In the USA, an abusive tax shelter reduces liability to tax using complex transactions often judged to have no legitimate business purpose beyond tax avoidance. The IRS publishes a list of such transactions, making taxpayers liable for back taxes and interest. Similarly, the UK's GAAR aims to outlaw 'artificial and abusive' tax shelters.
Accrued taxes represent the amount of taxes owed, based on income earned or property value assessment, but not yet paid. This concept plays a crucial role in accounting, taxation, and financial reporting.
An allowable capital loss refers to the excess of the cost of an asset over the proceeds received on its disposal. Both individuals and companies may set capital losses against capital gains to establish tax liability.
A cluster of statutory provisions designed to stop certain arrangements that would otherwise reduce the taxpayer's tax liability. Important areas include dividend stripping, bond washing, manufactured dividends, and transactions in securities.
The Basis Period is a critical concept in accounting and taxation, referring to the specific period, usually a fiscal year, during which income generated or profits earned are used as the basis for assessing tax liabilities for the following tax year.
Carryover refers to the process by which deductions and credits of one taxable year that cannot be used to reduce tax liability in that year are applied against tax liability in subsequent years.
A chargeable event refers to any transaction or occurrence that results in a liability for income tax, capital gains tax, or corporation tax.
A chargeable transfer is a lifetime gift not covered by any of the exemptions, making it liable to inheritance tax. This can include potentially exempt transfers or payments into a discretionary trust.
A requirement for taxpayers who do not have adequate tax withheld regularly, often applicable to self-employed individuals. It ensures that taxpayers can manage their tax liability by paying estimated taxes quarterly.
A deficiency in tax occurs when a taxpayer's correct tax liability exceeds the taxes previously paid for that taxable year. It can be identified during an audit of the taxpayer's return and may lead to penalties.
A Federal Tax Lien is a legal claim by the government on all properties and rights to properties of a taxpayer who fails to pay a tax for which they are liable.
A finance vehicle is a specialized financial entity that organizations use to achieve certain fiscal or operational advantages, such as minimizing tax liabilities or securing funding.
Understanding the concept of 'franked' in accounting, particularly within the context of dividends, and its implications on tax liabilities.
A general tax lien is a legal claim by a government entity against a taxpayer's assets for unpaid tax liabilities, affecting all of the taxpayer's property.
An election to treat a production herd as a capital asset. The election is irrevocable and must be made within two years from the end of the first year of assessment or company accounting period for which the tax liability will be affected by the purchase of the herd.
Income shifting is a tax strategy that involves transferring gross income from one taxpayer to another, typically to a taxpayer in a lower tax bracket, in order to reduce the overall tax liability of a group or family.
An information return is a document that businesses, organizations, and entities must submit to the IRS to report certain types of payments made during the year. While it does not compute the actual tax liability of a taxpayer or accompany the payment of taxes, it provides key details that are relevant for tax calculations. Common examples include Forms 1099, W-2, and others.
A tax return filed jointly by a married couple, computing a combined tax liability with progressive tax rates based on the assumed equal income by both spouses.
Loss carryforward involves the practice of applying current year's net operating losses to future years' net incomes for tax purposes. It's typically employed when a loss carryback is not feasible.
The status of an individual who does not reside in a specific country for fiscal purposes, potentially affecting their tax obligations within that country.
A qualified opinion is a statement issued by an auditor that indicates exceptions or limitations to the comprehensive nature of the audit conducted on financial statements.
A historical notion referring to any dividend or other distribution from company assets to shareholders that carried a tax credit, allowing shareholders to offset this against their tax liability. This system was replaced by the dividend tax system in April 2016.
In UK tax law, the Ramsey Principle allows the court to examine a series of connected transactions collectively to ascertain the taxpayer's liability, rather than isolating each individual transaction.
Recapture is the process of taxing at ordinary rates the portion of the gain on a sale that represents prior depreciation allowances or prior tax credits, thereby increasing the taxable income of the seller.
An overview of Recoverable Advance Corporation Tax (ACT), its purpose, and its eventual abolition in the context of corporate taxation practices.
A refundable credit is a tax credit that is paid to a taxpayer even if the amount of the credit exceeds the taxpayer's total tax liability. Notable examples include the Earned Income Tax Credit (EITC) and taxes withheld on wages.
A scheme for the self-assessment of tax by companies introduced in the UK for all companies with an accounting period ending after 1 July 1999. This includes the timely submission of tax returns and payment of tax liabilities.
A single taxpayer is an individual who files taxes separately from others, and who does not qualify as a head of household or a qualifying widower; they fall into the 'single' filing status category, one of several classifications used by the IRS to determine tax liability.
The term 'single taxpayer' refers to an individual who is not married on the last day of the tax year. This designation affects the rate schedules and tax tables used to calculate their tax liabilities.
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.
The process of distributing a tax charge among different sources of income to ensure appropriate tax liability allocation.
The Tax Benefit Rule addresses the treatment of certain recoveries or repayments as taxable or deductible based on how they affect tax liability in prior years.
A tax credit is a tax incentive that allows certain taxpayers to subtract the amount of the credit from the total they owe the state. It can be used in various contexts such as dividends paid by a company, allowances against a tax liability, and social security payments in the UK.
Tax evasion is the illegal act of deliberately misrepresenting or not reporting income to reduce tax liabilities. This practice involves concealing income, inflating deductions, or using deceptive methods to evade tax obligations.
Tax liability refers to the total amount of tax debt owed by an individual, organization, or corporation to a tax authority. It includes both current taxes due and any unpaid taxes from prior periods.
An encumbrance placed upon property as a claim for payment of a tax liability.
Tax planning involves the strategic structuring of a taxpayer's financial activities and affairs in accordance with relevant tax legislation to minimize tax liability. It is a legal and ethical means of reducing the overall charge to tax.
A tax rate is the percentage at which an individual or corporation is taxed. Tax liability is calculated by applying the appropriate tax rate to the tax base.
A tax shelter, also known as a tax shield, is any financial arrangement made to legally lower an individual or a corporation's tax liabilities. These shelters can involve transactions or methods that result in deductions, credits, or reductions in taxable income.
A tax straddle is a technique that was once used to postpone tax liability by showing a short-term loss in the current tax year and realizing a long-term gain in the following tax year.
Taxable value refers to the assessed value of a property or other asset, which is used to determine the amount of a tax liability. It's often a percentage of the property's market value and is used by tax authorities to calculate the proper amount of tax due.
A taxable year is a period, usually 12 months, during which the tax liability of an individual or entity is calculated. In the case of certain nontaxable entities, it is the period for which tax information is provided.
A taxpayer is an individual or entity that is liable to pay taxes to a governmental authority, including but not limited to the Internal Revenue Service (IRS) in the United States.
Ten-year averaging is a method used to calculate income tax on a lump-sum distribution from a qualified benefit plan. This method was designed to reduce the tax liability of the beneficiary on large, one-time distributions. The ten-year averaging rule applies to individuals who were participants in a qualified benefit plan, were at least 50 years of age before January 1, 1986, and had been participants in the plan for at least five years before the year they receive the distribution.
