If it seems people are speaking a different language when they talk about taxes, it is because they are. You need to be familiar with the unique terms used to explain tax laws. We have compiled a list of common tax terms and their meanings, using plain English. Once you start understanding these terms, you will be amazed how quickly they can become a part of your vocabulary!
The act of voluntarily and permanently giving up possession and use of property with the intention of ending ownership without transferring ownership to another person. Back to Top
The taxpayer's home, habitation, residence, domicile, or place of dwelling.Back to Top
Academic Period -
A semester, trimester, quarter, or other period of study (such as a summer school session) as reasonably determined by an educational institution.Back to Top
Accelerated Cost Recovery System (ACRS) -
The name given to tax rules relating to recovering, through depreciation deductions, the cost of property used in a trade or business to produce income. ACRS applies to property first used before 1987. Back to Top
Accelerated Death Benefits -
Any amounts paid under a life insurance contract, prior to death, for an individual who is terminally or chronically ill. Back to Top
Accountable Plan -
A reimbursement or allowance arrangement that requires an employee to account to their employer for their business expenses within a reasonable time. Back to Top
Accounting Method -
The way a taxpayer accounts for income and expenses. Back to Top
Active Conduct of Trade or Business -
Generally, to participate meaningfully in the management or operations of a trade or business. Back to Top
Active Participation -
Participation in a rental real estate activity in which the taxpayer owns at least 10% of the rental property and makes significant and bona fide management decisions, such as approving new tenants, deciding on rental terms, and approving expenditures. Back to Top
A unit for performing a specific function that generates taxable income, such as a business entity.Back to Top
Actual Expense Method -
A method used to determine the deductible amount of the expenses of operating a vehicle (including a car, van, pickup, or panel truck) for business, charitable, medical, or moving purposes. This method is based on the actual costs incurred and the percentage of business use. Back to Top
Additional Child Tax Credit -
A refundable credit for certain individuals who get less than the full amount of the Child Tax Credit. Back to Top
Adjusted Basis -
The basis in property (usually its cost) increased or decreased by various events, such as improvements, depreciation, and casualty losses. Back to Top
Adjusted Gross Income (AGI) -
The amount of income that remains after certain adjustments to income are subtracted from the taxpayer's gross income. Back to Top
Adjustment to Income -
Certain subtractions allowed directly against a taxpayer's gross income. Back to Top
Adopted Child -
An individual adopted by the taxpayer or placed by an authorized placement agency for adoption by the taxpayer. This child is considered a child of the taxpayer by blood.
Adoption Assistance Program -
A written plan set up by an employer to provide adoption assistance to its employees.
Adoption Taxpayer Identification Number (ATIN) -
A temporary nine-digit number issued by the IRS for a U.S. citizen or resident alien child being adopted when the adoptive parents cannot get a Social Security number for the child in time to file their tax return.
Advance Earned Income Credit -
Advance payments of the Earned Income Credit paid to the taxpayer throughout the year in their paychecks.
Advance Rent -
Any rent received before the period that it covers.
After-Tax Contribution -
A voluntary contribution subject to income tax.
Age of Majority -
The age at which an individual legally becomes an adult.
An individual who is not a U.S. citizen.
A payment to or from a spouse or former spouse under a divorce or separation instrument. Back to Top
Allocated Tips -
Tips that an employer assigns an employee. These tips are in addition to tips the employee reported to the employer for the year.
Alternative Minimum Tax (AMT) -
An additional tax a taxpayer may have to pay if they benefit from special tax treatment for some types of income, deductions, and expenses. Back to Top
Alternative Depreciation System (ADS) -
The slower of the two depreciation systems under the Modified Accelerated Cost Recovery System.
Alternative Minimum Taxable Income (AMTI) -
The basis for calculating the alternative minimum tax exemption amount and the tentative minimum tax.
Amended Return -
Forms completed to correct a tax return that was filed previously. Back to Top
A method of recovering (deducting) certain capital costs in equal amounts over a period of 60 months or more. Back to Top
Amount Realized -
The total value of all money and the fair market value of all property or services the seller received from a sale or exchange of a property, less expenses of sale. The amount realized also includes any of the seller's liabilities or any liabilities (assumed by the buyer) to which the transferred property is subject. Back to Top
Amount Recognized -
The amount of gain or loss realized from the sale or exchange of property that is included in or deducted from gross income for tax purposes.
