Ability to pay refers to a financial criterion used in various contexts such as finance, taxation, industrial relations, municipal bonds, and public policy. It represents the capacity of an individual or entity to meet financial obligations based on their income or economic status.
Accounting is the process of identifying, measuring, recording, and communicating economic transactions. Typically, this is done using monetary terms and involves the preparation of financial statements such as profit and loss accounts and balance sheets.
An accumulation and maintenance trust is a type of discretionary trust designed to allow for the accumulation of income until certain beneficiaries reach a specified age, at which point the income is applied for their maintenance, education, or benefit.
ACT stands for both Association of Corporate Treasurers and Advance Corporation Tax in the realm of accounting, each holding significant importance in different contexts.
In taxation, active income refers to earnings derived from active involvement in work and trade, including salaries, wages, and commissions. It is distinct from portfolio and passive income, which come from investments and activities in which the taxpayer does not materially participate.
An ad valorem tax is calculated as a percentage of the assessed value of an item, such as property, goods, or services. Common examples include property taxes and value-added taxes (VAT).
An adjusted basis, or adjusted tax basis, refers to the original cost or other basis of property, reduced by depreciation deductions and increased by capital expenditures. It serves as the base amount from which to measure gains and losses for tax purposes.
Advocacy advertising involves companies placing advertisements that present their opinions on public issues, aiming to influence public opinion. Common issues include consumer rights, education, the environment, health, and taxation.
For purposes of consolidated tax returns, an affiliated group is composed of companies whose common parent or other inclusive corporation owns at least 80% of the voting power and value of the stock of the includable corporations (except preferred stock).
After-tax proceeds from resale refer to the amount of money left for the investor after accounting for all transaction obligations and personal income taxes on the transaction.
A federal tax designed to ensure that wealthy individuals, estates, trusts, and corporations pay a minimum amount of tax regardless of deductions, credits, or exemptions.
In the USA, the professional organization of certified public accountants. The Institute provides technical advice and guidance to its members and such government bodies as the Securities and Exchange Commission. It issues many influential publications in the areas of accounting, auditing, and taxation.
The annual amount that an individual can give to another person without having to pay federal gift tax, which was up to $13,000 in 2010 and 2011, and periodically adjusted for inflation.
Apportionment refers to the distribution or allocation of income, expenses, property, or tax liability among different entities, individuals, or states. It is a concept widely used in fields such as accounting, taxation, and real estate.
Appropriation in accounting refers to the allocation of net profits of an organization in its accounts. This can include dividends to shareholders, transfers to reserves, and amounts for taxation.
An assessment is the amount of tax or special payment due to a municipality or association, or a proportionate share of a common expense.
The 'Assignment of Income' doctrine is a tax principle that prevents taxpayers from avoiding tax by directing income they have earned to another person.
ATT stands for Associate of the Association of Tax Technicians, a professional qualification for employees working in taxation. It is particularly aimed at individuals operating at a level below that of the Chartered Institute of Taxation members.
An audit limited in scope due to restrictions on certain accounts, reduced period, or restricted access to records. Often pertinent in accounting and taxation scenarios.
Automatic stabilizers are built-in changes in government spending and taxation that dampen the business cycle by adjusting automatically with the economy's performance without additional legislative action.
A Bad-Debt Reserve is an offset to Accounts Receivable, with amounts that can be expected to be uncollectible. Businesses use this reserve to account for receivables that are not likely to be collected.
Basis is an amount usually representing the taxpayer's cost in acquiring an asset. It is crucial for various tax purposes including computation of gain or loss on the sale or exchange of the asset and depreciation with respect to the asset.
The basis upon which personal income or business profits are assessed in the UK for each fiscal year. The specific rules for each income-tax schedule detail the profits or income to be assessed in that year.
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.
