Tax Glossary

Tax Glossary

Scroll through the list of terms below or click a letter to jump directly to that section of the glossary. Terms in boldface may be found elsewhere in the glossary.

A

AARP - American Association of Retired Persons

This nonprofit organization (technically, a collective of nonprofit entities) serves Americans age 50 and older by providing health and safety guidance, retail discount offers and other benefits. People can join AARP regardless of their status as working or retired. The organization actively lobbies Congress on tax, healthcare and related issues affecting older and retired Americans.

ABLE Account

Named for the Achieving a Better Life Experience Act of 2014, an ABLE account is a tax-advantaged savings plan for a person with a qualifying disability. People with qualifying disabilities may set up these accounts for themselves, or the account may be established by the person's designated agent, a relative or someone else authorized by the IRS or Social Security Administration. The disabled individual must be the sole beneficiary of the account. Anyone may make after-tax contributions to an ABLE account, as long as the total of all contributions does not exceed the annual contribution limit. Generally, ABLE accounts can grow in value tax-free, and beneficiaries may receive tax-free distributions throughout their lives, as long as the funds are used for qualified disability-related expenses.

Above-the-Line Deductions

Officially called adjustments to income by the IRS, above-the-line deductions are tax deductions that people may claim before figuring their adjusted gross income (AGI) on their tax returns. (Hence, these deductions appear above the AGI line on the return form.) Generally, if you qualify for these deductions, you may claim them regardless of whether you use the standard deduction or itemize deductions.

Accelerated Depreciation - see Bonus Depreciation.

Accounting Methods

The IRS allows businesses, including individuals with self-employment income, to track income and expenses in several different ways. The main accounting methods for tax purposes are accrual accounting and cash accounting. Some small businesses and self-employed people may also qualify to use hybrid accounting, which blends the two other methods.

Accrual Accounting

Accrual accounting is one of two major bookkeeping methods (the other being the cash method) that businesses may use for tax purposes. With accrual accounting, a business reports income when it is earned, regardless of when payments are actually received (technically, constructively received). Similarly, expenses are recorded when they are incurred, regardless of the date of payment. The IRS allows many small businesses to choose between accrual and cash accounting, or to use a combination of the two ( hybrid accounting). However, businesses in some industries, along with those with sales above a specified threshold, must use accrual bookkeeping methods.

Active Participation (Rental Income)

People are considered to actively participate in rental activities if they make significant business or rental management decisions, such as approving expenditures and projects, or overseeing rental terms and new tenant selection. The IRS guidelines for active participation are not as strict as the business material participation standards. Those who actively participate in rental operations may qualify for an exception to the passive activity loss rule, such as the special $25,000 allowance.

Active Pay, or Active Duty Pay

These terms refer to income that a military service member receives while on active duty, as opposed to retirement income or retainer payments received while the member has Fleet Reserve status. For some federal tax purposes, active duty pay is treated differently than other forms of military service income.

Actual Expense Method (for Business Vehicle Expense Deduction)

The actual expense method is one of two methods that businesses and self-employed people may use to calculate and deduct expenses related to business vehicle use. To use this method, tally up all relevant vehicle expenses, such as fuel and maintenance costs, auto loan interest, and parking fees and tolls. For a vehicle used for both business and personal purposes, prorate all expenses based on the vehicle's business use percentage (measure by mileage). Alternatively, vehicle expense deductions may be calculated by using the standard mileage rate. Note that enterprises that operate a fleet of five or more vehicles generally must report actual expenses instead of using the standard rate.

Additional Child Tax Credit

People who qualify for the Child Tax Credit (CTC), but cannot claim the full credit amount because it exceeds their tax liability, may be eligible for the Additional Child Tax Credit (ACTC). This refundable credit can allow a person to claim part or all of their unused CTC as a tax refund.

Additional Medicare Tax

People whose earned income for a year exceeds a threshold set by the IRS must pay the Additional Medicare Tax. This tax is assessed on top of the standard Medicare tax component of FICA taxes. The income threshold depends on a person's filing status. In most cases, an employer automatically withholds Additional Medicare Tax from an employee's pay once the employee's earnings for the year cross the threshold. However, people with multiple jobs or self-employment income may need to figure their Additional Medicare Tax on their tax returns, and may need to make quarterly estimated tax payments.

Adjusted Basis

This term can play a key role in calculating capital gains and losses. If you purchase investment property, then your cost basis in the property is typically the amount you paid for it, including commissions and fees. For gifted or inherited property, or property acquired in a trade, your initial basis might be based on the original owner's basis, or on fair market values (FMVs) at the time of the transfer. Certain activities may subsequently decrease your basis, like claiming depreciation deductions for property used in a trade or business. Meanwhile, making substantial improvements to property may increase your basis. Taking all of these factors into account enables you to calculate your adjusted basis, which in turn must be used to figure a capital gain or loss.

Adjusted Gross Income (AGI)

Adjusted gross income (AGI) is the total of a person's earned income and unearned income (their gross income), with certain exclusions and above-the-line deductions subtracted away. Your AGI (or the related MAGI) may affect your eligibility for tax benefits, such as the Child Tax Credit (CTC) and Premium Tax Credit (PTC). It may also affect the maximum value of your itemized deductions.

Adjustments to Income - see Above-the-Line Deductions.

Adoption Taxpayer Identification Number (ATIN)

An Adoption Taxpayer Identification Number (ATIN) is a temporary, 9-digit ID that the IRS issues for a child in the process of being adopted. Sometimes, a child is placed in a home before the adoption process is finalized, and the adoptive parents cannot immediately obtain a Social Security Number (SSN) for the child. In these circumstances, the adoptive parents may obtain an ATIN, which enables them to claim the child as a dependent and/or qualifying child for certain tax benefits. Adoptive parents may apply for an ATIN by filing Form W-7A.

Advance Premium Tax Credit (APTC)

Many people who qualify for the Premium Tax Credit (PTC) under the Affordable Care Act (ACA) may choose to receive the credit as an adjustment to their health insurance premiums. This adjustment, called the Advance Premium Tax Credit (APTC), can significantly reduce the cost of healthcare coverage for an individual or family. If you receive the APTC, you will need to reconcile your monthly APTC premium reductions with your total PTC for the year when you file your tax return. To avoid issues with incorrect APTC amounts, inform the Health Insurance Marketplace where you purchased your coverage of any changes in your income, family size or other circumstances that may affect your PTC.