A person from whom an individual descended. For example, an individual's great grandmother and great grandfather are their ancestors.
Annual Additions -
The total of all contributions (not including rollovers) for the year to an individual participant's retirement plan account plus forfeitures allocated to that account.
Annual Benefits -
The annual payment of a straight-life annuity (with no extra benefits) under a plan without employee contributions or rollovers.
A person entitled to receive benefits from an annuity.
A contract for a series of fixed or variable payments made at regular intervals over a period of more than one full year. Back to Top
Annuity Starting Date -
The first day of the first period for which an individual should receive a plan payment or, if after that day, the date the plan's obligations became fixed.
A legal order declaring that a valid marriage never existed.
An item of value or usefulness. Back to Top
At risk -
The amount a taxpayer could actually lose in an activity.
Authorized IRS e-file Provider -
A tax professional or business that is accepted to participate in the IRS e-file
program. Back to Top
Authorized Placement Agency-
Any person, state, or local government agency, tax-exempt organization licensed by a state, or court authorized by state law to place children for legal adoption or in foster care. Back to Top
Away From Home -
The status of an individual when their job requires them to travel away from their tax home longer than an ordinary workday and they need to sleep or rest before they can continue working. Back to Top
Bad Debt -
A loss from the worthlessness of a debt. Back to Top
Balance Due -
The amount owed to the IRS after subtracting total tax payments from the total tax liability on a tax return.
Barter Exchange -
Any person or an organization with members or clients that contract with each other (or with the barter exchange), who jointly trades or barters property or services.
An exchange or property or services.
The amount of an individual's investment in property for tax purposes. Back to Top
A person designated to receive all or a portion of a benefit after the owner dies. Back to Top
Cash or fair market value of unlike property received in an exchange. Back to Top
Business Bad Debt -
A business bad debt that is either of the following: created or acquired in the taxpayer's trade or business or closely related to the taxpayer's trade or business when it became partly or totally worthless (a debt is closely related to the taxpayer's trade or business if the taxpayer's primary motive for incurring the debt is business related). Back to Top
Business Books and Records -
The intangible value of technical manuals; training manuals or programs; data files; accounting or inventory control systems; customer lists; subscription lists; insurance expirations; patient or client files; and lists of newspaper, magazine, radio, and television advertisers.
Business Expenses -
Costs that do not have to be capitalized or included in the cost of goods sold. To be deductible, business expenses must be both ordinary and necessary. Back to Top
Calendar Quarter -
One of four quarters of a calendar year: January through March, April through June, July through September, or October through December. Back to Top
Call Option -
The right to buy a state number of shares of stock at a predetermined price (the strike price) before a specified date.
Capital Asset -
Generally, everything an individual owns and uses for personal purposes, pleasure, or investment. Back to Top
Capital Gain Distributions -
Amounts paid to an individual or credited to their account by regulated investment companies and real estate investment trusts (REITs). These amounts are also known as capital gain dividends. Back to Top
To recover a cost over a period of years through deductions for depreciation, amortization, or depletion, and adding the cost to the basis of the property to which it relates. Back to Top
Capitalized Interest -
The unpaid interest on a loan that the lender adds to the outstanding principal balance of the loan. Back to Top
Cash Settlement Option-
Any option that, upon exercise, is settled by paying the owner of the option cash or other property and not the actual property underlying the option. Back to Top
Cash Wages -
Generally, wages paid by cash, checks, money orders, or equivalent means. Cash wages do not include the value of food, lodging, clothing, or other such noncash items given to an employee.
The damage, destruction, or loss of property resulting from an identifiable event that is sudden, unexpected, or unusual. Back to Top
Charitable Contribution -
A donation or gift to, or for the use of, a qualified organization. It is voluntary and is made without getting, or expecting anything of equal value. Back to Top
A natural child, stepchild, adopted child, or an eligible foster child. Back to Top
A payment that is specifically designated as child support or treated as specifically designated as child support under a divorce or separation instrument. Back to Top
Chronically Ill Individual -
An individual who has been certified by a licensed health care practitioner within the previous 12 months as one of the following: (1)an individual who is unable, for at least 90 days, to perform at least two activities of daily living without substantial assistance from another individual due to loss of functional capacity (activities of daily living are eating, toileting, transferring, bathing, dressing, and continence), or (2) an individual who requires substantial supervision to be protected from threats to health and safety due to severe cognitive impairment.Back to Top
Church Employee -
An employee (other than a minister or member of a religious order) of a church or qualified church-controlled organization that is exempt from employer Social Security and Medicare taxes.