A below-the-line deduction, also referred to as an itemized deduction, is a tax deduction that taxpayers can claim on their federal income tax returns. These deductions are subtracted from a taxpayer's adjusted gross income (AGI) to determine their taxable income, ultimately reducing the amount of tax owed.
The Benefit Principle is an economic theory proposing that those who benefit from government expenditures, which are financed by taxes, should also be the ones to pay the taxes that finance them.
The term 'BOOT' has distinct meanings in both computing and taxation. In computing, it refers to the process of starting a computer. In taxation, it refers to additional property or money included to balance the values in a tax-deferred exchange.
Bracket creep occurs when taxpayers move into higher tax brackets due to inflationary increases in their nominal income without a real increase in their purchasing power. This phenomenon increases government revenue without any changes in tax rates.
A C Corporation is a type of corporation that is taxed separately from its owners under Subchapter C of the Internal Revenue Code. This structure allows the corporation to retain earnings and provides liability protection for its shareholders.
A cadastre is a comprehensive register of the real property in a jurisdiction, which includes detailed information about property boundaries, land ownership, and the value of the land and its improvements. It is commonly used to determine the amount of tax assessed on each parcel of land.
A calendar year refers to a continuous period beginning on January 1 and ending on December 31, widely used for financial and accounting purposes. In contrast, a fiscal year can vary depending on the organization's specific reporting requirements.
A capital asset is property of any type held by an individual or business, excluding inventory and certain other types of property. Capital assets can include buildings, land, equipment, vehicles, stocks, and bonds.
Capital assets are forms of property with a relatively long life, often used in trade or business, that receive specific tax treatments when sold, resulting in either capital gain or capital loss.
Capital Gains Tax (CGT) is a tax levied on the profit from the sale of assets or investments. The tax applies to the difference between the sale price and the original purchase price or basis of the asset.
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.
The carryover basis concept is pivotal in a tax-deferred exchange, wherein the adjusted tax basis of the property surrendered is used to determine the tax basis of the property acquired.
Cash Basis or Cash Method is an accounting method primarily used by individual taxpayers, wherein income and deductions are recognized when money is received or paid.
A statement made in a document certifying that the transaction concerned is not part of a larger transaction series that exceeds a certain monetary value, primarily used to determine stamp duty requirements.
A professional certification conferred by the International Board of Standards and Practices for Certified Financial Planners. It requires passing national examinations in various financial planning disciplines and substantial professional experience.
A Certified Public Accountant (CPA) is a professional designation awarded to accountants who meet specific education, experience, and examination requirements within the jurisdiction of a U.S. state. CPAs hold responsibilities in accounting, auditing, taxation, and financial consulting for both corporations and individuals.
A 'Change in Accounting Method' refers to an alteration in the overall method of accounting or a change in a material item used in an overall accounting plan. This could involve changes such as switching from cash basis accounting to accrual basis accounting, or altering inventory valuation methods.
Chargeable assets encompass all forms of property subject to tax on capital gains, excluding specifically exempt items such as private motor cars, National Savings Certificates, and others.
A chargeable event refers to any transaction or occurrence that results in a liability for income tax, capital gains tax, or corporation tax.
In the UK, a chargeable gain refers to that part of a capital gain arising from the disposal of an asset that is subject to taxation. Understanding chargeable gains is crucial for both individuals and businesses to manage tax liabilities effectively.
In the context of capital gains tax, a chargeable person is any individual or entity that is resident, or ordinarily resident, in the UK during the year in which a chargeable gain was made due to the disposal of an asset.
In the UK, a Chartered Accountant (CA) is a qualified member of the Institute of Chartered Accountants in England and Wales (ICAEW), the Institute of Chartered Accountants of Scotland (ICAS), or the Institute of Chartered Accountants in Ireland (ICAI). Chartered Accountants provide a range of services including auditing, taxation, financial advice, and management roles in various industries.
Chartered Financial Consultant (ChFC) is a professional designation awarded by The American College in Bryn Mawr, Pennsylvania, recognizing individuals for their expertise and proficiency in financial planning.