Affordable Care Act (ACA)

The Affordable Care Act (ACA) created the official Health Insurance Marketplace, where individuals and families can purchase private health insurance. Those who obtain coverage through the marketplace and have incomes below specified limits may qualify for the Premium Tax Credit (PTC), which is a refundable credit. Eligible people may choose to receive this credit as a reduction in their monthly health insurance premiums, known as the Advance Premium Tax Credit (APTC). The ACA also established minimum standards for health insurance coverage, and increased the number of Americans who qualify for free or very low-cost coverage through the Medicaid Expansion.

After-Tax Contributions

This term refers to contributions to certain tax-advantaged accounts like Roth IRAs and qualified tuition programs that are not tax-deductible. After-tax contributions do not reduce your tax liability for the year when they are made. However, later withdrawals from the account may be shielded from tax, resulting in tax-free growth. Also see pre-tax contributions.

Age Test

Various federal tax benefits, such as the Child Tax Credit (CTC), are only available to people with a qualifying child they can claim as a dependent. The IRS uses a number of tests to determine whether someone is your qualifying child. Age tests set a maximum age for qualifying children, which may depend on whether the child is a full-time student. Note that various IRS programs have their own age tests, so your qualifying child for one tax deduction or tax credit may not meet the test for another tax benefit.

Alimony

Alimony is a payment to a spouse or former spouse under a legal separation or divorce agreement. Depending on when the divorce occurred, alimony payments may or may not be taxable income for the recipient. Similarly, the person paying alimony may or may not be able to claim a tax deduction for the payments.

Allocated Tips

In most cases, employees who receive tips must report those tips to their employers, as well as to the IRS on their tax returns. If you work in a food or beverage establishment and the tips you report add up to less than a percentage of gross revenue specified by the IRS, then your employer may assign additional tips to you, called allocated tips. Generally, you must report the full amount of allocated tips assigned to you on your tax return. However, if you have records proving that your actual tips were less than the amount allocated by your employer, then you can qualify for an exception to this rule. Note that only tips reported by your employer on a year-end income statement like Form W-2 qualify for the "No Tax on Tips" deduction.

Alternative Minimum Tax (AMT)

When some people with higher incomes compute their tax using standard IRS formulas, their resulting tax liability falls below a minimum level set by law. For example, a person might qualify for very large tax deductions, resulting in little or no tax. In such cases, the person may have to pay a special tax called alternative minimum tax (AMT), which brings their total tax bill up to the required minimum threshold.

Amended Return / Amended Tax Return

People who discover that they filed an incorrect tax return, such as a return with errors or omissions that affect their tax liability, may need to file an amended return. Generally, an amended return must show the figures reported on the original return, the corrected figures, and the difference between them. In most cases, IRS Form 1040-X is used for this purpose.

American Opportunity Tax Credit (AOTC)

The IRS offers the American Opportunity Tax Credit (AOTC) for qualifying students for their first four years of higher (post-secondary) education. This partially refundable tax credit for tuition and required school fees may be claimed by either the student or another person (such as a parent) who claims the student as a dependent. To qualify, the student must be pursuing a degree or other recognized credential. In addition, the person taking the credit must have a modified adjusted gross income (MAGI) below the limit set by the IRS. In order to claim the AOTC on your tax return, you will need to obtain IRS Form 1098-T (Tuition Statement) from a qualifying higher education institution.

Amortization

The term amortization generally refers to depreciation expenses related to intangible assets like intellectual property. Tax deductions for amortization are figured in the same way as other depreciation deductions, but determining an intangible asset's useful life may be a somewhat complicated process.

Amount Realized

When you sell property with the potential result of a capital gain or loss, your "amount realized" is the selling price minus certain expenses necessary for the sale. Those expenses may include commissions, loan charges (such as points), and advertising and legal fees.

Annual Contribution Limits

The IRS sets yearly limits on the amount of money that people may contribute to various tax-advantaged accounts. Savings plans subject to such annual contribution limits include health FSAs, MSAs, ABLE accounts, IRAs and various other qualified retirement plans. Exceeding an annual contribution limit may disqualify a person from receiving the account's usual tax advantages.

Annual Gift and Estate Tax Exclusion

The annual gift exclusion allows people to give away a certain amount of money or property each year without having gift and estate tax reporting or payment obligations. Gifts below the annual exclusion threshold do not count toward the donor's lifetime exclusion. Importantly, the annual exclusion applies to the amount given away per beneficiary, and there is no limit on the number of beneficiaries a person may make gifts to during a given year. Note that gifts in excess of the annual exclusion amount generally must be reported to the IRS, but do not necessarily get taxed. In most cases, gifts only become taxable events once the donor has exceeded the lifetime exclusion.

Annuity

An annuity is a contract with an insurance company, trust or other entity that provides a person with long-term income. An annuity may be purchased with either a lump-sum payment or a series of payments specified in the contract. Thereafter, the individual receives regular payments (usually monthly or annually) over the length of the contract. Most commonly, annuity agreements last for 10, 15 or 20 years. Annuity payments are generally taxed as ordinary income.

Archer MSA (Medical Savings Account)

An Archer MSA (named for a congressman who wrote key parts of the legislation) works much the same way as a health savings account (HSA). For that reason, once HSAs came into common use, Congress voted not to allow people to start new Archer MSAs. However, those who already had Archer MSAs could continue contributing to and using their accounts. If you have an Archer MSA and a high-deductible health plan (HDHP), then you or your employer can make pre-tax contributions to the account. However, unlike with an HSA, an employee and employer cannot both contribute to an Archer MSA during the same year. You can withdraw Archer MSA funds tax-free, as long as you use them for qualified medical expenses.

ATIN - see Adoption Taxpayer Identification Number.

At-Risk Rule

In many cases, people who engage in business activities and other self-employment pursuits can use business losses to offset other income, reducing their tax liability. However, the IRS limits losses that may be claimed in relation to a passive activity that generates business or rental income. Under the at-risk rule, you cannot claim a passive active loss greater than the amount of investment for which you are personally at risk. In other words, the loss you claim must be no more than the maximum amount of money you stand to lose in the event of a business failure. Also see passive activity rule.

