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Glossary of Tax Terms: Medical Dependent
I like to say that there are two types of dependents in the tax world: a “dependent dependent” and a “medical dependent.” A “dependent dependent” is someone who you claim as a dependent on your tax...
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Glossary of Tax Terms: Enrolled Agent
What is an Enrolled Agent? The EA designation has existed since 1884 but sadly, EAs toil in obscurity (I once opined that EAs are like Liechtenstein while CPAs are like the United States). The National...
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Glossary of Tax Terms: Passive Activity/Passive Activity Losses
These glossary posts are intended to be an expansion on the brief definitions given in this website’s “Glossary of Tax Terms.” Unfortunately, when talking about passive activities, it’s hard to expand...
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Glossary of Tax Terms: Refundable Credits
The term “refundable credit” refers to a tax credit that can produce a tax refund even if your tax liability is $0. Contrast this with “nonrefundable credits,” which can reduce your tax liability to $0...
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Glossary of Tax Terms: Asset
In the tax world, the term “asset” often comes up. An asset can refer to a broad variety of property. For a business, the term “asset” typically means something the business purchases that has a useful...
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Glossary of Tax Terms: Head of Household
The term “head of household” refers to a filing status on a tax return available to unmarried people caring for children or parents. In simple terms, head of household creates a standard deduction and...
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Glossary of Tax Terms: IRA
In the tax world, “IRA” stands for “individual retirement account.” An IRA is a way for people to save for retirement. You can put up to $5,500 into an IRA if you’re under age 50, and up to $6,500 if...
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Glossary: Filing Status
Federal tax returns allow for 5 filing statuses on a tax return: Single Head of household Married filing jointly Married filing separately Qualifying widow(er) Single Straightforward. An unmarried...
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Glossary: Varnum Ruling
Whenever you see or hear reference to the Varnum Ruling in Iowa, it’s referring to the 2009 decision by the Iowa Supreme Court that legalized same-gender marriage in Iowa. I used to do a lot of blog...
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Glossary: Earned Income Credit
The Earned Income Credit refers to a tax credit available to taxpayers between the ages of 25 and 65 whose income is below certain levels. The EIC is surprisingly complex. The IRS publication on the...
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Glossary: Miscellaneous Itemized Deductions
Miscellaneous itemized deductions are itemized deductions subject to special limitations on how much deduction can be taken. Examples of miscellaneous itemized deductions include: Unreimbursed...
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Glossary of Tax Terms: AMT
AMT stands for Alternative Minimum Tax. AMT is an alternative tax calculation that re-figures taxable income without personal exemptions and certain itemized deductions. Those certain itemized...
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Glossary of Tax Terms: Roth IRA
A Roth IRA is a type of individual retirement account where deposits into the account are not tax deductible and withdrawals are generally tax-free (with restrictions). Basic Rules You must have...
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Glossary: Net Income/Net Loss
The term “net income” refers to what’s left of your gross income after expenses. To review: gross income is money coming in the door before expenses are accounted for. Net income is what’s left after...
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Glossary of Tax Terms: LLC
LLC is an abbreviation for “Limited Liability Company” (yes, “company,” not “corporation”). LLCs are legal entities formed under state law. As with corporations, LLCs give liability protection but LLCs...
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Glossary: Asset
In the tax world, the term asset can have several different meanings. For businesses, an asset is generally a major purchase of something that will last for more than one year. In other words,...
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Glossary: Patient-Centered Outcomes Research Fee
Image courtesy of OpenClipartVectors on Pixabay.com The Patient-Centered Outcomes Research Fee is a fee imposed as part of the Affordable Care Act. The fee, presently $2.18 per participant in a health...
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Glossary: MACRS
MACRS refers to “modified accelerated cost recovery system,” which is the default depreciation method used for tax purposes. Within MACRS there are two depreciation methods: general depreciation system...
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Glossary: Audit (Of Financials)
Image courtesy of user stevepb on pixabay.com In financial accounting, an audit refers to a CPA firm reviewing a company’s financials and internal controls, and reviewing documentation to verify the...
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Glossary: S-corporation
S-corporation is a tax term that refers to a corporation or an LLC that elects to be taxed under the rules of Subchapter S of the Internal Revenue Code. S-corporations share many of the same...
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