Civil Service Annuity -
Annuity benefits that are paid primarily under the Civil Service Retirement System or the Federal Employees Retirement System.
Class Life -
The number of years that establishes the property class and the recovery period for most types of property for the General Depreciation System and the Alternative Depreciation System under the Modified Accelerated Cost Recovery System.
Closely Held Corporation -
Generally, a corporation that, at any time during the last half of the tax year, has more than 50% in value of its outstanding stock directly or indirectly owned by five or fewer people. This type of corporation is generally not a personal service corporation.
Individuals living together in an intimate relationship when not legally married.
Collapsed Loans -
Two or more loans made to the same borrower that are treated by both the lender and the borrower as one loan.
Any work of art, rug, antique, metal (such as gold, silver, and platinum bullion), gem, stamp, coin, or alcoholic beverage.
Combat Zone -
Any area the president of the United States designates by Executive Order as an area in which the U.S. Armed Forces are engaging or have engaged in combat. An area usually becomes a combat zone and ceases to be a combat zone on the dates the President designates by Executive Order. Back to Top
Common-Law Employee -
An individual who performs services for an employer in return for compensation. An employee is subject to the control of the employer regarding what work is done and how, when, and where it is done. Back to Top
Common-Law Marriage -
A marriage in which a man and woman are considered to be married even without a license or a formal ceremony. Only certain states recognize common-law marriages. Back to Top
Common Stock -
A type of share in the ownership of a company that usually provides the right to vote on decisions relating to the company's management. Shareholders are entitled to receive distributions of the company's profit in the form of dividends.
Community Income -
Income earned while married and domiciled in a community property state that is allocated to both spouses, regardless of which spouse actually earned it. Back to Top
Community Property Laws -
Laws that affect what income is reported on the federal income tax returns of married taxpayers who live in a community property state and file separate returns. Back to Top
Travel between a personal home and work or job site within the area of an individual's tax home. Back to Top
Money or other benefits given or received as payment for work or service. Compensation can include wages, salaries, bonuses, prizes, and tips an employee receives. Back to Top
The process by which private property owned by a taxpayer is legally taken for public use without their consent.
Conduit IRA -
An IRA account used as a holding account for eligible rollover distributions from an employer plan that can be rolled over to a new employer plan later.
Consent to Assessment -
A written agreement between a taxpayer and the IRS that extends the statutory period of limitations (which is usually three years) to allow additional time, when it is necessary, to fairly resolve a tax examination. These agreements are called "consents" and apply to all kinds of taxes except estate tax.
Consolidated Loans -
Loans used to refinance more than one loan of the same borrower.
Constructive Receipt -
The unqualified, vested right to receive immediate income or property. The right may be credited to an account, set apart, or otherwise made available so that it may be drawn upon at any time. Back to Top
Contract Price -
The selling price plus mortgages, debts, and other liabilities assumed or taken by the buyer that are in excess of the seller's adjusted basis. This amount is the total of all principal payments a seller is scheduled to receive on the installment sale, including the down payment and each later payment of principal on any debt that the buyer assumed. It also includes payments the seller is considered to receive. This does not include interest.
Contribution (Retirement) -
The amount put into a retirement plan for the individuals participating in the plan, including self-employed individuals.
A method established under the Modified Accelerated Cost Recovery System (MACRS) to determine when the recovery period begins and ends. The convention affects a taxpayer's depreciation deduction for the year they place their property in service and the year they dispose of it. Back to Top
Conversion (IRA) -
The movement of funds from a traditional IRA to a Roth IRA.
Legal protection for artists and authors for the publication or use of their works.
Cost of Goods Sold -
Inventory at the beginning of the year, plus purchases (reduced by cost of items withdrawn for the taxpayer's personal use), plus cost of labor (not including amounts the taxpayer paid to themselves), plus materials and supplies, plus other costs, minus inventory at the end of the year. Back to Top
Coverdell Education Savings Account (ESA) -
A trust or custodial savings account that is set up to pay the qualified education expenses of a designated beneficiary. Contributions are not deductible, but earnings may be tax-free. Back to Top
Covered Disaster Area -
A presidentially declared disaster area in which the IRS has decided to postpone tax-related filing deadlines for up to one year.
