Simple Tax Terms

For the absolute tax beginner here are some basic terms. Memorize them.

Dependent – Someone who is depending on you for their food, shelter, etc. Your children are dependents. If you live with your parents, they probably claim you as a dependent.

Gross Income – Total Income from all jobs and investments (stock market, savings)

Exemption – A portion or amount of income that is not taxable.

Adjusted Gross Income – Total Income after Exemptions

Deduction – an amount by which taxes owed may be lowered.

You may choose to take the “Standard Deduction” which is based on your income level, and written on your tax form. Or you may add up different special conditions. This is called “Itemized Deductions“. Itemized Deductions gives relief and incentives for many situations such as buying a hybrid car, being in the military, or having a disability. You may take either “Standard” or “Itemized” deductions, whichever is larger for you. For most JETs, this will be the “Standard” deduction.

Foreign Earned Income Exclusion – “Foreign Earned Income” is all income earned outside of your home country. In this case, income earned in Japan. Exclusion is to claim this income is not taxable by the United States.

1040 – Standard U.S. Tax form, with many optional boxes

1040ez – Simplified U.S. Tax form. You cannot use this one. It does not allow you to file for Foreign Earned Income Exclusion.

W-2 – The form given to you by an employer, stating how much money you made in that year. Includes money withheld for taxes, social security, and tax info for the company.

Gensen Choshuhyo – Japanese Equivalent of a W-2. Request one from your BOE or Base School to use for filing taxes.

8822 – Change of Address Form. This form is to notify the IRS that you have moved outside of the United States. Needed so they know where to mail you, and you can claim foreign income.

2555EZ – Foreign Earned Income Exclusion form. On this you will calculate your income in U.S. dollars, an tell the IRS that it is not taxable due to where you were living when you earned it.