Tax terminology refers to the vocabulary used to describe tax forms, concepts, and tools that individuals use to file, pay, and understand their taxes better.
Welcome to the tax terminology 101 section of the Cash Academy Blog. Here we'll go over key tax terminology, what it means, and how it applies to you.
Tax terms can be confusing at first. There are unique words, phrases, abbreviations, forms, and tools to learn all about. But don't let it overwhelm you. Understanding tax terms is an important part of understanding your taxes the better and making taxes less stressful.
That's why we created the tax terminology 101 section of the Cash Academy Blog, so we can go over key tax terms in simple and easy-to-understand ways. We'll help you gain a better comprehension of taxes and how they work so you can rest easy during tax season.
Let's get started and grow your knowledge of tax vocabulary today!
1040 Tax Form
The 1040 tax form is the Standard Individual Income Tax Form used by individual taxpayers to file their annual tax return.
1095 Tax Form
The 1095 tax form is used to report information about an individual's health insurance coverage and is used to verify compliance with the Affordable Care Act.
1098 Tax Form
The 1098 tax form is used to report mortgage interest.
A 1099 employee is a self-employed individual who works for a company or client on a contract basis and receives a 1099 form (also known as an independent contractor).
1099 Tax Form
The 1099 tax form is used by independent contractors to report how much income they earned from a client.
An adoption credit is a tax credit that aids families with the expenses associated with adopting a child.
Affordable Care Act
The Affordable Care Act is a law meant to make affordable health care available to more people.
An amended return is a corrected tax return filed by a taxpayer after they have already filed their original tax return.
Child Tax Credit
The child tax credit is a tax credit that allows parents to reduce their federal income tax liability based on the number and age of their dependent children.
A correspondence audit is a type of tax audit where the IRS sends you a correspondence letter through the mail to perform the tax audit.
Deferred Income Tax
Deferred income tax is the amount of income tax that a company expects to pay or recover in the future.
Deferred tax is any tax made payable in the future rather than the present.
Deferred Tax Asset
A deferred tax asset is a company asset that can represent a future tax deduction, tax credit, or tax rate reduction.
Deferred Tax Liability
A deferred tax liability is the amount of taxes a company will owe in the future due to a temporary difference in calculation methods, tax carryforwards, or uncertain tax positions.
Delayed Tax Refund
A delayed tax refund is a tax refund that isn't sent by the IRS in the typical time frame and arrives to the taxpayer late.
A dependent is a qualifying child or relative of the tax filer.
Double taxation is when two or more taxes are applied to the same thing by different jurisdictions or levels of government.
Earned income is any income received from wages, salary, tips or benefits.
Earned Income Tax Credit (EITC)
The Earned Income Tax Credit (EITC) is a tax credit designed for taxpaying workers who make a low to moderate income.
Employer Identification Number
An employer identification number is an identification number given by the IRS to a business for tax purposes.
Employment tax is a tax paid by both employees and employers.
Excise tax is a tax applied at the time of manufacturing, sale, or use to specific goods or services, like tobacco.
Fair Labor Standards Act (FLSA)
The Fair Labor Standards Act (FLSA) was created by the Department of Labor (DOL) to outline exempt vs nonexempt employee qualifications and rights.
A field audit is when an IRS representative visits your home or business to perform the tax audit.
Federal Income Tax Withholding (FITW) is the amount of money taken from an employee's wages to cover federal income taxes.
Head of Household
Head of Household is a tax filing status for unmarried individuals who provide more than half of the financial support for a household and a qualifying dependent.
Homeowner Tax Credits
The homeowner tax credit is a tax credit that provides a potential tax break for homeowners, reducing their tax liability or increasing their tax refund.
Income tax is a tax applied to any income a business or individual earned.
Married Filing Jointly
Married filing jointly is a tax filing status used by married couples who file one tax return together.
Married Filing Separately
Married filing separately is a tax filing status used by married couples who each file two individual tax returns.
