Taxation Legal Terms and Definitions

Gross income Money, goods, services, and property a person receives that must be reported on a tax return. Includes unemployment compensation and certain scholarships. It does not include welfare benefits and nontaxable Social Security benefits. Income taxes Taxes on income, both earned (salaries, wages, tips, commissions) and unearned (interest, dividends). Income taxes can be levied on both individuals (personal income taxes) and businesses (business and corporate income taxes). Exemptions Amount that taxpayers can claim for themselves, their spouses, and eligible dependents. There are two types of exemptions-personal and dependency. Each exemption reduces the income subject to tax. The exemption amount is a set amount that changes from year to year. Form W-4, Employee's Withholding Allowance Certificate Completed by the employee and used by the employer to determine the amount of income tax to withhold. Acquisition The purchase of one corporation by another, through either the purchase of its shares, or the purchase of its assets. Earned Income Credit A tax credit for certain people who work, meet certain requirements, and have earned income under a specified limit. Dependent A person, other than the taxpayer or spouse, who entitles the taxpayer to claim a dependency exemption. Excise tax A tax on the sale or use of specific products or transactions. Installment Agreements To be eligible for an installment agreement, all returns that are due must first be filed. Installment agreements generally require equal monthly payments. The amount of an installment payment will be based on the amount owed and on the taxpayer’s ability to pay that amount within the time legally available for the IRS to collect. Estate and Gift Tax One of the oldest and most common forms of taxation is the taxation of property held by an individual at the time of their death. Such a tax can take the form, among others, of estate tax (a tax levied on the estate before any transfers). An estate tax is a charge upon the decedent's entire estate, regardless of how it is disbursed.

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	Form 5471 is Information Return of U.S. Persons With Respect to Certain Foreign Corporations Report information with respect to certain foreign corporations. A domestic partnership may have to file Form 5471 if it: Controls a foreign corporation; or Acquires, disposes of, or owns 5% or more in value of the outstanding stock of a foreign corporation; or Owns stock in a corporation that is a controlled foreign corporation for an uninterrupted period of 30 days or more during any tax year of the foreign corporation, and it owned that stock on the last day of that year.