A 15% penalty surcharge on earnings retained in a corporation to avoid the higher personal income taxes to which they would be subject if paid out as dividends to the owners.
The adjusted tax basis is the value used for calculating gain or loss upon the sale or disposition of an asset, reflecting adjustments for various tax-related incentives, improvements, or expenses.
An automatic extension provides taxpayers with additional time to file their tax return by submitting IRS Form 4868 or Form 7004 by the original due date. However, the estimated tax payment remains due on the original filing date.
Backup withholding is a procedure used to ensure that federal income tax is paid on earnings even though the recipient cannot be identified by a Social Security number. Banks, brokers, and other entities report nonwage earnings paid out on IRS Form 1099. When the form cannot be filed because it lacks the taxpayer's Social Security number, 28% (through December 31, 2012) of the interest, dividends, or fees is withheld by the payer and remitted to the federal government.
A government entity whose purpose is to ensure uniform property tax assessments. It operates at both local and state levels to review and assure fair assessments.
An IRS publication that provides instructions for employers concerning employment tax withholding amounts and procedures.
An examination of a tax return that is conducted largely by telephone or mail, usually involving substantiation or explanation of only a few items.
This is a filed statement that a taxpayer must submit to the IRS that includes an estimate of the amount of income tax owed for a particular year. It is typically used by individuals who do not have their taxes automatically withheld from their paycheck.
Deregistration refers to the process by which an entity ceases to be registered for Value Added Tax (VAT). This often occurs when a taxable person stops making taxable supplies, making deregistration compulsory, with a notification requirement within 30 days.
Entertainment expenses and business meals are deductible only if they are 'directly related to' or 'associated with' the active conduct of a taxpayer's trade or business. These expenses are deductible to the extent of 50% of cost, excluding any lavish or extravagant costs.
Excess contributions refer to contributions made to a cash or deferred arrangement for highly compensated employees that exceed the limits set by nondiscrimination rules.
An extension refers to an agreement between two parties to extend the time period specified in a contract. In the context of taxation, an extension provides an additional period of time to file an income tax return.
The Failure-to-File Penalty is assessed on tax returns not filed by the due date, and it is typically a percentage of the tax that remains unpaid. This penalty aims to deter late filings and encourage timely compliance.
Income tax is a tax imposed by governments on individuals and businesses based on their earnings within a fiscal year. Understanding income tax is essential for compliance and financial planning.
An Income Tax Lien is a legal claim imposed by a government entity against a noncompliant taxpayer's property due to unpaid income taxes. This lien can pertain to both real and personal property.
A collection of tax laws that are enacted by the federal government of the United States to administer tax obligations on individuals, corporations, and other entities.
The IRS is the United States federal government agency responsible for collecting taxes and administering the Internal Revenue Code. It ensures compliance with tax laws, investigates tax abuses, and prosecutes tax fraud.
A midnight deadline is a completion requirement that marks the end of a calendar day, often used in contexts such as personal tax return filings.
A payee statement is a required tax information statement that indicates the amount paid to a payee, including various types of income and withholding details.
Payroll withholding is the process by which employers deduct a portion of an employee's earnings to pay for taxes and other mandatory deductions. This system ensures that the employees' tax obligations are met throughout the year.
A persistent misdeclaration penalty is used in the collection of value-added tax (VAT) to address significant inaccuracies in VAT returns, coupled with a trader's prior record of errors.
A command issued by the Commissioners of Inland Revenue to a taxpayer to produce specific documents, usually by a designated date.
Official interpretations of the Internal Revenue Code (IRC) issued by the Treasury Department (IRS) that have the force and effect of law to guide taxpayers and tax professionals.
Retailer schemes offer various methods for retailers to efficiently manage and report taxable supplies, ensuring compliance with VAT regulations.
Revenue Procedures are published statements from the Internal Revenue Service (IRS) detailing instructions for the taxpayer and IRS officials in performing their duties.
