What is Underwithholding?

What is Underwithholding? Underwithholding is when you haven’t had enough income taxes withheld during a year. If a tax payer’s incomes taxes are underwithheld, it does not mean that tax payers doesn’t have to pay the taxes. Tax payers pay the underwithheld taxes when he or she files a tax return. The withholding amount is determined by how … Continued

What is a Tax Credit?

What is a Tax Credit? A tax credit reduces the amount of tax a business or individual has to pay. The government uses tax credits to encourage or reward behavior that they find beneficial. For example, the government can give a tax credit to people for replacing old appliances with new, energy efficient ones. Most tax … Continued

What is Sales Tax?

What is Sales Tax? Sales tax is a consumption tax on goods and services. State governments, along with county and local governments, set the sales tax; however, not every state has sales tax. The purpose of sales tax is to fund government projects. The revenues from sales tax are used to fix roads, improve communities, … Continued

What is the Rehabilitation Tax Credit?

What is the Rehabilitation Tax Credit? The rehabilitation tax credit is a federal tax credit that encourages real estate developers to renovate or restore older buildings. Buildings built before 1936 are the target of the rehabilitation tax credit. Any renovations made on buildings from 1936 or earlier are eligible for a 10% tax credit. Any … Continued

What are Pretax Earnings?

What are Pretax Earnings? Pretax earnings can be applied to individuals or businesses. In each case, pretax earnings refer to the amount of money an individual or business earns before income tax is taken out. Pretax earnings are also referred to as pretax income or earnings before tax. In order to determine the pretax earnings for … Continued

Glossary: Accounting & Tax Terms

This glossary of accounting & tax terms will hep you understand basic accounting vocabulary. Click on any of the terms for a expanded definition and examples. Accounting & Tax Terms After-tax income: The amount of disposable income that a person or company has left over after all federal, state and withholding taxes have been deducted … Continued

What is Withholding Tax?

What is Withholding Tax? Withholding taxes are a form of income taxes. These taxes are taken out, or withheld, from an employee’s paycheck, which the employer pays directly to the government. The IRS determines how much to withhold from your paycheck using the W-4 form you fill out when you’re hired. The number of deductions you take … Continued

What is the Nanny Tax?

What is the Nanny Tax? The Nanny Tax is a federal (and sometimes state) tax paid by people who have household help and pay them over a certain threshold. The nanny tax applies to nannies, housekeepers, gardeners or any other household help. The Internal Revenue Service (IRS) instituted the nanny tax because a taxpayer becomes an employer … Continued

What is Mileage Allowance?

What is Mileage Allowance? The Internal Revenue Service (IRS) allows people who use their vehicles for business, charity, moving or medical expenses to take deductions on those expenses; this is called mileage allowance. The IRS deducts a certain cent-per-mile; the IRS determines the deduction each year. This is also referred to as the “standard mileage … Continued

What is the Kiddie Tax?

What is the Kiddie Tax? The Kiddie Tax is a tax applied to a child’s unearned income. When children under the age of 18 make $2,100 or more in unearned income, that income is taxed at the guardian’s tax rate. Unearned income is considered any gifts of stock or other investments. The Kiddie Tax does not … Continued