The Chartered Institute of Taxation (CIOT) is a professional body in the UK that grants chartered status to candidates meeting specific standards in tax competency and practice.
Professional designation conferred by The American College, signifying expertise in insurance planning, investments, taxation, and related areas.
The Child and Dependent Care Credit is a non-refundable tax credit in the United States designed to help families offset the cost of care for children and dependents while they work or look for work.
Commerce Clearing House (CCH) is a leading provider of information services, software, and workflow tools for tax, accounting, and legal professionals.
A commuter tax is a form of income tax levied on individuals working in a jurisdiction different from where they reside.
A company car is a vehicle owned by a business but made available for employees to use for business and, in some cases, personal purposes.
Payment to someone who has suffered harm, such as for loss of income, expenses incurred, property destroyed, or personal injury. These payments, except for personal injury damages, are generally taxable.
Complete Liquidation refers to a series of distributions that redeem all the stock of a corporation under a specific plan.
A complex trust is a type of trust that can either distribute or retain income according to its governing instrument or state law, or has a charitable beneficiary. It is entitled to only a $100 exemption.
The conduit approach allows income or deductions to flow through to another entity, such as a partnership or trust, enabling tax liabilities to be managed at the beneficiary or partner level.
Items that are eliminated from separate taxable income, computed on a consolidated basis, and combined with the aggregated separate taxable income (for example, net operating loss, net capital gain or loss, total charitable contributions).
Constructive ownership of stock refers to situations in which a taxpayer is treated as owning shares that are actually owned by another person or entity, due to the application of specific tax rules, also known as attribution rules.
Constructive Receipt of Income is a doctrine where a taxpayer must include in gross income amounts that, though not actually received, are deemed received during the taxable year. This principle ensures that taxpayers cannot defer taxation by simply delaying the physical receipt of income.
In the USA, the chief accounting executive of an organization responsible for financial reporting, taxation, and auditing but typically leaving the planning and control of finances to the treasurer.
An examination of a tax return that is conducted largely by telephone or mail, usually involving substantiation or explanation of only a few items.
Cost depletion refers to the method used to recover the tax basis in a mineral deposit by deducting it proportionately over the productive life of the deposit. It is contrasted with the percentage depletion method.
The Cumulative Bulletin (CB) is a hardbound compilation that consolidates material found in the Internal Revenue Bulletin (IRB) and is typically issued on a semiannual basis.
Current liabilities are amounts owed by a business to other organizations and individuals that should be paid within one year from the balance-sheet date, including trade creditors, bills of exchange payable, and short-term loans.
Customs and Excise refer to government agencies responsible for collecting taxes on goods imported into or exported out of the country, as well as enforcing regulations related to these activities.
The term 'Death Tax' is commonly used to refer to state inheritance taxes, though it is frequently conflated with estate taxes. It represents the taxation imposed on the transfer of wealth upon an individual's death.
Debt Discharge Income refers to the forgiven portion of outstanding debt that becomes taxable income to the borrower, subject to specific exemptions.
The debt/equity ratio is a financial metric that indicates the relative proportion of a company’s debt to its total equity. It demonstrates how leveraged a company is in terms of its debt financing compared to its equity financing.
In various contexts, 'declare' means to announce formally or officially. It has distinct applications in finance, importation, and taxation.
Deferred gain refers to any gain from a transaction that is not subject to tax in the year it is realized but is instead postponed until a future period.
The concept of depreciable basis is essential in determining the amount that can be depreciated for tax purposes. It represents the initial cost of an asset, including certain expenditures necessary to put the asset into use.
Depreciation is the systematic allocation of the cost of a tangible asset over its useful life. It reflects the asset's usage, wear and tear, or obsolescence.
Depreciation Recapture refers to the portion of taxable capital gain from the sale of an asset, which represents the depreciation previously deducted for that asset.
