Tax Glossary

Tax Glossary

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There are currently 65 names in this directory beginning with the letter a.
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.

A reduction in the assessment of tax, penalty or interest when it is determined the assessment is incorrect.

The taxpayer's home, habitation, residence, domicile, or place of dwelling.

Abuse of Law
The doctrine which allows the tax authorities to disregard a civil law form used by the taxpayer which has no commercial basis.

Academic Period
A semester, trimester, quarter, or other period of study (such as a summer school session) as reasonably determined by an educational institution.

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.

Accelerated Death Benefits
Any amounts paid under a life insurance contract, prior to death, for an individual who is terminally or chronically ill.

Accelerated Depreciation
Method of depreciation under which taxpayers may allocate larger depreciation deductions to the first year or first few years of useful business assets, such as plant and machinery.

Accountable Plan
A reimbursement or allowance arrangement that requires an employee to account to their employer for their business expenses within a reasonable time.

Accounting Method
The way a taxpayer accounts for income and expenses.

Accounting Period
The time period used for financial reporting.

Accounting Records
All documents and books used in the preparation of the tax return and all financial statements, including general ledger, subsidiary ledgers, sales slips, and invoices.

Accounts Payable
A list of the debts currently owed by a person or business, mainly for the purchase of services, inventory, and supplies.

Accounts Receivable
A list of the money owed on current account to a creditor, which is kept in the normal course of the creditor's business and represents unsettled claims and transactions.

Accrual Basis/Method
An accounting method whereby income and expense items are included in taxable income or expense as they are earned or incurred, rather than when they are received or paid.

Active Conduct of Trade or Business
Generally, to participate meaningfully in the management or operations of a trade or business.

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.

A unit for performing a specific function that generates taxable income, such as a business entity.

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.

Ad Valorem Tax
A tax on goods or property expressed as a percentage of the sales price or assessed value.

Additional Child Tax Credit
A refundable credit for certain individuals who get less than the full amount of the Child Tax Credit.

Adjusted Basis
The basis in property (usually its cost) increased or decreased by various events, such as improvements, depreciation, and casualty losses.

Adjusted Gross Income (AGI)
The amount of income that remains after certain adjustments to income are subtracted from the taxpayer's gross income.

Adjustment to Income
Certain subtractions allowed directly against a taxpayer's gross income.

Administrative Expenses
Expenses that are not as easily associated with a specific function as are the direct costs of manufacturing and selling. It typically includes expenses of the headquarters office and accounting expenses.

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.

Affiliation Privlege
Tax relief or exemption accorded to dividend distributions made by a resident subsidiary company to its parent company which owns a certain minimum percentage of shares, in order to mitigate double taxation of such dividends.

After-Tax Contribution
A voluntary contribution subject to income tax.

Age of Majority
The age at which an individual legally becomes an adult.

Term used to denote the adding together of the taxpayer's income from all sources in order to determine the applicable tax rate for income tax purposes.

An individual who is not a U.S. citizen

Alienated Income
This income can be 'alienated' when an entity (a company, trust or partnership) is interposed between the individual and the person paying for their services, so that the interposed entity derives the income rather than the individual.

A payment to or from a spouse or former spouse under a divorce or separation instrument.

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.

Allocation of Income/Expenses
The apportionment or assignment of income or expense for various tax purpose, e.g., between permanent establishments in various jurisdictions.

Deduction or exemptions made in computing income taxes, inheritance and gift taxes and some forms of sales taxes.

Alternative Depreciation System (ADS)
The slower of the two depreciation systems under the Modified Accelerated Cost Recovery System.

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.

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.

A method of recovering (deducting) certain capital costs in equal amounts over a period of 60 months or more.

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.

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.

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.

Process of buying a commodity (which may include currency or securities) and simultaneously selling it in another market to profit from price differentials.

Arbitrage Tax
Process of entering into a tax motivated transaction (i.e. to obtain profit from the application of tax rules).

Term used for the determination of a dispute by the judgment of one or more persons, called arbitrators, who are chosen by the parties and who normally do not belong to a normal court of competent jurisdiction.

Arm's Length Standard
The IRS requires taxpayers to adopt an arm's length standard when making business arrangements with another controlled company. This means that the price charged or paid by a related party must be the same price charged or paid by an unrelated party under the same (or similar) circumstances.

The act of computing the tax due.

An item of value or usefulness.

At risk
The amount a taxpayer could actually lose in an activity.

Attribution Rules
Rules that create ownership by attributing stock to one party even though the shares are legally owned by another party; often called constructive ownership of stock.

Authorized IRS e-file Provider
A tax professional or business that is accepted to participate in the IRS e-file program.

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.

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.