Nonexempt is a tax status that means an individual or organization is not excluded from certain tax obligations.
Nontaxable income is income that is not subject to taxes like some municipal bond interest or disability benefits.
An office audit is when you visit an IRS office to meet with an IRS examiner to perform the tax audit.
Payroll tax is a tax that an employer withholds from an employee's paycheck and pays to the government on the employee's behalf.
Payroll Tax Deferment
Payroll tax deferment is when a company temporarily delays paying certain payroll taxes to the government.
Personal Property Tax
Personal property tax is a tax on items the IRS defines as personal property that is movable and not attached to a home or building.
Property tax is a tax applied to the value of real estate or other property paid by property owners.
Qualifying widow(er) is a tax filing status that eligible widow(er)s can use to retain some of the tax benefits of the married filing jointly status after a spouse dies.
Real Estate Tax
Real estate tax is a tax paid by real estate owners on the assessed value of the property.
Sales and Use Tax
Sales and Use Tax is a tax applied to the sale or use of goods and services that costumers pay upon purchase.
Self-employment tax is a tax applied to self-employment income, earned by self-employed workers.
Single Tax Filing Status
The single tax filing status is a tax filing status for unmarried, individual tax filers.
Small Business Tax
Small business tax is a tax that small businesses are required to pay to the government based on their income, employment, property, and other factors.
Taxes are a financial obligation placed on members of a community by the governing entities of that community.
A tax audit is when the Internal Revenue Service (IRS) decides to review an individual's or organization's tax returns.
A tax bracket is a range of income levels that are each subject to different tax rates.
A tax credit is a reduction in taxes owed or an increase in your tax refund.
A tax deductible is an expense that can be subtracted from taxable income to reduce the amount of tax owed.
A tax deduction is a reduction in the amount of taxable income before calculating taxes.
Tax Deferred Account
A tax deferred account is an investment account that allows investors to delay paying taxes on some investment gains.
Tax Deferred Exchange
A tax deferred exchange is a method that defers sales tax on real estate property and reinvests the sale proceeds into a similar property.
Tax exempt is a tax status that excludes an individual or organization from a certain tax obligation.
A tax exemption allows taxpayers to exclude all or a portion of their income from a certain tax obligation.
Tax Filing Status
A tax filing status is a status used in tax filing to outline a taxpayer's marital and household situation and determines their tax rate and standard deduction.
Tax liability is the total amount of tax that an individual or organization owes to the government.
A tax refund is the amount of money returned to a taxpayer by the government when they have overpaid their taxes for the year.
Tax Refund Advance
A tax refund advance is a funding option that lets tax filers receive funds from their estimated tax refund early.
A tax return is a tax form that an individual or organization uses to report income, deductions, and tax payments to the government.
A tax scam is a fraudulent attempt to steal money or sensitive information from taxpayers by posing as a legitimate entity.
Tax-free income is income that is not subject to taxes like some municipal bond interest or disability benefits.
Taxable income is the amount of your income that is subject to income tax.
A taxpayer advocate is an independent organization within the Internal Revenue Service (IRS) that assists taxpayers who are experiencing significant difficulties in resolving their tax issues with the IRS.
Taxpayer Compliance Measurement Program (TCMP)
The Taxpayer Compliance Measurement Program (TCMP) is when the IRS completes an audit on a high-income earner’s financial records to determine whether they reported all income and paid all taxes.
Unemployment tax is a tax that employers pay to state governments to fund state unemployment insurance programs.
A W2 employee is a traditional employee that works directly under an employer and receives a W2 form from their employer.
W2 Tax Form
A W2 tax form is a tax form provided by employers to employees to report the employee's annual earnings, taxes withheld, and other information needed for tax filing purposes.
W4 Tax Form
A W4 tax form is a tax form used for employees to outline withholding and allowances to employers.
Tax withholding is the amount of money taken from a paycheck by an employer to cover the employee's income taxes.