Automatic Filing Extension (6-Month Extension)

All individuals and some businesses may request an automatic six-month extension to file their tax returns. For example, if the standard IRS filing deadline is April 15, then people who request an automatic extension have until October 15 to file their returns. Because the extension is automatic, your request does not require IRS approval. Note, however, that an automatic 6-month extension generally applies only to filing your return, NOT to paying any tax due.

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B

BAH and BAS - Excludable income for Military Members

The IRS allows members of the Armed Services to exclude certain cash benefits from their gross income for tax purposes. These income exclusions include the basic allowance for housing (BAH) and basic allowance for subsistence (BAS). Excludable income is not subject to federal income tax, and usually does not have to be reported on a person's tax return.

Basis

To determine whether you had a capital gain or loss from the sale of property like a home, stocks, artwork, musical instruments or virtual currency, you need to know your basis in the property. Basis is essentially a measure of your total investment. If you purchase or build property, then your basis is typically the purchase price or building cost, including fees and commissions. If you trade for property, then your basis may be the fair market value (FMV) of either the property you give up or the property you receive. In these scenarios, your basis may be called cost basis. For inherited or gifted property, your initial basis may be determined by its FMV, the previous owner's basis or other factors. Some activities, such as making improvements to a building or claiming depreciation deductions, can increase or decrease your basis in an asset. In these cases, you may need to determine your adjusted basis.

Before-Tax Contributions - see Pre-Tax Contributions.

Bequeath / Bequeathal / Bequest

These terms usually refer to the act of passing property along to heirs, or otherwise giving it away as instructed in a deceased person's will. For example, if Armon's last will dictates that $200,000 of his assets are to be given to the local library upon his death, then Armon has bequeathed this money to the library. Similarly, if Armon's son and daughter receive his house as an inheritance, then Armon bequeathed the home to them. In both cases, the transferred property is called a bequeathal or bequest. Bequests in excess of the donor's lifetime exclusion may be subject to gift and estate tax.

Blocked income

Generally, U.S. citizens and residents must report and pay tax on their foreign income in U.S. dollars. In some cases, however, foreign income cannot be readily converted into U.S. dollars due to laws or other restrictions imposed by a foreign government. The IRS calls this non-convertible income blocked income. In most cases, people may choose to either report and pay tax on blocked income, or defer reporting and paying tax on the income until it is unblocked. If you choose to defer paying tax on blocked income, then you generally must submit an information return called a Report of Deferrable Foreign Income, to explain the situation to the IRS.

Bona Fide Residence (or Residency) Test

The IRS applies multiple tests to determine whether a person qualifies for the foreign earned income exclusion. The bona fide residence test generally requires people to prove that they have set up a permanent residence in a foreign country and maintained it for an entire, uninterrupted year. Depending on details of their period of stay in a foreign country, people who do not meet this test may still qualify for the exclusion based on the physical presence test.

Bonus Depreciation

Also called accelerated depreciation, bonus depreciation allows businesses and self-employed people to deduct the cost of capital business expenses more quickly than standard depreciation rules would allow. For example, a capital expense that qualifies for 100% bonus depreciation can be fully written off in a single year, while 50% bonus depreciation would mean that half of an asset's cost could be deducted during the first year of the asset's useful life.

Book Value (of a Capital Asset)

The book value of capital property is the theoretical remaining value of the asset, as indicated by depreciation deductions. Generally, book value is equal to the owner's basis minus those deductions. For example, suppose that you purchase business equipment at a total cost of $15,000. You claim a $2,600 depreciation deduction for the equipment in each of the first three years after putting it in service, for a total of $2,600 X 3 = $7,800 in deductions. After those three years, the book value of the equipment would generally be $15,000 - $7,800 = $7,200. At the end of the recovery period for an asset, its book value should equal its salvage value.

Business Entity or Business Entity Type

A business entity (or business structure) is a legal framework for the ownership of an enterprise. The type of entity established affects not only how a business is taxed, but also how well the owners' personal assets are protected from a business failure or legal action against the company. The most commonly used business entities are sole proprietorships, partnerships, limited liability partnerships (LLPs), limited liability companies (LLCs), S corporations, C corporations and nonprofit organizations. Setting up a business entity other than a sole proprietorship often requires the assistance of both a tax professional and a business attorney.

Business Expenses - Basic IRS Rules

People with business income, including sole proprietors, independent contractors, self-employed freelancers and many gig economy workers, may generally deduct business expenses on their tax returns. These deductions reduce tax liability by lowering the net profit of a person or business. IRS rules state that in order to be deductible, an expense must be "ordinary and necessary" to conduct a trade or business. There is no precise definition of these terms, but the basic ideas are:

• Ordinary: Broadly, this term means that the expense is common within a particular trade or industry. For example, purchasing sheet metal would be ordinary for a welder, but not for a freelance writer. The more unusual an expenditure is within your field, the better prepared you should be to show how it contributes to your ability to earn income.
• Necessary: To qualify as "necessary," a business expense does not have to be absolutely indispensable. However, it does need to have a clear connection to the ongoing success of your business or self-employment activities.

Business Income

For tax purposes, this term refers to income not only from formal business ownership, but also from a broad range of self-employment activities. These activities may include freelancing, gig economy work, or work as an independent contractor or artist. Note that if you accept goods, property or services as forms of payment in the course of your business activities, you generally must include the fair market value (FMV) of those payments in your business income. Business income may be subject to both income tax and self-employment tax. People with significant business income may need to make quarterly estimated tax payments to avoid tax penalties.

Business Structure - see Business Entity.

Business Use of a Home - see Home Office Deduction.

Business Vehicle Expense Deduction

Business owners and self-employed people may generally deduct expenses related to business use of one or more vehicles on their tax returns. This deduction may generally be calculated either by tracking and reporting actual expenses in detail, or by using the IRS standard mileage rate.

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C

Cafeteria Plan / Cafeteria Benefits Plan / Cafeteria 125 Plan

The term cafeteria plan refers to a variety of employer-sponsored benefit packages with optional participation, and rules based on Section 125 of the federal tax code. Cafeteria plans often include tax-advantaged accounts that can be funded with pre-tax contributions, such as flexible spending arrangements (FSAs), health savings accounts (HSAs) and 401(k) plans. Some employers also offer cafeteria plans for term life insurance, adoption costs or dependent care expenses.

Capital Asset / Capital Property (Personal)

The terms capital asset and capital property generally refer to property held as an investment and/or used to generate income. Examples of personal capital property include real estate, artwork, stocks and virtual currency. Selling capital property may result in a capital gain or loss.

