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ABILITY TO PAY  look up translate image
A concept of tax fairness that states that people with different amounts of wealth or different amounts of income should pay tax at different rates. Wealth includes assets such as houses, cars, stocks, bonds, and savings accounts. Income includes wages, interest and dividends, and other payments.
ADJUSTED GROSS INCOME  look up translate image
Gross income reduced by certain amounts, such as a deductible IRA contribution or student loan interest
AMOUNT DUE  look up translate image
Money that taxpayers must pay to the government when the total tax is greater than their total tax payments
APPEAL  look up translate image
To call for a review of an IRS decision or proposed adjustment.
AUTHORIZED IRS E-FILE PROVIDER  look up translate image
A business authorized by the IRS to participate in the IRS e-file Program. The business may be a sole proprietorship, a partnership, a corporation, or an organization. Authorized IRS e-file Providers include Electronic Return Originators (EROs), Transmitters, Intermediate Service Providers, and Software Developers. These categories are not mutually exclusive. For example, an ERO can at the same time, be a Transmitter, a Software Developer, or an Intermediate Service Provider, depending on the function being performed.
BENEFITS RECEIVED  look up translate image
A concept of tax fairness that states that people should pay taxes in proportion to the benefits they receive from government goods and services.
BONUS  look up translate image
Compensation received by an employee for services performed. A bonus is given in addition to an employee's usual compensation.
BUSINESS  look up translate image
A continuous and regular activity that has income or profit as its primary purpose.
CITIZEN OR RESIDENT TEST  look up translate image
Assuming all other dependency tests are met, the citizen or resident test allows taxpayers to claim a dependency exemption for persons who are U.S. citizens for some part of the year or who live in the United States, Canada, or Mexico for some part of the year.
COMMISSION  look up translate image
Compensation received by an employee for services performed. Commissions are paid based on a percentage of sales made or a fixed amount per sale.
COMPULSORY PAYROLL TAX  look up translate image
An automatic tax collected from employers and employees to finance specific programs.
DEFICIT  look up translate image
The result of the government taking in less money than it spends.
DEPENDENCY EXEMPTION  look up translate image
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. One exemption is allowed for each qualifying child or qualifying relative claimed as a dependent.
DEPENDENT  look up translate image
A qualifying child or qualifying relative, other than the taxpayer or spouse, who entitles the taxpayer to claim a dependency exemption.
DIRECT DEPOSIT  look up translate image
This allows tax refunds to be deposited directly to the taxpayer's bank account. Direct Deposit is a fast, simple, safe, secure way to get a tax refund. The taxpayer must have an established checking or savings account to qualify for Direct Deposit. A bank or financial institution will supply the required account and routing transit numbers to the taxpayer for Direct Deposit.
DIRECT TAX  look up translate image
A tax that cannot be shifted to others, such as the federal income tax.
EARNED INCOME  look up translate image
Includes wages, salaries, tips, includible in gross income, and net earnings from self-employment earnings.
EARNED INCOME CREDIT  look up translate image
A tax credit for certain people who work, meet certain requirements, and have earned income under a specified limit.
ELECTRONIC FILING (E-FILE)  look up translate image
The transmission of tax information directly to the IRS using telephones or computers. Electronic filing options include (1) Online self-prepared using a personal computer and tax preparation software, or (2) using a tax professional. Electronic filing may take place at the taxpayer's home, a volunteer site, the library, a financial institution, the workplace, malls and stores, or a tax professional's place of business.
ELECTRONIC PREPARATION  look up translate image
Electronic preparation means that tax preparation software and computers are used to complete tax returns. Electronic tax preparation helps to reduce errors.
ELECTRONIC RETURN ORIGINATOR (ERO)  look up translate image
The Authorized IRS e-file Provider that originates the electronic submission of an income tax return to the IRS. EROs may originate the electronic submission of income tax returns they either prepared or collected from taxpayers. Some EROs charge a fee for submitting returns electronically.
EMPLOYEE  look up translate image
Works for an employer. Employers can control when, where, and how the employee performs the work.
EXCISE TAX  look up translate image
A tax on the sale or use of specific products or transactions.
EXEMPT (FROM WITHHOLDING)  look up translate image
Free from withholding of federal income tax. A person must meet certain income, tax liability, and dependency criteria. This does not exempt a person from other kinds of tax withholding, such as the Social Security tax.
EXEMPTIONS  look up translate image
Amount that taxpayers can claim for themselves, their spouses, and eligible dependents. There are two types of exemptions-personal and dependency. Each exemption reduces the income subject to tax. While each is worth the same amount, different rules apply to each.
