S. Steps to taxable income and tax liability owed What steps should you take when completing a tax return? When preparing a tax return, it is important to complete each step in the order prescribed. Identify each step in completing a tax return by choosing the step from the drop-down fields below. Step A: Determine Adjusted Gross Income Step B: Calculate Taxable Income Larger of itemized deductions or standard deduction Step C: Calculate Tax Liability Calculate tax using tax tables or tax rate schedules Adjusted gross income (AGI) Total tax liability owed Gross income [all income subject to income taxes] Total personal exemptions Adjusted gross income (AGI) Adjustments to (gross) income Total tax liability owed Itemized deductions Adjusted gross income (AGI) Taxable income Total personal exemptions Total tax liability owed Taxable income Adjusted gross income (AGI) Other taxes Other taxes Total personal exemptions Tax credits Tax credits Other taxes Total tax liability owed Taxable income Total tax liability owed Adjustments to (gross) income