Capital Business Asset / Capital Business Property

A capital business asset, or capital business property, is any capital asset that is either held by a business entity (like an LLC or corporation), or used by an individual for business purposes. Common examples of capital business property include financial assets, intangible assets like intellectual property, and fixed assets like buildings, machinery, furniture and computers. Selling capital business property may result in a capital gain or loss, and possibly the need to report a depreciation recapture. Also see Capital Business Expense.

Capital Business Expense

The IRS divides business expenses into two main categories: operating (or ordinary) expenses and capital expenses. The category of capital expenses includes costs associated with acquiring capital business assets, including not only purchase prices but also required taxes, commissions and fees. Under standard IRS rules, a capital expense cannot be deducted all at once. Instead, the cost usually must be recovered gradually, through depreciation deductions. However, some capital assets may qualify for bonus depreciation, or for a one-time Section 179 Expense deduction.

Capital Gain or Capital Loss

The sale of real estate, stocks, antiques, musical instruments, mutual funds, virtual currency, artwork, capital business property or other long-term investment assets may result in a capital gain or capital loss. The amount of gain or loss is the difference between your basis or adjusted basis in the property, and the amount realized in the sale (the selling price minus necessary expenses). If the amount realized is greater than your basis, then you generally must report a capital gain, which may be subject to capital gains tax. If your basis is greater than the amount realized, then you may have a capital loss that can be used to offset capital gains or other income, reducing your tax liability. Capital gains and losses are classified as either short-term or long-term:

• Short-term capital gain or loss:

This classification generally applies to a gain or loss from the sale of property held for a year or less.

• Long-term capital gain or loss:

This classification generally applies to a gain or loss resulting from the sale of property held for more than a year.

Capital Gain Distributions

Certain investment portfolios and packages, such as mutual funds and real estate investment trusts (REITs), distribute capital gains to investors. Recipients of these capital gain distributions generally must report the income on their personal tax returns. Capital gain distributions are usually taxed at the long-term capital gains tax rate. Also see Capital Gains Tax, along with long-term capital gain or loss under Capital Gain or Capital Loss.

Capital Gains Tax

The IRS and many states assess capital gains tax on income derived from the sale of investment or business property. The rules for capital gains tax may differ significantly from the tax rules for other income. To determine whether you owe capital gains tax, first calculate your net capital gain or net capital loss for the year. The tax rate that applies to a net gain will depend on your adjusted gross income (AGI), and on how long you held the property in question. Also see short-term capital gain or loss and long-term capital gain or loss under Capital Gain or Capital Loss, and Capital Gains Tax Rate.

Capital Gains Tax Rate

This term usually refers to special tax rates applied to long-term capital gains. By contrast, short-term capital gains are generally taxed as ordinary income. Also see long-term capital gain or loss under Capital Gain or Capital Loss.

Capital Loss Carryover

The IRS generally limits the dollar value of capital losses that people can use to offset other income, reducing their tax liability. The maximum loss that can be used as an offset during a particular year is referred to as the capital loss deduction limit. In most cases, losses above the limit may be carried forward to future years. You may generally repeat this capital loss carryover process until excess losses get completely used up.

Capital Loss - see Capital Gain or Capital Loss.

Capital Loss Deduction Limit

The IRS limits the extent to which people can use capital losses to offset other income, reducing their tax liability. The maximum dollar value of losses that may be used for this purpose is known as the capital loss deduction limit. Also see Capital Loss Carryover.

Capitalization of Expenses

Rather than being claimed on a single tax return, certain deductible expenses must be divided up between multiple tax years. For example, a self-employed person might claim a deduction for 1/4 of a particular business expense in each of four consecutive years. This process is called capitalization of the expense. The most common forms of expense capitalization are depreciation and amortization.

Cash Accounting

Cash accounting is one of two major bookkeeping techniques that businesses may use for tax purposes (the other being accrual accounting). With cash accounting, a business or self-employed person reports income when it is constructively received, regardless of the date of the underlying transaction. Similarly, most expenses are recorded when they are paid, regardless when they are incurred. Many businesses that generally qualify to use cash accounting for tax purposes must use accrual methods for a few specific situations, such as inventory accounting. In such cases, the IRS may allow hybrid accounting, which involves using accrual bookkeeping for limited purposes, and cash accounting for all other transactions.

C Corporation

Also called a traditional or true corporation, a C corporation is a business entity that, for tax and legal purposes, exists separately from its owners or shareholders. C corporations generally must pay corporate income tax, which can lead to double taxation. However, the C corporation structure also provides the highest degree of personal asset protection for shareowners in the event of a business failure, lawsuit or other legal action against the company.

Charitable Contributions / Charitable Donations Deduction

People who itemize deductions may claim a tax deduction for contributions they make to qualifying nonprofit charities. The maximum allowed deduction for charitable donations is typically based on a percentage of a person's adjusted gross income (AGI). Contributions in excess of the deduction limit may generally be carried over to the next tax year. People who use the standard deduction may qualify to claim an above-the-line deduction for a very limited amount of cash donations. Corporations may also deduct charitable contributions, up to an annual limit based on the company's taxable income.

Child and Dependent Care Credit

The IRS offers this credit to people who pay for the care of a qualifying child under the age of 13, or the care of other dependents of any age who cannot care for themselves. To be eligible for this credit, a person must have earned income, and must pay the care expenses to make it possible to work or seek work. Based on a person's income, the credit may be as high as 50% of qualifying care expenses.

Child Tax Credit (CTC)

People with adjusted gross incomes below a limit set by Congress may claim the Child Tax Credit (CTC) for each of their qualifying children. This credit can reduce an individual or married couple's tax by thousands of dollars. Depending on current laws, the CTC may be a nonrefundable credit, partially refundable credit, or entirely refundable credit. Also see Additional Child Tax Credit.

Children's Health Insurance Program (CHIP)

This federal government program provides low-cost healthcare coverage to children in families whose incomes are too high to qualify for Medicaid, but too low to purchase health insurance. Some states also allow families with slightly higher incomes to buy into CHIP coverage for an increased premium amount. Any premiums that a family pays for such a CHIP buy-in program may qualify for the Premium Tax Credit (PTC) under the Affordable Care Act (ACA).

