Tax Return Glossary
Accounting Method:
The way by which income and expenses are reported and taxes calculated.
Adjusted Gross Income:
The total of all income reported on a tax return after subtracting certain specific expenses and/or deductions.
Business Property:
Property that is used to operate a business. Business property can include an office space, rental space, or other common business locations.
Calendar Year:
January 1st through December 31st.
Capital Gain:
The profit from the sale of a valuable asset. A capital gain most commonly occurs when stocks or business property is sold for more than the puchase price.
Dependent:
A person who depends on another as a primary source of income. For example, a minor child, under the age of majority, is a dependent of his or her parent and the existence of the dependent enables the providor, such as a parent or guardian, to claim a deduction for the purpose of income tax calculations.
Dependent Care Credit:
a tax credit that is based on the amount of money paid for child or adult care while the taxpayer or taxpayer and spouse work. This credit is overlooked by a large number of taxpayers.
Earned Income:
Money that an individual receives from an employer, a retirement fund or from other sources that require the individuals active participation. Income reported on a W-2 form or 1099 form is earned income.
Earned Income Tax Credit (EITC):
A refundable tax credit that reduces or eliminates the taxes that low-income working people pay (such as payroll taxes) and also frequently operates as a wage subsidy for low-income workers.
Estimated Tax:
The amount of money that a taxpayer pays in addition to any withholding to cover what he believes he will be required to pay in taxes. Taxpayers estimate their taxes to plan ahead and avoid interest and penalty charges.
Federal Insurance Contributions Act (FICA):
Taxes which are used to pay for social security or Medicare programs. FICA taxes are commonly taken from a paycheck that an employee receives from an employer.
Fiscal Year:
A period of 12 months within which a business reports its revenues and earnings. The month in which a fiscal year begins is entirely up to the business.
Form 1040 (A, B, EZ, etc.):
The starting form for personal Federal income tax returns filed with the Internal Revenue Service (IRS) in the United States.
Form 1099:
A supplemental form used to report various types of income other than wages, salaries, and tips. U.S. tax law requires businesses to submit a Form 1099 for every contractor paid more than $600 for services during a year.
Form W-2:
A form used to report wages paid to employees and the taxes withheld from them. The form is also used to report FICA taxes to the Social Security Administration.
Head of Household:
A filing status that is used for individuals who are not married, but have someone living with them. They must pay more than half of the costs for the household.
Joint Return:
Income taxes that are filed for a couple who are married at the end of the tax year. The income, tax credits, tax deductions, and tax exemptions are combined on one tax return.
Non-Custodial Parent:
a parent who does not have full or physical custody of their children. Either the custodial parent or non-custodial parent can claim the children as dependents.
Personal Expense:
money that is spent when an individual purchases a service or product for their own personal use. Unlike business expenses, personal expenses are not tax deductible.
Qualified Charitable Organization:
a charity or a non-profit group that is approved by the IRS. Donations that are made to a qualified charitable organization are all tax deductible.
Refund Anticipation Loan (RAL):
Short-term cash advances against your anticipated income tax refund. It provides consumers a way to get immediate access to their anticipated tax refunds.
Schedules:
Forms that are provided by the IRS. A schedule is commonly used to record tax deductions or tax credits.
Tax bracket:
a preset group of incomes that are used to determine what a tax rate is.
