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

What is an Itemized Tax Deduction?

What is an Itemized Tax Deduction? An itemized tax deduction is the alternative to taking the standard tax deduction. An itemized deduction counts all of your tax deductions in order to lower your taxable income. It requires more work than claiming the standard deduction, but it can also pay off if your itemized tax deduction … Continued

What is the Hobby Loss Rule?

What is the Hobby Loss Rule? If your business goes too many years without making a profit it can be classified as a hobby. When it becomes a hobby you can no longer claim losses as business deductions. In order to determine if you are running a business or a growing a hobby, the Internal Revenue … Continued

What are Gifts of Equity?

What are Gifts of Equity? A gift of equity is when family members sell property to other family members for less than market value. The gift of equity is specifically the difference between the market value and what the buyer pays. A gift of equity can be for any amount, up to the total value of … Continued

What is a Federal Tax Lien?

What is a Federal Tax Lien? A federal tax lien is used to put a lien on property, or any other assets, as collateral for unpaid back taxes. The Internal Revenue Service (IRS) can issue federal tax liens to secure payment of those unpaid back taxes. A federal tax lien does not allow the government … Continued

What is the Earned Income Credit?

What is the Earned Income Credit? The Earned Income Credit (EIC) is a tax credit for low to moderate income earners. In order to qualify for the Earned Income Credit, you must file a tax return, even if you are not required to file taxes. Those who file for an Earned Income Tax Credit may … Continued