Custodial Parent -
The parent who has custody of a child for the greater part of the year or for the entire year. Back to Top
An individual or organization, such as a bank or trust company, that is responsible for overseeing and safeguarding assets on behalf of the beneficiary or owner of the assets (for example, a minor).
Customer-Based Intangible -
The value associated with a customer base, a circulation base, an undeveloped market or market growth, insurance in force, a mortgage servicing contract, an investment management contract, or any other relationship with customers involving the future provision of goods or services.
Date of Record -
The date an individual must be listed as the owner of shares in a company's records to be the recipient of the dividends to be paid.
A deceased individual. Back to Top
Declaration Date -
The date a company publicly announces that it will be paying a dividend.
Declining Balance Method -
A method of calculating the depreciation for property that applies the same depreciation rate each year to the adjusted basis of the property. Back to Top
Deemed IRA -
A qualified employer retirement plan that maintains a separate account or annuity to receive voluntary employee contributions. If this plan or annuity otherwise meets the requirements of an IRA, it is subject only to IRA rules. An employee's account can be treated as a traditional IRA or a Roth IRA.
Deferred Compensation -
The voluntary contribution an employer deducts from an employee's pay that is not subject to income tax. Also called elective deferral or pre-tax contributions. Back to Top
Deferred Interest Account -
An account that postpones payment of interest to a future date. Back to Top
An individual, other than the taxpayer or their spouse, who entitles the taxpayer to claim an exemption. Back to Top
Dependent Care Benefits -
Amounts an employer pays directly to an employee or the employee's care provider for the care of the employee's qualifying dependent while the employee works, or the fair market value of care in a daycare facility provided or sponsored by the employer.
The using up of natural resources by mining, quarrying, drilling, or felling, for which a deduction allows an owner or operator to account for the reduction of a product's reserves. Back to Top
An amount that can be deducted annually that allows the taxpayer to recover the cost or other basis of certain property over the time the property is used in trade or business. It is an allowance for the wear and tear, age, deterioration, or obsolescence of the property. Back to Top
A person who descended from an individual. For example, an individual's great grandchild is their descendent.
The transfer of a distribution made by the administrator of the distributing plan directly from one qualified plan to another qualified plan (if permitted) or traditional IRA. Back to Top
Disabled Individual -
An individual who can show proof that they cannot engage in a substantial gainful activity because of their physical or mental condition. A physician must determine that their condition can be expected to result in death or to be of long-standing and indefinite duration. Back to Top
The difference between the amount paid for an asset and the fair market value or stated face value of that asset.
The exchange, sale, or loss of property, whether voluntary or involuntary.
Distressed Community -
An area for which the poverty rate or other conditions cause certain tax incentives to apply.
Money or assets paid out or withdrawn.
Dividend Reinvestment Plan -
A plan that lets an investor choose to use their dividends to buy more shares of stock in a corporation through an agent instead of receiving the dividends in cash. The investor must still report the fair market value of the dividends on their tax return.
Distributions of money, stock, or other property paid to shareholders by a corporation. Dividends may also be received through a partnership, estate, trust, or association that is taxed as a corporation. Back to Top
Divorce or Separation Instrument -
A divorce or separate maintenance decree or a written instrument that happens as a result of that decree, a written separation agreement, or a decree or any type of court order requiring a spouse to make payments for the support or maintenance of the other spouse. This includes a temporary decree, an interlocutory (not final) decree, and a decree of alimony pendente lite (while awaiting action on the final decree or agreement).
Documentary Evidence -
Written records that establish certain facts; for example, documents that support a tax deduction or an expense.
The taxpayer's permanent legal home where they intend to live for an indefinite or unlimited period and to which they intend to return when absent.
A person who receives a gift.
A person who gives a gift.
Dual-Status Taxpayer -
An individual who is a resident alien for part of the tax year and a nonresident alien for part of the year. Back to Top
Due Diligence -
The requirement that a paid preparer must show a serious and earnest effort to obtain accurate and complete information.
Dwelling Unit -
Property, such as a house, an apartment, a condominium, a mobile home, a boat, a vacation home, or another similar property that has basic living accommodations, such as sleeping space, a toilet, and cooking facilities. It does not include a unit in a hotel, motel, inn, or other establishment where more than half the units are used on a transient basis.