FEDERAL INCOME TAX  look up translate image
The federal government levies a tax on personal income. The federal income tax provides for national programs such as defense, foreign affairs, law enforcement, and interest on the national debt.
FEDERAL INSURANCE CONTRIBUTIONS ACT (FICA) TAX  look up translate image
Provides benefits for retired workers and their dependents as well as for disabled workers and their dependents. Also known as the Social Security tax.
FEDERAL/STATE E-FILE  look up translate image
A program sponsored by the IRS in partnership with participating states that allows taxpayers to file federal and state income tax returns electronically at the same time.
FILE A RETURN  look up translate image
To mail or otherwise transmit to an IRS service center the taxpayer's information, in specified format, about income and tax liability. This information-the return-can be filed on paper, electronically (e-file).
FILING STATUS  look up translate image
Determines the rate at which income is taxed. The five filing statuses are: single, married filing a joint return, married filing a separate return, head of household, and qualifying widow(er) with dependent child.
FINANCIAL RECORDS  look up translate image
Spending and income records and items to keep for tax purposes, including paycheck stubs, statements of interest or dividends earned, and records of gifts, tips, and bonuses. Spending records include canceled checks, cash register receipts, credit card statements, and rent receipts.
FLAT TAX  look up translate image
This is another term for a proportional tax.
FORM W-4, EMPLOYEE'S WITHHOLDING ALLOWANCE CERTIFICATE  look up translate image
Completed by the employee and used by the employer to determine the amount of income tax to withhold.
FORMAL TAX LEGISLATION PROCESS  look up translate image
This is another term for a proportional tax.
FOSTER CHILD  look up translate image
A foster child is any child placed with a taxpayer by an authorized placement agency or by court order. Eligible foster children may be claimed by taxpayers for tax benefits.
GASOLINE EXCISE TAX  look up translate image
An excise tax paid by consumers when they purchase gasoline. The tax covers the manufacture, sale, and use of gasoline.
GROSS INCOME  look up translate image
Money, goods, services, and property a person receives that must be reported on a tax return. Includes unemployment compensation and certain scholarships. It does not include welfare benefits and nontaxable Social Security benefits.
HEAD OF HOUSEHOLD FILING STATUS  look up translate image
You must meet the following requirements: 1. You are unmarried or considered unmarried on the last day of the year. 2. You paid more than half the cost of keeping up a home for the year. 3. A qualifying person lived with you in the home for more than half the year (except temporary absences, such as school). However, a dependent parent does not have to live with the taxpayer.
HORIZONTAL EQUITY  look up translate image
The concept that people in the same income group should be taxed at the same rate. "Equals should be taxed equally."
INCOME TAXES  look up translate image
Taxes on income, both earned (salaries, wages, tips, commissions) and unearned (interest, dividends). Income taxes can be levied on both individuals (personal income taxes) and businesses (business and corporate income taxes).
INDEPENDENT CONTRACTOR  look up translate image
Performs services for others. The recipients of the services do not control the means or methods the independent contractor uses to accomplish the work. The recipients do control the results of the work; they decide whether the work is acceptable. Independent contractors are self-employed.
INDIRECT TAX  look up translate image
A tax that can be shifted to others, such as business property taxes.
INFANT INDUSTRY  look up translate image
A new or developing domestic industry whose costs of production are higher than those of established firms in the same industry in other countries.
INFLATION  look up translate image
The simultaneous increase of consumer prices and decrease in the value of money and credit.
INFORMAL TAX LEGISLATION PROCESS  look up translate image
Individuals and interest groups expressing and promoting their opinions about tax legislation.
INTEREST  look up translate image
The charge for the use of borrowed money.
INTEREST INCOME  look up translate image
The income a person receives from certain bank accounts or from lending money to someone else.
INTERMEDIATE SERVICE PROVIDER  look up translate image
Assists in processing tax return information between the ERO (or the taxpayer, in the case of online filing) and the Transmitter.
INTERNAL REVENUE SERVICE (IRS)  look up translate image
The federal agency that collects income taxes in the United States.
INVESTMENT INCOME  look up translate image
Includes taxable and tax-exempt interest, dividends, capital gains net income, certain rent and royalty income, and net passive activity income.
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Glossary of Tax terms
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Created by admin
Created on 2012-08-19 18:24:29
Number of terms 116
Last added withholding ("pay-as-you-earn" taxation) by admin
2012-08-19 18:27:47
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Sources
  • Tax Terms A-Z - Tax Glossary - About.com
    taxes.about.com
    Definitions of tax terms and concepts in plain English.
  • Understanding Taxes - Glossary
    www.irs.gov