Citizen or Resident Test / Citizenship or Residency Test

Some tax credits and deductions are available only to people who claim a qualifying child or other qualifying relative as a dependent. One of the tests the IRS uses to determine whether a person is a qualifying dependent is the citizenship or residency test. In general, this test requires that the person be a U.S. citizen for some part of the year, and/or live in the U.S., Canada or Mexico for some part of the year.

Combat Zone (Special Tax Rules for Armed Services Personnel)

Members of the U.S. Armed Forces who serve in a designated combat zone may typically exclude military pay from their taxable income. However, eligible military personnel may instead elect to include combat pay in their reported income for the purpose of qualifying for the Earned Income Tax Credit. In general, a combat zone is any area that (1) the President of the United States designates by Executive Order as an area in which U.S. forces are engaged in combat; (2) the Department of Defense has certified for combat zone tax benefits; or (3) has been established by statute as a Qualified Hazardous Duty Area where service members receive imminent danger pay.

Compensation

For tax purposes, the term compensation refers to a wide range of benefits that a person might receive for work or business activities. Forms of potentially taxable compensation include wages, salaries, commissions, tips, bonuses, royalties, professional fees, earnings from self-employment, and various non-monetary benefits like free housing or free personal use of a company vehicle.

Community Income

This term refers to income received by either spouse in a married couple whose domicile is a community property state.

Community Property State

A community property law holds that any assets or property acquired by either spouse during a marriage belongs equally to both spouses. States that operate under laws of this type are called community property states. Some IRS rules apply differently for married couples in community property states than for couples in other states. These differences may affect both couples who file joint returns and those whose filing status is married filing separately.

Constructively Received

In tax accounting, income and other payments are considered constructively received when they become available to the recipient (or recipient's agent) without restriction. In other words, you have constructively received income if you have full control over the money or property, even if you have not yet converted it to cash or deposited it into an account. If your business uses cash accounting, you should generally report all income on the date it was constructively received.

Contractor - see Independent Contractor, and also Employee vs. Independent Contractor.

Conversion (of Retirement Account) - see IRA Conversion.

Contribution Limit - see Annual Contribution Limits.

Corporate Income Tax

This term refers to federal or state income tax paid by C corporations. Corporate income taxes have their own tax rates and tax brackets, separate from the rates and brackets for individuals.

Cost basis

Cost basis generally refers to a person's or company's initial investment in a capital asset. In most cases, cost basis is the total amount paid to acquire the property, including any required taxes, fees or commissions. However, your cost basis for a particular asset could also be based on the fair market value ( FMV) of the property when you took possession of it, the former owner's basis, or the FMV of any goods, services or property that you exchanged for it. Cost basis plays a critical role in calculating a capital gain or capital loss. Also see Adjusted Basis.

Cost of Goods Sold (COGS)

An important component of inventory accounting, cost of goods sold (COGS) represents the total amount that a business or self-employed person paid to acquire or manufacture the products that they sold in a given year. Generally, COGS is subtracted from gross revenue to compute the gross profit of a business. As a simple example, if you purchase a single item for $350 and then sell it for $525, your COGS is $350, your gross revenue is $525, and your gross profit is $525 - $350 = $175.

Coverdell Education Savings Account (ESA)

A Coverdell ESA is a tax-advantaged account created for the purpose of paying the qualified education expenses of a designated beneficiary. Qualified education expenses typically include tuition and school fees, along with certain other required purchases like books and supplies. Individuals may make after-tax contributions to an ESA if their adjusted gross income (AGI) is below a specified limit, while trusts and corporations may generally contribute to ESAs regardless of their income. The beneficiary of an ESA may subsequently take tax-free withdrawals from the account to pay qualified education expenses. Overall, a Coverdell ESA works similarly to a qualified tuition program plan, also called a Section 529 plan.

Credit - see Tax Credit.

Credit for the Elderly or Disabled

This nonrefundable tax credit is available to people who are 65 years old or older, or retired due to permanent disability, and have incomes below a limit set by the IRS. Because the credit is nonrefundable, it can reduce or eliminate a person's tax bill, but cannot generate an IRS refund.

Credit for Other Dependents

This nonrefundable tax credit is available to people with one or more dependents who do not meet the criteria to be qualifying children for the Child Tax Credit (CTC). The maximum credit amount is significantly lower than the CTC, so always check your eligibility for the CTC before claiming the Credit for Other Dependents.

Cryptocurrency

Like other virtual currencies, cryptocurrencies ("crypto" for short) are digital assets that are not regulated or distributed by a national government. The term cryptocurrency refers to the computer coding that supports the creation and distribution of these currencies. People must report a wide variety of crypto transactions on their tax returns, because those transactions may generate taxable capital gains. Also see Virtual Currency Tax Rules.

Cryptocurrency Tax Rules - see Virtual Currency Tax Rules.

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D

Date of Transaction

IRS rules sometimes require people or businesses to report exactly when a particular transaction occurred. For example, if a transaction is conducted in a foreign currency, then the conversion to U.S. dollars should be based on the exchange rate on the date when the transaction occurs. For individuals, the official date of a transaction is typically either the date when they make a payment, or the date when they constructively receive income. For a business, the correct transaction date for tax purposes may depend on whether the business uses cash accounting or accrual accounting.

Deduction - see Tax Deduction.

Deduction for Business Use of a Home / Deduction for Home Office - see Home Office Deduction.

Deduction for One Half of Self-Employment Tax

People with self-employment income may generally claim a tax deduction for one-half of the self-employment tax that they owe for a given year. This is an above-the-line deduction, so you do not need to itemize deductions in order to claim it.

Defined Benefit Plan - see Pension.

Defined Contribution Plan - see Pension.

Department of Veterans Affairs (VA)

This federal government agency manages a wide variety of programs and benefits for U.S. military veterans, including VA disability compensation, military pensions, and free or low-cost medical care. Many VA benefits qualify as excludable income, and so are not subject to federal income tax.

Dependency Tests

This term refers to the various rules that the IRS applies to determine if someone qualifies as a person's dependent for tax purposes. The main dependency tests are the Support Test, Age Test, Relationship or Member of Household Test, Gross Income Test, Joint Return Test, and Citizen or Resident Test.

Dependent

In general, a person is your dependent if you provide significant financial support for that person (usually more than half of the person's total support), and the person meets several other dependency tests. Having one or more dependents may make you eligible for tax benefits like the Child Tax Credit (CTC), Earned Income Credit (EITC) or Credit for Other Dependents. If you are unmarried, having dependents may also qualify you to use Head of Household or Qualifying Surviving Spouse as your filing status.