An official interpretation by the IRS of the internal revenue laws, related statutes, tax treaties, and regulations, published in the Cumulative Bulletin. Revenue rulings are issued only by the National Office of the IRS and are published for the information and guidance of taxpayers, IRS officials, and others concerned.
In taxation, the Safe Harbor Rule provides guidelines established by the IRS for certain transactions, indicating specific parameters a taxpayer can observe to ensure favorable tax treatment or avoid an unfavorable one. An example is a list of parameters that, if followed, will assure sale and leaseback treatment rather than a financing arrangement.
Schedule K-1 is a tax form used to report to each partner or beneficiary his or her share of income, losses, capital gains, and other tax information passed through from a partnership or trust to the individual.
A notice issued when a trader is late with a value-added tax (VAT) return or with the payment of the VAT. The surcharge period is specified on the notice and it will run to the anniversary of the end of the period in which the default occurred.
A tax accountant is a professional specializing in preparing, filing, and managing tax returns for individuals and businesses, ensuring compliance with tax laws and maximizing tax efficiency.
Tax accounting is an accounting specialization focusing on tax preparation, compliance, and planning. It involves the application of accounting principles to adhere to tax laws and accurately report tax-related information.
A tax audit is an examination of an individual's or organization's tax returns by the tax authorities to ensure that financial information is reported accurately and according to taxation laws. The primary aim is to verify that the amount of tax declared and paid is accurate.
The span of time covered by a value added tax (VAT) return, usually encompassing three calendar months. VAT returns must be completed and submitted to HM Revenue and Customs within one month following the end of this tax period.
Under the value added tax (VAT) rules, the tax point is the date on which goods are removed or made available to a customer or when services are completed. It determines the tax period for which the output tax must be accounted.
A professional who is compensated for preparing, assisting in preparing, or reviewing tax returns. They must sign the tax returns they handle.
An informal name for an Inspector of Taxes, who ensures compliance with tax laws and regulations.
A Taxpayer Identification Number (TIN) is a unique identifier used by the Internal Revenue Service (IRS) in the United States to track and manage taxpayers' various tax-related activities.
Under-Withholding refers to a situation where taxpayers have insufficient federal, state, or local income tax withheld from their wages, potentially resulting in tax liability upon filing returns and incurring penalties and interest.
Underestimation in the context of taxation occurs when taxpayers pay less tax than they owe, which can lead to underpayment penalties and is often linked to terms such as underpayment penalty and underwithholding.
The underpayment penalty, also known as the estimated tax penalty, is levied on taxpayers who do not withhold enough tax or fail to make sufficient estimated tax payments throughout the year.
Uniform Capitalization Rules (UNICAP) are a set of tax accounting principles governing the capitalization of direct and indirect costs to property produced by taxpayers or acquired for resale. Established under the Tax Reform Act of 1986, these rules aim to ensure consistent decision-making regarding inventory cost allocation, leading to more accurate financial reporting and tax compliance.
Unreported income refers to the improper failure to include certain income on a tax return. This can have significant legal repercussions, including penalties, interest, and criminal charges.
Value Added Tax (VAT) registration is an obligation for businesses making taxable supplies that exceed a set registration threshold within a specific period, requiring them to register for VAT.
Registration for value-added tax (VAT) by a taxable person whose taxable turnover does not exceed the registration threshold. This option allows businesses to benefit from claiming input tax credits even if their revenue—taxable turnover—does not mandate compulsory VAT registration.
The IRS W-9 form requires taxpayers to provide their Social Security number, employer identification number, or other identification to a payer, enabling the obligation of reporting interest, dividends, royalties, or other payments made to the taxpayer to the IRS.
Special work clothes are apparel required for the performance of one's job and are not suitable for wear outside of work settings. The cost of these clothes is a miscellaneous itemized deduction, subject to the 2% Adjusted Gross Income (AGI) floor.
