Glossary of Terms

Above-the-line deduction (adjustment to income)

Taxes

A permitted deduction used in determining adjusted gross income, rather than an itemized deduction taken afterward. Eligibility and limitations depend on the particular adjustment. Some adjustments are available whether or not you itemize.

Adjusted gross income (AGI)

Taxes

Gross income for federal income tax purposes minus allowed adjustments to income. AGI is a starting point for many tax calculations and eligibility rules. It is different from take-home pay and taxable income.

AGI

Alternative minimum tax (AMT)

Taxes

A separate federal tax calculation that adjusts certain income, deductions and preferences. A taxpayer may owe additional tax when the applicable AMT calculation exceeds regular tax. Rules and exemptions depend on the year and taxpayer.

AMT

Amended return (Form 1040-X)

Taxes

A return used to correct a previously filed individual federal income tax return. Changes may also affect state filings. Correction procedures, supporting documents, filing methods and refund deadlines depend on the issue and tax year.

Form 1040-X

Amount realized

Taxes

The value received from disposing of property, determined under applicable tax rules and generally reduced by selling expenses. It can include cash, other property and debt relief, so it may differ from cash received at closing.

Audit (tax)

Taxes

An examination by a taxing authority to determine whether a return or reported information is correct. An audit can be conducted by correspondence or through other procedures. Receiving a notice does not necessarily mean an audit has begun.

Bonus depreciation

Taxes

A tax provision allowing an accelerated deduction for qualifying property under rules applicable to its acquisition and placed-in-service dates. Eligibility, percentages, elections and state treatment can change, so a blanket deduction percentage can be misleading.

Child Tax Credit (CTC)

Taxes

A federal tax credit for taxpayers with qualifying children who meet the applicable requirements. Income limits, identification rules, child eligibility and any refundable portion depend on the tax year.

CTC

Dependent (tax)

Taxes

A person who meets the requirements to be claimed under a particular tax provision, commonly as a qualifying child or qualifying relative. Financial support alone does not determine eligibility, and different benefits can apply different tests.

Earned income

Taxes

Income from work or self-employment, as defined for the particular tax provision. Wages and net self-employment earnings are common examples. Investment income and retirement payments generally follow different rules.

Earned Income Tax Credit (EITC)

Taxes

A refundable federal credit for qualifying workers whose income and other circumstances meet the rules. Eligibility and amount depend on factors including earnings, filing status and qualifying children; some workers without children can qualify.

EITC

Effective tax rate

Taxes

Tax divided by a stated measure of income. The result depends on which taxes and income figure are included. It describes an overall burden and differs from the marginal rate on an additional dollar.

Electronic filing (e-file)

Taxes

Submitting a tax return electronically through an approved method. Acceptance generally confirms receipt and basic processing checks, not that every tax position has been examined or that a refund is guaranteed.

Employer identification number (EIN)

Taxes

A federal tax identifier assigned by the IRS to a business or other entity. An EIN is different from state registration, a business license and a determination of the entity's federal tax classification.

EIN

Estimated tax payment

Taxes

A payment made during the year toward tax not adequately covered by withholding. It can apply to self-employment, investment or other income. Required amounts and payment periods follow rules that are not simply four equal calendar quarters.

Excise tax

Taxes

A tax on specified goods, services, activities or transactions. It may be charged per unit or as a percentage. Excise taxes differ from broad income taxes and general retail sales taxes.

Extension to file

Taxes

Additional time to submit a tax return when the applicable extension requirements are satisfied. It generally does not extend the time to pay tax. Interest and penalties can apply to unpaid amounts.

Fair market value (FMV)

Taxes

A value reflecting a transaction between a willing buyer and willing seller, neither compelled to act and both reasonably informed. The relevant valuation date and tax or legal context matter.

FMV

Filing status

Taxes

A tax-return classification, such as Single or Married Filing Jointly, determined by applicable rules. It affects rates, deductions and eligibility. Marital status alone does not resolve every filing-status question.

Form 1040

Taxes

The principal U.S. individual federal income tax return used to report income, deductions, credits, payments and tax. Additional schedules and forms may be required depending on the taxpayer's circumstances.

Form 1095-A

Taxes

A Health Insurance Marketplace statement reporting coverage and related amounts used in premium tax credit calculations. It can be necessary to reconcile advance credit payments. It is different from Forms 1095-B and 1095-C.

Form 1099-B

Taxes

An information return generally reporting certain sales or exchanges through a broker or barter exchange. Reported proceeds are not automatically taxable gain; basis, adjustments and other tax rules must also be considered.

Form 1099-DIV

Taxes

An information return reporting dividends and certain distributions. Different boxes can have different tax treatment, including ordinary dividends, qualified dividends and capital-gain distributions.

Form 1099-INT

Taxes

An information return reporting interest and certain related amounts. Interest may still be reportable even if no form arrives. Tax-exempt interest can also require reporting and affect other calculations.

Form 1099-K

Taxes

An information return reporting certain payment-card and third-party-network transactions. Gross reported payments are not necessarily profit or taxable income. Reporting thresholds and transaction classification must be checked for the applicable year.

1099 K;1099k

Form 1099-MISC

Taxes

An information return for specified miscellaneous payments, such as certain rents, royalties and other income. The payment's actual character determines tax treatment; the form's name does not make every amount self-employment income.

Form 1099-NEC

Taxes

An information return used to report qualifying nonemployee compensation. Receiving it does not by itself determine worker classification, and business income can be taxable even when no form is required or received.

1099 NEC;1099nec

Form 1099-R

Taxes

An information return reporting distributions from retirement plans, IRAs, annuities and certain other arrangements. Distribution codes and taxable amounts require context; a reported distribution is not always fully taxable.

