Writing it Off: Test Your Income Tax Knowledge

Your Adjusted Gross Income (AGI) is your taxable income before deductions. It includes your gross income like salary and investment interest, minus adjustments that aren't taxed like money you get from interest on retirement plans or alimony.

A progressive income tax system is one in which tax rates increase progressively as income increases.

The cost of utilities isn't tax deductable. You can, however, get deductions for unexpected loss of property due to theft or natural disaster. You can even deduct gambling losses up to the amount of your gambling winnings.

Don't file a tax return amendment, form 1040X, if you discover an addition or subtraction error you made on your 1040. The IRS will check your math. And, they'll notify you if a mathematical error results in a change to your taxes.

The W-4 form lists all of your withholding allowance information like the number of dependents and child care expenses. This tells your employer how much money to withhold from your paycheck for federal income tax. Toward the end of the tax year, your company sends you a W-2 form which details how much money you've made during the last year and how much federal tax was withheld from your income.

The 16th Amendment, passed in 1913, allowed the federal government to collect taxes on income.

The Fair Tax Plan would abolish the income tax and instead institute a national sales tax.

Watch your figures -- mathematical errors look bad and could increase the likelihood you'll be targeted for an audit. A clearly filled-out return and explanatory notes will help you avoid an audit.

If you sell something for more than you paid for it, it's subject to capital gains tax. The capital gains tax takes a percentage of all realized (sold) capital gains.

The simplest strategy for lowering the amount you owe in capital gains tax is to avoid short-term investments. Long-term investments will almost always have a lower tax rate. You can also deduct capital losses from your capital gains to lower your total taxable earnings.

When claiming your small business, the IRS expects a profit. If your business was profitable in at least three out of the past five years, you should avoid audits.

When going to prepare your taxes, be sure to take all relevant documents including, identification, proof of expenses, and proof of income. Rental agreements are not necessary.

April 15 equals doomsday for many Americans. Don’t fret! You may get an extra day or two if the 15th falls on the weekend.

The Tax Act of 1862 gave the commissioner the power to levy and collect taxes.

The IRS is the Internal Revenue Service.

The United States uses a marginal tax rate and uses six tax brackets.

If April 15th is fast approaching and you are not prepared to file your taxes, use Form 4868 to file for an extension.

There are a number of tax deductible expenses; however interest and penalties paid on taxes cannot be deducted.

A flat tax is where everyone pays the same percentage on their taxes regaradless of income.

Seven states -- Alaska, Florida, Nevada, South Dakota, Texas, Washington and Wyoming -- have no income tax.