Dependent Exemptions / Dependency Exemptions

Depending on current tax laws, a person may qualify to claim income adjustments called exemptions in addition to tax deductions like the standard deduction or itemized deductions. As the name suggests, dependent exemptions are based on the number of dependents a person has. When they are allowed, exemptions work similarly to deductions, reducing a person's tax liability by lowering their taxable income. Also see personal exemption.

Dependent Care Benefits

Some workplaces provide dependent care benefit programs for employees. These programs help employees who have qualifying dependents pay for child care or other services that allow the employee to work. In some cases, the employee can make pre-tax contributions to a dependent care flexible spending arrangement (FSA), then withdraw funds from the account tax-free for qualifying care expenses.

Dependent Taxpayer Test

This term may refer to two different IRS rules: (1) If another person can claim you as a dependent for tax purposes (even if they choose not to do so), then you will generally have a reduced standard deduction. You also may not qualify for certain tax benefits. (2) When determining whether a person is your qualifying child or qualifying other relative dependent, you need to know whether anyone else could claim that person as a dependent. In such cases, only one of you may claim the dependent.

Depreciated Asset

This term refers to any property for which a person or business has claimed depreciation deductions.

Depreciable Cost

The depreciable cost of a capital business asset is the portion of its acquisition cost that qualifies for depreciation deductions. In other words, it is the depreciable part of a capital business expense. For most property, the depreciable cost is equal to the acquisition cost minus the property's salvage value. The total of all depreciation deductions claimed for a particular asset cannot exceed its depreciable cost.

Depreciation / Depreciation Deductions

For tax purposes, depreciation is the process of claiming tax deductions for a capital expense over a series of years. It is the most common example of capitalization of an expense. Depreciation usually involves deducting a portion of the cost of an asset each year throughout a specified depreciation period. However, businesses and self-employed people can sometimes shorten the timeline through the use of bonus depreciation or Section 179 deductions. The two most common methods of calculating depreciation deductions are the straight-line method and the modified accelerated cost recovery system ( MACRS). In some cases, the IRS allows alternative depreciation techniques, such as the units of production method. Also see Amortization.

Depreciation Period

Also called a recovery period, a depreciation period is the number of years required to deduct the total depreciable cost of property through annual depreciation deductions. For example, if IRS rules require a business to deduct the cost of new machinery gradually over the course of six years, then the machinery has a 6-year depreciation period. Depending on the date an asset is put into service and the depreciation method used, the asset's depreciation period may differ slightly from its useful life.

Depreciation Recapture

The process of depreciation is based on the assumption that a capital asset will lose value over time, ultimately retaining only a nominal salvage value or no value at all. The theoretical remaining value of an asset at any point during the depreciation process is known as its book value. However, the true residual value of property may be significantly higher than its book value. If you sell or exchange a depreciated asset for more than its book value (or more than its salvage value after the depreciation period ends), then you may need to report that gain as a depreciation recapture. A depreciation recapture may be taxed as ordinary income, rather than at capital gains tax rates.

Digital Assets

This term refers to not only virtual currencies like cryptocurrency, but also other purely digital commodities like non-fungible tokens (NFTs). Many types of transactions involving digital assets must be reported to the IRS, because those transactions may result in a capital gain or loss.

Direct Expenses - see Home Office Deduction.

Disability Income

This term generally refers to payments that a person receives to replace wages or other earned income while the person is unable to work due to a disability. Disability income may come from an employer, Social Security benefits or some other source. Depending on circumstances, disability payments may be either excludable income or taxable income.

Disability Pension

This special type of pension is paid to an employee who retires early due to a permanent disability. Different tax rules may apply for disability pension payments than for other pension benefits. However, once a person receiving disability pension benefits reaches standard retirement age, further benefits from the plan are usually treated as ordinary pension income.

Disaster Tax Relief Programs

The IRS offers a variety of tax relief programs for people and businesses affected by disasters like storms, floods, earthquakes and wildfires. These programs are usually available only in areas covered by major disaster declarations signed by the President. Relief measures may include tax filing and/or payment extensions, special tax deductions, and waivers of tax penalties and IRS interest. People who lose vital records in a disaster may also request free transcripts of their past tax returns from the IRS.

DITY Move or DIY Move (Military) - see Personally Procured Move.

Dividends

Corporations typically distribute earnings to shareholders in the form of stock dividends, often on a quarterly basis. Like other investment returns, dividends are generally taxable income. Different tax rates may apply for ordinary dividends than for qualified dividends.

Domestic Employee - see Household Employee.

Domicile

A person's domicile is the state where they maintain a legal, permanent residence. Note that your domicile might not be the same as the state where you currently reside. For example, if you have a permanent home in Tennessee but live for two years in a rented home in Delaware to complete a work contract, your domicile would generally still be Tennessee. If you regularly use homes in multiple states, then the IRS and state governments will apply a variety of tests to determine which state is your domicile.

Double Taxation

The term double taxation refers to any situation where the IRS or a state revenue department taxes the same income twice. A common example of double taxation occurs with C corporation earnings. The company generally must pay corporate income tax on its net profits. Stockholders then pay individual income tax on any stock dividends they receive, which are distributions from those same profits.

DRIP (Dividend ReInvestment Plan) Accounts

A DRIP account allows stockholders in a company to automatically reinvest dividends to purchase new shares (or in some cases, fractions of shares) of stock. In most cases, the dividends that are reinvested through a DRIP account are still considered taxable income for the stockholder.

Dual Status Alien

The IRS designates a person as a dual-status alien if the person was both a resident alien and a nonresident alien during the same tax year. Such dual status most often occurs during the year when a person arrives in or departs from the U.S. Since different tax rules apply for resident and nonresident aliens, people classified as dual-status aliens must take extra care when preparing their tax returns.

Dual-use Property

This term most often refers to property that a person uses for both personal and business purposes. Common examples include vehicles, computers and cell phones used by independent contractors, freelancers and sole proprietors. When deducting business expenses related to dual-use property, you generally must prorate each expense based on your percentage of business use. For example, if you use your computer for business purposes 40% of the time, then you may claim at most 40% of costs related to the computer (such as repairs and software updates) as business expenses.