Form SSA-1099

Taxes

A Social Security benefit statement used in determining federal tax reporting for benefits. Whether benefits are taxable depends on the applicable income calculation and filing circumstances. It is not an SSI benefit statement.

1099 SSA;SSA1099;Social Security tax form

Form W-2

Taxes

An employer's annual statement of wages and specified payroll taxes or withholding. Different boxes serve different reporting purposes. It is distinct from Form W-4, which employees use to guide withholding.

W2;W 2

Form W-4

Taxes

An employee form used to provide information for federal income tax withholding. Updating it can change paycheck withholding, but does not itself change the final tax determined on the annual return.

W4;W 4

Form W-9

Taxes

A request for a U.S. person's taxpayer identification number and related certifications, commonly used by payers for information reporting. It is usually provided to the requester rather than filed directly with the IRS.

W9;W 9

Gross income (tax)

Taxes

Income included in the federal tax calculation before allowed adjustments and deductions. Its scope depends on tax rules, including exclusions. It is different from business gross receipts and from cash deposited into an account.

Head of household

Taxes

A filing status available when specific household-cost, marital-status and qualifying-person requirements are met. Paying bills or supporting a relative does not automatically establish eligibility.

Identity Protection PIN (IP PIN)

Taxes

A six-digit IRS number used to help prevent someone else from filing a federal income tax return using your identifying information. It is different from an e-filing signature PIN and must be handled securely.

IP PIN

Individual taxpayer identification number (ITIN)

Taxes

An IRS tax-processing identifier for certain people who need a U.S. taxpayer identification number but are not eligible for a Social Security number. It does not itself authorize work or establish immigration status.

ITIN

Installment agreement (tax)

Taxes

An arrangement with a taxing authority to pay an outstanding balance over time. Interest, penalties and fees may continue, and compliance conditions apply. Approval is different from forgiveness of the liability.

Itemized deduction

Taxes

An eligible expense deducted under applicable rules instead of taking the standard deduction. Limits and qualifications apply. Paying an expense does not automatically make it deductible or make itemizing advantageous.

Marginal tax rate

Taxes

The tax rate applying to an additional increment of taxable income under a stated tax system. Moving into a higher bracket generally does not subject all income to that bracket's rate.

Modified adjusted gross income (MAGI)

Taxes

Adjusted gross income recomputed with specific additions or exclusions for a particular tax rule. There is no single universal MAGI calculation; the version used for one benefit may differ from another.

MAGI

Net investment income tax (NIIT)

Taxes

An additional federal tax that can apply to certain investment income when applicable income thresholds are exceeded. Its income definitions and calculation differ from self-employment tax and Additional Medicare Tax.

NIIT

Nonrefundable tax credit

Taxes

A credit that can reduce specified tax but generally cannot by itself produce a refund beyond that tax. Some credits have carryover rules. A taxpayer may still receive a refund of withholding or other payments.

Ordinary income

Taxes

Income subject to regular income-tax treatment rather than a special capital-gain rate or another special rule. Examples often include wages and interest. The classification depends on the payment or transaction.

Pass-through taxation

Taxes

Treatment under which an entity's tax items are generally reported by its owners rather than being subject only to entity-level income tax. Reporting can occur without cash distributions, and entity-level taxes may still apply.

Passive activity loss

Taxes

A loss from an activity classified as passive under federal tax rules, subject to restrictions on how it can offset other income. Rental activities and participation rules have important exceptions and separate limitations.

Premium Tax Credit (PTC)

Taxes

A refundable federal credit that helps eligible households pay for qualifying Marketplace health coverage. Advance payments are reconciled on the tax return. Eligibility, amounts and repayment rules depend on the year and circumstances.

PTC

Qualified business income deduction (QBI)

Taxes

A federal deduction based on qualifying business income and, in some cases, other eligible items. It is subject to detailed limitations and is distinct from a business-expense deduction or an entity classification.

QBI

Qualified dividend

Taxes

A dividend eligible for special federal tax rates when the payer, holding period and other requirements are met. A dividend shown as qualified on an information statement may still require checking the recipient's eligibility.

Refundable tax credit

Taxes

A credit that can result in a payment to an eligible taxpayer even when the qualifying credit exceeds the relevant tax. Some credits are only partly refundable and have additional eligibility limits.

Sales tax

Taxes

A tax generally imposed on specified retail transactions under state or local law. Taxable items, rates and collection rules vary by jurisdiction. Online purchases are not automatically exempt.

Schedule A

Taxes

A schedule used with an individual federal return to report itemized deductions. Only qualifying expenses within applicable limits are included; the total must be compared with available standard-deduction treatment.

Schedule C

Taxes

A schedule generally used by sole proprietors to report business profit or loss on an individual federal return. Certain single-member LLC activities also use it. Not every payment on a Form 1099 belongs on Schedule C.

Schedule D

Taxes

A schedule used to summarize capital gains and losses for an individual federal return. Supporting forms may be needed, and special transactions can have additional reporting requirements.

Schedule E

Taxes

A schedule generally used to report specified supplemental income and losses, including many rental activities and pass-through items. Different sections and limitation rules apply; it is not a universal form for all side income.

Schedule K-1

Taxes

A statement reporting an owner's or beneficiary's share of specified tax items from a partnership, S corporation, estate or trust. Different K-1 forms serve different entities. Taxable allocations and cash distributions can differ.

Section 179 deduction

Taxes

An election to deduct qualifying property costs under specified rules rather than recovering all costs through depreciation over time. Dollar limits, business-income restrictions, property eligibility and state treatment require current review.