Loss from a disaster in an area declared by the President as warranting federal assistance.
Disposable income is the amount of money that individuals have available for spending and saving after personal taxes have been accounted for.
Distributive share refers to the allocation of income, gain, loss, deduction, or credit to a partner in a partnership, typically determined by the partnership agreement.
A district court is a type of court that hears civil actions against the United States for the recovery of any tax alleged to have been erroneously or illegally assessed or collected by the IRS.
The District Director serves as the chief operating officer of one of the Internal Revenue Service (IRS) districts and reports to the appropriate regional commissioner.
A divisive reorganization involves the transfer of all or part of a division, subsidiary, or corporate segment in a tax-free manner. It includes three main types: split-up, split-off, and spin-off.
Domicile refers to the country or place of an individual's permanent home, influencing their civil status and tax liabilities. It is distinct from nationality and residence, encompassing both physical presence and an intention to remain.
A dormant company is an entity that has had no significant accounting transactions during the accounting period in question and therefore is exempt from certain financial and auditing obligations.
Early-retirement benefits are benefits a person is entitled to when retiring before the formal retirement age. Early retirement is increasingly common in the United States.
Earned income is a critical concept in the financial landscape, particularly for tax purposes, and encompasses income from employment, trades, professions, and more.
Earnings and Profits refers to the economic capacity of a corporation to make a distribution to shareholders that is not considered a return of capital. If distributed, it constitutes a taxable dividend to the shareholder to the extent of current and accumulated earnings and profits.
Economic accrual of interest refers to the cost of an indebtedness for a given period, calculated by multiplying the period’s interest rate by the unpaid loan balance, including prior accrued interest.
Electronic Filing, commonly referred to as E-Filing, is a system allowing taxpayers to transmit their tax returns directly to the Internal Revenue Service (IRS) electronically. This streamlines the tax submission process, reduces the chance of errors, and accelerates the refund process.
An income tax code issued by tax authorities when the correct tax code for an employee is unavailable, ensuring basic personal allowance application but excluding further allowances until proper code assignment.
An Enrolled Actuary is a professional actuary accepted by the Internal Revenue Service (IRS), whose signature is required for IRS Form 5500 to demonstrate the tax compliance of a pension plan.
Explore estate duty, a type of tax levied on estates of deceased individuals before inheritance taxes. Understand its impact, calculation, examples, and frequently asked questions.
Excess (accelerated) depreciation refers to the accumulated difference between accelerated depreciation claimed for tax purposes and what straight-line depreciation would have been. Generally, excess accelerated depreciation is recaptured as ordinary income upon a sale, instead of receiving more favorable capital gains treatment.
An excise tax is a tax imposed on specific goods, services, activities, or privileges, often included in the price of the product.
In both insurance and taxation, exclusion rules determine what items or amounts are not covered by policies or not included in gross income, respectively.
An exemption is a deduction allowed to a taxpayer based on their status or circumstances, reducing the amount of income subject to taxation. Exemptions can apply in various contexts including personal income tax, homestead exemptions, and the alternative minimum tax.
Exemption Phase-Out refers to the gradual reduction in the amount that can be claimed as a deduction for personal exemptions as Adjusted Gross Income (AGI) rises above a specified threshold.
An exit charge is the tax imposed under inheritance tax regulations when an asset is removed from a discretionary trust.
Filing Status for tax purposes governs the form of return used and may affect the rate at which income is taxed and eligibility for various credits and deductions.
The annual UK Act of Parliament that changes the law relating to taxation, implementing the rates of income tax, corporation tax, etc., proposed in the preceding Budget.
Fiscal policy involves the strategic use of government spending and taxation to influence a nation's macroeconomic conditions. It plays a crucial role in managing economic cycles by affecting demand, employment, inflation, and overall economic growth.
A fiscal tax year is a 12-month period used by businesses and organizations for accounting and taxation purposes. Unlike the calendar year, it does not necessarily end on December 31.
