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.: Glossary
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Glossary
Terms in glossary: 113.
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ability to pay
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.
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adjusted gross income
Total income reduced by certain amounts, such as for an IRA or student loan interest
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amount due
Money that taxpayers must pay to the government when the total tax is greater than their total tax payments.
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appeal
To call for a review of an IRS decision or proposed adjustment.
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Authorized IRS e-file Provider
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.
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benefits received
A concept of tax fairness that states that people should pay taxes in proportion to the benefits they receive from government goods and services.
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bonus
Compensation received by an employee for services performed. A bonus is given in addition to an employee's usual compensation, such as a salary.
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business
A continuous and regular activity that has income or profit as its primary purpose.
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Citizen or Resident Test
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.
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commission
Compensation received by an employee for services performed. Commissions are paid based on a percentage of sales made or a fixed amount per sale.
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compulsory payroll tax
An automatic tax collected from employers and employees to finance specific programs.
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deficit
The result of the government taking in less money than it spends.
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dependency exemption
Amount that taxpayers can claim for their eligible dependents. Each exemption reduces the income subject to tax. The exemption amount is a set amount that changes from year to year.
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dependent
A person, other than the taxpayer or spouse, who entitles the taxpayer to claim a dependency exemption.
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Direct Deposit
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.
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direct tax
A tax that cannot be shifted to others, such as the federal income tax.
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earned income
Includes wages, salaries, tips, and self-employment earnings.
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Earned Income Credit
A credit that can be paid to low-income workers, even if no income tax was withheld from the workers' pay. To receive the credit, a taxpayer must file a tax return.
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electronic filing
The transmission of tax information directly to the IRS using telephones or computers. Electronic filing options include (1) TeleFile using a touch-tone telephone, (2) Online self-prepared using a personal computer and tax preparation software, or (3) 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.
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electronic preparation
Electronic preparation means that tax preparation software and computers are used to complete tax returns. Electronic tax preparation helps to reduce errors.
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Electronic Return Originator
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.
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employee
Works for an employer. Employers can control when, where, and how the employee performs the work.
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Employee's Withholding Allowance Certificate
Completed by the employee and used by the employer to determine the amount of income tax to withhold.
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excise tax
A tax on the sale or use of specific products or transactions.
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exempt
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.
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