Early Distribution -
An amount distributed from the individual's pension, annuity, or traditional IRA account before they reach age 59 1/2.
Earned Income -
Income received for services, such as wages, salaries, tips, net earnings from self-employment, and professional fees, and any other income received as pay for work actually performed. Earned income also includes taxable scholarship and fellowship grants. Back to Top
Earned Income Credit (EIC) -
A refundable credit for certain individuals who work and have earned income under a certain amount based on their filing status and the number of qualifying children, if any. Back to Top
A legal right to use someone else's land for a particular purpose, such as for utilities, for a right-of-way, or for recreational purposes. Ownership is not transferred.
Education Savings Bond Program -
A program that allows a taxpayer who paid qualified higher educational expenses during the year to exclude from income all or part of the interest they receive during the same year from redeeming Series EE savings bonds and Series I savings bonds issued after 1989. Back to Top
The process of electronically filing a federal income tax return with the IRS. Back to Top
Elective Deferral -
The voluntary contribution an employer deducts from an employee's pay that is not subject to tax. Also called deferred compensation or pre-tax contributions. Back to Top
Eligible Educational Institution -
Any college, university, vocational school, or other postsecondary educational institution eligible to participate in a student aid program administered by the Department of Education. These institutions include nearly all accredited, public, nonprofit, and proprietary (privately owned profit-making) postsecondary institutions.
Eligible Foster Child -
An individual who is placed by an authorized placement agency, or by judgment, decree, or other order of any competent jurisdiction. Back to Top
An individual who is hired to work for a person, an organization, or a company in return for compensation and who is subject to the will and control of the employer regarding what work is done and how and when to do it. Back to Top
The individual, organization, or company for which an employee works. Back to Top
Employer Identification Number (EIN) -
A nine-digit number assigned by the IRS to an employer for tax filing and reporting purposes.
Entertainment Expenses -
Expenses incurred while participating in an activity that provides entertainment, amusement, or recreation. Back to Top
Erroneous item -
Any deduction, credit, or expense item that is incorrectly stated on a tax return and any income item that is not properly reported on a tax return. Back to Top
Placing an amount in the care of a third party to make a payment in the future.
Estimated Tax -
Estimated tax is the method used to prepay tax on income that is not subject to withholding. Back to Top
Excess Accumulation -
The difference between the minimum amount required to be distributed from a qualified retirement plan and the amount that was actually distributed.
To barter, swap, part with, give, or transfer property for other property or services. Back to Top
Ex-Dividend Date -
The date that determines whether the buyer or the seller of stock receives the next dividend distribution a company pays. This date is usually two business days before the date of record.
Exemption Amount -
An amount that a taxpayer can claim for themselves, their spouse, and their eligible dependents.Back to Top
Additional time granted by the IRS for a taxpayer to file their federal income tax return.
Fair Market Value (FMV) -
The price that property would sell for on the open market or the price that would be agreed upon between a willing buyer and willing seller, with neither being required to buy or sell and both having reasonable knowledge of the relevant facts. Back to Top
Fair Rental Price -
Generally, an amount that an individual (who is not related to the property owner) is willing to pay to rent property. If the rental price is substantially less than for similar properties in the same area, it is not considered a fair rental price.
Fair Rental Value -
The amount an individual could reasonably expect to receive from a stranger for lodging. Fair rental value includes rent or taxes, interest, depreciation, pain, insurance, utilities, or the cost of furniture and appliances. In some cases, fair rental value may be equal to the rent paid.
Farming Business -
A trade or business involving the cultivation of land; raising or harvesting any agricultural or horticultural commodity; operating a nursery or sod farm; raising or harvesting trees bearing fruit, nuts, or other crops; or raising or harvesting ornamental trees. Farming businesses also include the raising, shearing, feeding, caring for, training, and management of animals.
Generally, an amount paid for the benefit of an individual to aid in the pursuit of study or research. Back to Top
Filing Requirements -
Factors that determine whether a taxpayer must file a federal individual income tax return. Back to Top
Filing Status -
The tax return status used to determine a taxpayer's filing requirements, standard deduction, applicable tax, and whether the taxpayer is allowed to claim certain other deductions and credits. Back to Top
Financially Disabled -
The inability of an individual to manage their financial affairs because of a medically determinable physical or mental impairment which can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than 12 months.
