjusted gross income is a measure of the amount of money you
earned during the year. It’s basically all your income —
including any wages,
dividends, alimony, retirement money, or other income — minus
certain deductions. It is used to figure out how
much of your income the government can tax.

MAGI

There’s also modified
adjusted gross income, another measure of income that is
slightly but crucially different from AGI. To calculate MAGI, you
take your AGI and add back certain deductions, but only if they
apply to you. The deductions can include
student loan interest, tuition expenses, IRA contributions, and
more.

SSN

Social Security numbers are issued to all U.S. citizens, and some
eligible U.S. residents, often as soon as they are
born. The nine-digit number is used to track your income and
report it to the Internal Revenue Service. You also use it for
other purposes, like opening a bank account or applying for a
mortgage.  

EIN

An employer identification number is kind of like a Social
Security number for a business or organization. It’s a nine-digit
number assigned by the IRS to individuals, businesses,
sole proprietors, non-profit organizations and other
entities. The EIN identifies tax-paying entities that need to
file business tax returns.

EIC

The Earned Income Credit is a “benefit for working people with
low to moderate income,” according to the
IRS. It is also called the Earned Income Tax Credit (EITC).
You might be eligible for this credit
depending on factors like income, filing status, and whether
you have any qualifying children.

CTC

Parents may qualify for a Child
Tax Credit for having child dependents under the age of 17.
The credit may also apply for a grandchild, sibling, niece or
nephew, adopted child,foster child, or any other family member
who is under 17, has lived with you for more than half the tax
year, and is claimed as a dependent on your tax return. Under the
new tax plan, the credit has doubled to $2,000 per child, and
much of it is refundable.

FICA

Those deductions taken out of each paycheck? Some of it is for
the US federal payroll tax called the Federal Insurance
Contributions Act. FICA “helps fund Social Security and Medicare
programs,” which pay benefits to retirees, the disabled, and
children, according to the
Social Security Administration.

IRA

An individual retirement arrangement provides a way for you to
save money for retirement while enjoying certain tax advantages.
You set up an IRA through a bank or financial institution, and
you may be able to deduct “some or all of your contributions to a
traditional IRA” on your tax return, according to the IRS. There are
different types, including traditional IRAs and Roth IRAs, each
with their own tax rules.

Read more: 
This
chart should convince every teen to start saving for
retirement

HSA

A health savings account lets you put away pre-tax money to pay
for qualified medical expenses, including deductibles and
copayments. You are eligible to open one if you have
a High Deductible Health Plan (HDHP) — a health plan with a
deductible of at least $1,350 ($2,700 for a family). HSAs may
earn interest, and the interest is not taxable.

TCJA

In case you missed it, there’s been significant tax reform in the
past year. The Tax Cuts and Jobs
Act was enacted in December 2017, bringing many changes for
the next tax-filing season, including
reforms to deductions and tax rates. The IRS says the
simplest way to make sure you file a complete and accurate return
is to use tax-prep software like IRS Free File, IRS Free File
Fillable Forms, or commercial software.