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E

Early Withdrawal Penalty (IRAs and Other Retirement Accounts)

In general, a person who withdraws funds from a traditional IRA before reaching 59 1/2 years of age may need to pay an early withdrawal penalty, also called the additional tax penalty. Other qualified retirement plans may also have penalties for early withdrawals. Exceptions exist for certain withdrawals taken due to financial hardship, and for loans taken from the retirement account that are repaid within a short time. A withdrawal from a Roth IRA before age 59 1/2 may or may not be subject to an early withdrawal penalty, depending on the reason for the withdrawal, the amount withdrawn and how long the withdrawn funds have been in the account. Also see Qualifying Reason for Roth IRA Withdrawal and Roth IRA Early Withdrawal Rules.

Earned Income

The term earned income refers to any income received for performing work. Examples of earned income include a salary, wages, tips and self-employment earnings (such as payments for work as an independent contractor or gig economy worker). Also see Unearned Income.

Earned Income Tax Credit / Earned Income Credit (EITC or EIC)

People with modest incomes may qualify for the Earned Income Tax Credit (EITC or EIC), which is a refundable tax credit. Generally, to claim this credit, you must have an adjusted gross income (AGI) below the limit set by the IRS for your filing status and number of qualifying children, and have some earned income for the tax year. The rules for the EITC also include a limit on unearned income. Because the EITC is fully refundable, you can receive the credit as an IRS refund even if you owe no tax and did not have tax withheld from your pay. However, you must file a tax return to claim the credit.

Education Credits

The IRS offers multiple tax credits for qualified education expenses, including the American Opportunity Tax Credit (AOTC) and the Lifetime Learning Credit.

Educator Expense Deduction

Eligible educators like teachers, counselors, principals and classroom aides may claim this tax deduction for purchases of qualifying classroom supplies. The educator expense deduction is an above-the-line deduction, so it is available regardless of whether a person itemizes deductions.

Effective Tax Rate

A person's effective tax rate is the percent of their income that they actually pay in tax. This percentage typically differs from the person's marginal tax rate (also called nominal tax rate). For example, suppose that Jamal's gross income for a year was $67,780, but he qualified for tax deductions totaling $22,860. His taxable income was therefore $67,780 - $22,860 = $44,920, and his resulting tax liability was $8,700. Based on that year's tax brackets, Jamal's marginal tax rate was 22%. Yet his effective tax rate was only $8,700 ÷ $67,780 = 0.128 = 12.8%.

E-file (Electronic Filing)

E-filing is the process of transmitting forms and documents to the IRS or other U.S. Treasury departments over the internet. Electronically filing a federal tax return generally results in faster processing and a shorter wait time to receive a tax refund than mailing a paper return. Because tax forms contain a great deal of sensitive information, it is critical to use a secure, IRS-approved platform for e-filing. If you use public wifi, also use a VPN to encrypt the information on your tax documents.

EFTPS - see Electronic Federal Tax Payment System.

EIC or EITC - see Earned Income Tax Credit / Earned Income Credit.

EIN - see Employer Identification Number.

Electronic Federal Tax Payment System (EFTPS)

The Electronic Federal Tax Payment System (EFPTS) is an online portal that businesses, individuals and paid tax preparers can use to pay any type of federal tax, including income tax, FICA taxes, estimated tax and unemployment tax (FUTA). To use the EFPTS, a person or business must complete an identity verification process.

Electronic Filing - see E-file.

Employee vs. Independent Contractor

Whether workers are classified as employees or independent contractors has major tax impacts for both the workers and those who hire them. An employer must generally withhold income tax and the employee share of FICA taxes from each employee's pay, and also pay unemployment tax and the employer share of FICA taxes. By contrast, hirers generally do not need to withhold or pay taxes related to payments to independent contractors. Instead, independent contractors usually pay self-employment tax on their net earnings. The primary factor that the IRS examines to determine whether a worker should be classified as an employee or independent contractor is how much control the hirer exerts over when, where and how the worker must complete tasks.

Employer Identification Number (EIN)

If you pay employees, including household employees, then you likely need to withhold taxes from their pay. You may also have to pay unemployment tax. In order to properly report and remit these taxes, you will need an Employer Identification Number (EIN) from the IRS. EINs are available at no charge to residents of the U.S. and its territories. Also see Household Employment Taxes.

Employment Taxes

The IRS uses this term to refer to all the federal taxes that are calculated based on an employee's pay. Employment taxes typically include income tax, FICA taxes, and federal unemployment tax (FUTA). The required reporting and remittance schedule for employment taxes depends on an enterprise's gross revenues and payroll size. Also see Payroll Taxes.

ESA - see Coverdell Education Savings Account.

Estimated Tax

The IRS enforces a " pay as you go" rule for taxes, meaning that people and businesses generally must make regular payments throughout the year. Employees usually meet this requirement through paycheck withholding. On the other hand, if a significant portion of your income derives from sources not subject to withholding, such as dividends, interest, rents, or self-employment earnings, then you may need to make quarterly estimated tax payments. In most cases, the total of your withholding and estimated tax payments for a given year must be at least 90% of your tax for that year, or 100% of your tax from the previous year, whichever is less. (The standard shifts to 110% of the previous year's tax at higher income levels.) Note that different rules may apply to income from farming or fishing.

Excludable Income

Certain types of income, including workers' compensation benefits, economic stimulus payments, child support, some public assistance payments and many gifts, do not have to be included in a person's gross income for tax purposes. The IRS refers to these income types as excludable. Note that you must still report certain forms of excludable income on your tax return, such as tax-exempt municipal bond interest, even though the income will not affect your tax liability.

Exempt from Withholding / Exempt Employee

Due to their income level, lack of tax liability or other factors, some employees are exempt from having federal income tax withheld from their pay. In most cases, such an exemption applies only to income tax, so the employer must still withhold FICA taxes.

Exemptions (Personal or Dependent)

Depending on current tax laws, a person may qualify to claim income adjustments called exemptions in addition to tax deductions like the standard deduction or itemized deductions. The two main types of exemptions are personal exemptions and dependent exemptions. When they are allowed, exemptions work similarly to deductions, reducing a person's tax liability by lowering their taxable income.

Expenses for Business Use of a Home - see Home Office Deduction.

Expensing

This informal term is sometimes used to refer to the act of deducting a business expense all at once, as opposed to the process of capitalization of an expense. Most often in business tax contexts, the word "expensing" refers to claiming Section 179 deductions for capital business assets.

