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Tax Law Glossary

Trying to decipher an acronym? Attempting to understand legal jargon? The Tax Law glossary gives you access to definitions for legal terminology commonly used in tax law related documents, and court proceedings. This Tax Law glossary will help you understand the legal terms and phrases which are relevant to IRS audits, tax deductions, and other areas of tax law.

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Accrual Accounting
Income is reported in the year it is earned, and expenses are deducted in the year they are incurred.
Adjusted Gross Income
: an individual's gross income decreased by the amount of deductions allowed esp. for business expenses
Adjustment To Income
An expense that can be deducted even if the taxpayer does not itemize deductions.
Adoption Credit
A nonrefundable credit for qualified adoption expenses.
Advance Earned Income Credit
Prepayments of the earned income credit by an employer to an employee.
Audit
1 : a formal examination of an organization's or an individual's financial records often for the purpose of uncovering fraud or inaccurate tax returns ;also : the final report of such an examination ...
Capital Gains Tax
A tax on income derived from the sale of a capital asset, like real estate holdings or investments.
Cash Accounting
Income is reported in the year it is received, and expenses are deducted in the year they are paid.
Casualty Loss
see loss
Charitable Contribution
Money or property donated to a qualified charity.
Child And Dependent Care Credit
A tax credit in the amount of a percentage of the amount expended on child or dependent care by an employed individual.
Child Tax Credit
A tax credit available to people with children under the age of seventeen.
Compensation
1 : the act of compensating 2 in the civil law of Louisiana : the ending of mutual obligations between two people for money or quantities of fungible things usually by operation of law but sometimes ...
Credits
Reductions of tax liability allowed by Congress for various purposes.
Deduction
1 : an amount allowed by tax laws to be subtracted from income in order to decrease the amount of income tax due see also Internal Revenue Code in the Important Laws section compare credit, ...
Depreciation
1 : any decrease in the value of property (as machinery) for the purpose of taxation that cannot be offset by current repairs and is carried on company books as a yearly charge amortizing the ...
Earned Income
: income (as wages, salary, professional fees, or commissions) that results from the personal labor or services of an individual compare unearned income
Earned Income Credit
A tax credit allowed to employed individuals whose income and modified gross income is less than a certain amount.
Employer Identification Number
A number used to identify the tax account of employers, sole proprietors, corporations, partnerships, and limited liability companies. This number is required if you have employees, have a Keogh plan, ...
Employment Expenses
Ordinary and necessary expenses necessary to perform the duties for which an employee was hired.
Employment Tax
: a tax imposed on the basis of an employee-employer relationship
Entertainment Expenses
Employment expenses that have an element of entertainment that is directly related to conducting business.
Estate Tax
: an excise in the form of a percentage of the taxable estate that is imposed on a property owner's right to transfer the property to others after his or her death called also succession tax see also ...
Estimated Tax
: a tax paid usually quarterly by certain entities (as corporations or trusts) or individuals on income that is not subject to withholding NOTE: A declaration of estimated tax is not required for ...
Excise Tax
: excise
Exemption
1 : the act of exempting or state of being exempt 2 : one that exempts or is exempted: as a : an amount of income exempted from taxation that may be deducted from adjusted gross income under the ...
Foster Child
A child other than a natural or adopted child who lived with the taxpayer for the entire year and whom the taxpayer treated as his or her own child.
Gift Tax
: an excise tax imposed on a donor for gifts of property made during the donor's lifetime see also annual exclusion, gift split gift at gift, unified transfer tax compare death tax, estate tax, ...
Head Of The Household
A filing status used by an unmarried taxpayer who pays over half of the cost of maintaining the home of a qualified individual.
Hobby Loss
A nondeductible loss from a hobby.
Home Office Expense
Expenses arising from operating a business in a qualified manner in your home.
Information Tax Returns
A return that reports the income or loss of a business that is not subject to tax itself (e.g. partnerships, S Corporations, limited liability companies)
Internal Revenue Service
The Treasury Department division responsible for collecting taxes.
Itemized Deductions
Expenditures that the tax code deems appropriate for reducing adjusted gross income.
Married Filing Jointly
A filing status used by a couple that is married at the end of the tax year and uses one tax return.
Married Filing Separately
The filing status used by a couple that is married at the end of the year and chooses to file separate tax returns.
Modified Adjusted Gross Income
There are different definitions for different purposes. It is usually the adjusted gross income with various items added back in.
Nontaxable Income
Income that is not taxed.
Payroll Tax
: a tax that is levied as a percentage of an employee's pay and is usually paid by the employer
Permanent And Total Disability
A disability that is expected to last at least a year and keeps an individual from any gainful activity.
Proprietorship
1 : the fact or state of being a proprietor 2 : a business entity consisting of a single owner : sole proprietorship compare corporation, partnership
Qualifying Widow(Er)
The filing status used by a qualified person for the two years following a spouse's death.
Sales Tax
: a tax levied on the sale of goods and services that is usually calculated as a percentage of the purchase price and collected by the seller
Schedules
IRS forms that are used to report various kinds of income, deductions, and credits.
Self-Employed
A person who individually decides when and where to work and pays his or her own expenses. Self-employed individuals must pay self-employment taxes.
Self-Employment Tax
Social Security and Medicare tax paid by individuals who work for themselves.
Standard Deduction
see deduction
Tax Court
often cap T&C : a court having jurisdiction over questions of law and fact arising under the tax laws of a government ;specif : the federal court hearing tax cases
Tax Evasion
: a willful and esp. criminal attempt to evade the imposition or payment of a tax [convicted of tax evasion]
Tax Fraud
Federal offense of willfully attempting to evade or defeat the payment of taxes due and owing.
Tax Lien
see lien
Tax Year
: taxable year
Taxable Income
: income that is subject to taxation and is characterized by the accrual of some gain or benefit to the taxpayer ;specif : the total amount of income remaining as the basis of taxation for a given ...
Unearned Income
: income (as interest and dividends) that is not gained by labor, service, or skill compare earned income
Worksheet
An IRS document that is provided to the taxpayer to compile information and is not usually filed with the return.
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