Your comprehensive guide to tax and financial terminology
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Your gross income minus specific deductions. AGI is used to determine eligibility for many tax benefits and is the starting point for calculating your taxable income.
An examination of your tax return by the IRS to verify the accuracy of reported information. Can be conducted by mail, at an IRS office, or at your business location.
Costs incurred in the ordinary course of business that are necessary and reasonable. These expenses are generally deductible from business income.
The profit from the sale of an asset, such as stocks, bonds, or real estate. Short-term gains (held less than one year) are taxed as ordinary income, while long-term gains receive preferential tax treatment.
The net amount of cash moving into and out of a business during a specific period. Positive cash flow indicates more money coming in than going out.
The allocation of the cost of a tangible asset over its useful life. Allows businesses to deduct the cost of assets like equipment, vehicles, and buildings over time.
An expense that reduces your taxable income. Can be either itemized deductions (specific expenses you list) or the standard deduction (a fixed amount set by the IRS).
Quarterly tax payments made by individuals and businesses who don't have taxes automatically withheld from their income, such as self-employed individuals and business owners.
Federal payroll tax that funds Social Security and Medicare programs. Both employers and employees contribute, with a combined rate of 15.3% split between the two parties.
All income received from all sources before any deductions or taxes are applied. Includes wages, business income, investment income, and other sources of income.
The federal agency responsible for collecting taxes and enforcing tax laws in the United States. Part of the Department of Treasury.
In accounting, an obligation or debt that a company owes to creditors. In taxation, it refers to the amount of tax owed to the government.
The amount of income remaining after all expenses, taxes, and deductions have been subtracted from gross income. Also known as "bottom line" or net profit for businesses.
Taxes imposed on employers and employees, including Social Security, Medicare, and unemployment taxes. These are automatically withheld from employee paychecks.
Estimated tax payments made four times per year by individuals and businesses who don't have sufficient tax withholding from other sources of income.
Money returned to a taxpayer when the amount of tax paid exceeds the actual tax liability. This can occur through overwithholding or overpayment of estimated taxes.
A fixed dollar amount that reduces the income subject to tax. Taxpayers can choose between the standard deduction or itemizing their deductions, whichever provides a greater benefit.
A special type of corporation that avoids double taxation by passing income, losses, deductions, and credits through to shareholders for federal tax purposes.
A dollar-for-dollar reduction in the amount of tax owed. Unlike deductions, which reduce taxable income, credits directly reduce your tax liability.
The amount of income subject to tax after all deductions and exemptions have been applied. This is the figure used to calculate your actual tax liability.
The amount of tax that employers deduct from employee paychecks and send directly to the IRS on behalf of the employee. The amount is based on the employee's W-4 form.
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