Fiscal Year -
A 12-month period ending on the last day of any month except December. Back to Top
A procedure by which the lender either takes title to or forces the sale of the borrower's property in satisfaction of a debt. Back to Top
Foreign Country -
Usually any territory (including the air space and territorial waters) under the sovereignty of a government other than that of the United States, including the seabed and subsoil of those submarine areas adjacent to the territorial waters of a foreign country and over which the foreign country has exclusive rights under internationals law to explore and exploit the natural resources. Back to Top
Fringe Benefits -
A form of additional compensation for the performance of services. Back to Top
Full Day -
A period of 24 consecutive hours, beginning at midnight.
Full-Time Student -
An individual attending an educational institution who meets the definition of full-time attendance for that institution.
General Partner -
A partner who is personally liable for partnership debts.
General Rule -
The method generally used to determine the tax treatment of pension and annuity income from nonqualified plans (including commercial annuities).
General Sales Tax -
A tax imposed at one rate with respect to the retail sale of a broad range of classes of items.
Genuine Debt -
A debt that arises from a debtor-creditor relationship based on a valid and enforceable obligation to repay a fixed or determinable amount of money.
Going Concern Value -
The value associated with a business based on the expectation that the business will continue to function and generate income for the foreseeable future even though there is a change in ownership. Back to Top
The intangible value of a business based on expected continued customer patronage due to its name, reputation, location, or any other factor.
GO Zone Act -
The Gulf Opportunity Zone Act of 2005.
Gross Distribution -
The total amount distributed before any adjustments or considerations for basis.
Gross Distribution (Retirement) -
The total amount distributed from a retirement account before income tax and other deductions are withheld.
Gross Income -
All income received in the form of money, goods, property, and services that is not exempt from tax. Gross income includes earned income and unearned income. Back to Top
Gross Profit Percentage -
A certain percentage of each installment sale payment (after subtracting interest) that is reported as a gain from the sale.
Gulf Opportunity Zone (GO Zone) -
A special tax area specific to Hurricane Katrina designated by the Gulf Opportunity Zone Act of 2005 (GO Zone Act), which consists of the Hurricane Katrina core disaster area as determined by the Katrina Emergency Tax Relief Act of 2005 (KETRA). The GO Zone consists of counties and parishes affected by Hurricane Katrina that the president has determined are eligible for both individual and public assistance from the federal government under the Robert T. Stafford Disaster Relief and Emergency Assistance Act.
An individual who meets one of the following criteria: (1) owned more than 5% of the capital or profits in a business at any time during the current or prior year, or (2) received compensation during the prior year that was more than an annual predetermined amount and in the top 20% compared to other employees' compensation. Back to Top
An activity that is carried on for personal pleasure or recreation and is not entered into with the intention of making a profit. Back to Top
Holding Period -
The length of time investment property has been held. Generally, the time between the date of purchase (or acquisition) and the date of sale (or disposition). The holding period for stocks and securities begins the day after the trade date and ends the day of sale. Back to Top
Home Mortgage Interest -
Any interest an individual pays on a loan secured by their home (either their main home or a second home). The loan may be a mortgage to buy their home, a second mortgage, a line of credit, or a home equity loan. Back to Top
Household Services -
Ordinary and usual services done in and around the taxpayer's home that are necessary to run their home, including the services of a housekeeper, maid, or cook, but not including the services of a chauffer, bartender, or gardener. Back to Top
Property maintenance or enhancement that adds to the value of the property, lengthens its useful life, or changes it so it an be used in a new way. Back to Top
Incentive Stock Option (ISO) -
An option to purchase stock that is granted to an employee for any reason connected with their employment by a corporation. This option is granted by the employer corporation or its parent or subsidiary corporation and applies to an employee's purchase of stock of any such corporation.
Incidental Costs -
Expenses or costs that are not material expenses incurred while on business or that do not add substantial value to a gift.
Income in Respect of the Decedent -
Income received after the decedent's death that cannot be included in the decedent's income tax return but that would have been attributable to the decedent had they lived.
Indefinite Assignment -
An assignment that is realistically expected to last for more than one year or that does in fact last more than one year.
Independent Contractor -
A non-employee who performs services for a person. The person for which they perform services has the right to control or direct only the result of the work and not the means and methods of accomplishing the result. Back to Top
Individual Retirement Arrangement (IRA) -
A personal savings plan that offers an individual tax advantages to set aside money for retirement.
