Taxes can be complex, and navigating them could be daunting, especially when you don’t understand the terms used. With that in mind, today we provide you with a comprehensive glossary of common tax terms.

Adjusted Gross Income (AGI)

AGI is your total income from all sources before any adjustments are made for deductions or exemptions. Your AGI is used to determine your eligibility for certain tax deductions and credits.

Taxable Income

Taxable Income is the portion of your income subject to taxes. To calculate your taxable income, start with your AGI, deduct any deductions and exemptions you’re eligible for, and subtract any credits.

Dependent

A qualifying child or qualifying relative, other than yourself, who entitles you to claim a dependency exemption.

Deductions

Deductions are expenses you can subtract from your AGI to lower your taxable income. Some common deductions include interest paid on student loans, contributions to retirement accounts, and charitable donations.

Dependency Exemption

Amount that taxpayers can claim for a “qualifying child” or “qualifying relative”. Each exemption reduces the income subject to tax. The exemption amount is a set amount that changes from year to year. 

Exemptions

Exemptions are a set amount subtracted from your taxable income for each person on your tax return. There are two types of exemptions: personal and dependency. 

Personal Exemption

Can be claimed for yourself and your  spouse. Each personal exemption reduces the income subject to tax by the exemption amount.

Tax Credits

Tax credits are amounts that directly reduce your tax bill. Unlike deductions, which only lower your taxable income, tax credits are a dollar-for-dollar reduction in your tax liability. Some common tax credits include the Earned Income Tax Credit, Child Tax Credit, and Education Credits.

JT Tax Services: Taxes Made Easy

When it comes to taxes, knowledge is power. That’s why at At JT Tax Services, we give you the peace of mind that comes with knowing that you are working with experienced professionals with in-depth knowledge of all applicable tax laws and regulations.

We are located in Oxnard, California, contact us today by email (info@jttaxservices.com), telephone (805-984-8890), or through our social media accounts on Facebook, Twitter, and LinkedIn to schedule a consultation or to learn more about our services. Feel free to contact us today!

Before you start a business, you have to decide what form of business organization is right for you. Among the most popular options is a sole proprietorship. But what exactly is a sole proprietorship and is it the right fit for your business dreams? 

Sole Proprietorship: a Basic Definition

A sole proprietorship is a business that is owned and run by a single individual who is responsible for all of its debts and obligations. 

This is the simplest and most common form of business structure, particularly for small businesses or home-based enterprises. 

In a sole proprietorship, there is no legal separation between the owner and the business entity. This means that the owner is personally liable for all the company’s debts and legal actions.

Benefits of Sole Proprietorships

One of the main advantages of a sole proprietorship is its simplicity. A sole proprietorship is easy to set up and maintain, and there are no complex legal or accounting requirements to follow. 

Additionally, as the owner and operator of the business, a sole proprietorship gives you complete control over all aspects of the company, including the decision-making and profits. 

This means that you don’t have to worry about sharing profits with partners, and you have the flexibility to choose your work hours and style.

Sole Proprietorships: What You Need To Consider

While the simplicity of a sole proprietorship has its advantages, it also has some aspects you need to weigh.

The main thing you need to know about sole proprietorships is that under this type of structure, the owner has unlimited personal liability. 

Simply put, this means that since there is no legal separation between the owner and the business, creditors can go after the owner’s personal assets, such as their home, car, or personal bank accounts. 

Is a Sole Proprietorship Right for You?

Deciding whether a sole proprietorship is the right form of business organization for you depends on several factors, such as your business objectives, financial situation, and risk tolerance. 

If you want complete control and flexibility over your business, have simple accounting needs, and don’t plan on taking on debt or investors, then a sole proprietorship may be a good option. 

However, if you plan on expanding your business, taking on investments, or have high-risk assets, then you may want to consider other business structures such as a corporation or LLC.

JT Tax Services: Taxes Made Easy

When it comes to taxes, knowledge is power. That’s why at At JT Tax Services, we give you the peace of mind that comes with knowing that you are working with experienced professionals with in-depth knowledge of all applicable tax laws and regulations.

We are located in Oxnard, California, contact us today by email (info@jttaxservices.com), telephone (805-984-8890), or through our social media accounts on Facebook, Twitter, and LinkedIn to schedule a consultation or to learn more about our services. Feel free to contact us today!