Individual Taxpayer Identification Number (ITIN) -
A nine-digit number issued by the IRS to resident and nonresident aliens who are not eligible to get a Social Security number. An ITIN is issued exclusively for tax reporting or filing purposes.
Injured Spouse -
An individual who files a joint return for which all or part of their share of the overpayment was, or is expected to be, applied toward their spouse's past-due federal tax, child or spousal support, federal non-tax debt (such as a student loan), or state income tax. Back to Top
Innocent Spouse -
A taxpayer who did not know and had no way of reasonably knowing that there was an understatement of tax due to erroneous items of their spouse (or former spouse) on their joint return. Back to Top
The condition that occurs when a taxpayer's debts are more than the fair market value of their assets.
Installment Agreement -
An agreement with the IRS to pay tax debt in smaller, more manageable amounts (installments).
Installment Sale -
A sale of property in which the seller receives at least one payment after the tax year of the sale. Back to Top
A legal document.
Intangible Property -
Property that has value but cannot be seen or touched, such as goodwill, patents, copyrights, and computer software.
Intangibles Tax -
A tax based on the value of certain intangible personal property, such as portfolio income (income from stocks, bonds, mutual fund shares, etc.).
The fee received for lending money, usually calculated as a percentage rate for a certain time period. Interest can be earned through depositing money in savings programs, buying certificates of deposits (CDs) or bonds, or lending money to people.Back to Top
Property or merchandise the individual produces or purchases to sell in the natural course of their trade or business. Back to Top
Investment Interest -
The interest paid for money borrowed to buy property held for investment. Back to Top
Investment Property -
Generally, property that produces interest, dividends, annuities, or royalties not derived in the ordinary course of a trade or business.Back to Top
Involuntary Conversion -
The forced (not voluntary) disposition of property due to theft, casualty, or condemnation, and the receipt of other property or money in payment of this property, such as insurance or a condemnation award. An involuntary conversion is also called an involuntary exchange.Back to Top
IRA Basis -
For a traditional IRA, the amount of nondeductible traditional IRA contributions in the person's IRA. For a Roth IRA, the amount of contributions and conversions to the Roth IRA. Back to Top
Joint and Survivor Annuity -
An annuity from which more than one person can receive regular payments. Upon the original annuitant's death, regular payments are made to the designated survivor.
Joint Tenancy -
A form of property ownership in which two or more individuals own property jointly. If one owner dies, the survivors are automatically entitled to the decedent's share of the property.
Keogh Plan -
A retirement savings plan that is available to self-employed taxpayers. Contributions are deductible within specific limits. Back to Top
The Katrina Emergency Tax Relief Act of 2005.
Kidnapped Child -
A child who is presumed by law enforcement authorities to have been kidnapped by someone who is not a family member.
Like-Kind Properties -
Properties of the same nature or character, even if they differ in grade or quality. Back to Top
Limited Liability Company -
An entity formed under state law by filing articles of organization as an LLC. Unlike a partnership, none of the members of an LLC are personally liable for its debts. An LLC may be classified for federal income tax purposes as a partnership, a corporation, or an entity disregarded as an entity separate from its owner by applying the rules in the Treasury Regulations, section 301.7701-3.Back to Top
Limited Liability Partnership (LLP) -
A partnership formed under a state limited liability partnership law. Generally, a partner in an LLP is not personally liable for the debts of the LLP or any other partner, nor is a partner liable for the acts or omissions of any other partner, solely by reason of being a partner.
Limited Partnership -
A partnership formed under a state's limited partnership law and composed of at least one general partner and one or more limited partners.
Listed Property -
Items specifically named (listed) in IRS code as subject to special rules for depreciation. Listed property includes passenger automobiles and any other property used for transportation; property of a type used generally for entertainment, recreation, or amusement; computers and their peripheral equipment (unless used only at a regular business establishment and owned or leased by the person operating the establishment); and cellular telephones or similar telecommunications equipment. Back to Top
Loan Origination Fees -
The costs incurred to obtain a loan.
Long-Term Holding Period -
A period of more than one year. Back to Top
Lump-Sum Distribution -
The distribution or payment made in one tax year of a plan participant's entire balance from all of the employer's qualified plans of one kind; for example, pension, profit-sharing, or stock bonus plan. Back to Top
Luxury Automobile -
A vehicle for which the depreciation deduction is limited because of its purchase price.