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F

Fair Market Value (FMV)

Many tax situations require determining and reporting the fair market value (FMV) of goods or property. The IRS defines FMV as the price a willing buyer and willing seller would agree on if both were well informed. FMV can be determined in many ways, including appraisals, analysis of recent sales of similar property in the same region, and comparisons of prices published by distributors of the same or similar goods.

FBAR (Report of Foreign Bank and Financial Accounts)

Sometimes called the Foreign Bank Accounts Report (hence, FBAR), this form must be submitted annually by many Americans with foreign financial holdings. In general, you must file an FBAR if you have a financial interest in and/or control over foreign financial accounts with a total value above a threshold set by Congress. Note that the FBAR is not an IRS form and therefore cannot be filed with a tax return. Instead, FBARs must be filed with the Financial Crimes Enforcement Network ( FinCEN). Electronic filing is required in most cases. Many people required to file an FBAR must also provide information about their foreign accounts on their tax returns, most often on Schedule B, and sometimes on Form 8938 as well.

FICA Taxes (Federal Insurance Contributions Act)

Enacted in 1935, the Federal Insurance Contributions Act (FICA) created a mechanism to fund the new Social Security system. Today, FICA taxes consist of both Social Security Tax and Medicare Tax. In general, employers must withhold half of the FICA tax due on each employee wages from paychecks, and pay the other half themselves. Because FICA taxes typically apply to a company's entire payroll, they are sometimes referred to as payroll taxes. (Since the pay of self-employed people is not subject to tax withholding, they generally must meet their FICA tax obligations by paying self-employment tax.)

Fiduciary

A fiduciary is someone who acts on behalf of another person or organization, generally in financial matters. For example, someone who manages a trust is typically serving as the trust's fiduciary. Fiduciaries have a legal obligation to act in the best interest of those they represent.

FIFO

One of four common methods used in inventory accounting to determine the cost of goods sold, the FIFO method assumes that the oldest items in stock are sold first ("first in, first out"). Alternatively, a business may track inventory by using the specific identification, LIFO, or weighted average cost (WAC) method.

Filing Deadline / General Filing Deadline

The term filing deadline may refer to any date by which a tax form must be submitted to the IRS. The general filing deadline (often just called the IRS deadline or tax deadline) is an annual due date for many tax returns, forms and payments related to the previous year. Ordinarily, the general filing deadline falls on April 15, or the first business day after April 15 if the 15th falls on a weekend or holiday. The IRS considers mailed forms and payments to be on time if they are postmarked on or before the relevant filing deadline. Deadline extensions are often included in IRS disaster tax relief programs.

Filing Status

When filing a tax return, people must select a filing status that reflects their circumstances. The standard options are Married Filing Jointly (MFJ), Qualifying Surviving Spouse (QSS), Head of Household (HoH), Single and Married Filing Separately (MFS). If you qualify for more than one status, you are free to choose whichever option results in the lowest tax liability.

Financial Assets

This term generally refers to long-term business or investment property that has a well-defined monetary value and could be readily converted to cash. Common examples of financial assets include stocks, bonds, savings accounts, mutual funds, cash and cryptocurrency. Also see Fixed Assets, Tangible Assets and Intangible Assets.

FinCEN (Financial Crimes Enforcement Network)

Formed as a bureau of the U.S. Department of the Treasury in 1990, FinCEN was originally created to investigate and combat money laundering. Today, the bureau investigates a wide range of financial crimes, including the concealment of income in offshore bank accounts. As part of these duties, FinCEN processes the FBAR forms that many people with foreign financial accounts must file annually.

Five-Year Test Period Suspension (Home Sale Gain Exclusion)

Generally, to claim the home sale capital gain exclusion, a person must have owned the home and lived in it as their main home for at least two of the previous five years. However, members of the U.S. military, Foreign Service or other uniformed services, along with intelligence and Peace Corps personnel, may request to have this five-year test period suspended while they are on qualified extended duty.

Fixed Assets

This term refers to physical capital business property or investment property that generally cannot be quickly converted into cash. Common types of fixed assets include machinery, equipment, and real estate like buildings and land. Also see Tangible Assets, Financial Assets and Intangible Assets.

Flexible Spending Arrangement (FSA) or Health FSA

A flexible spending arrangement (FSA) is a workplace benefit plan that enables employees to make pre-tax contributions to a tax-advantaged account for a designated purpose. The most common type of FSA is a health FSA, but many employers also offer FSAs for other purposes like adoption. Generally, FSAs are subject to annual contribution limits. People with FSAs can take tax-free withdrawals to pay eligible expenses, such as qualifying medical expenses. Most FSAs operate on an annual " use it or lose it" basis, meaning that employees forfeit any unused funds at the end of the year. However, the IRS allows employers to offer either a small carryover of unused health FSA funds to the next year, or a grace period (usually through March 15) to use up remaining funds. Also see Health Savings Account (HSA).

FMV - see Fair Market Value.

Foreign Bank Accounts Report - see FBAR.

Foreign Earned Income Exclusion or Foreign Income Exclusion

In general, U.S. citizens and residents must report and pay federal tax on their worldwide income, including income earned in other countries. However, the foreign earned income exclusion allows eligible people to leave certain foreign earnings out of their gross income for U.S. tax purposes. To determine whether someone qualifies for this exclusion, the IRS examines the person's period of stay in a foreign country, generally by applying the bona fide residence test and/or physical presence test.

Foreign Tax Credit

Generally, all of a U.S. citizen or resident's worldwide income may be subject to U.S. federal taxes. However, eligible people may claim the foreign tax credit for taxes they pay to another government. This credit can reduce a person's U.S. tax liability by either a portion or the entire amount of tax paid to foreign countries.

Form 1040, Individual Income Tax Return

Form 1040 is the standard federal tax return that most people file annually. The IRS updates the form every year, and also publishes variations of Form 1040 for special circumstances, such as Form 1040-NR and Form 1040-SR.

Form 1040-ES, Estimated Tax for Individuals

This form provides instructions to determine whether you must make estimated tax payments, and if so, how to calculate your payment amount each quarter. You may need to pay estimated tax if a significant portion of your income comes from sources not subject to tax withholding, like investment returns, rents or self-employment earnings.

Form 1040-NR, Nonresident Alien Income Tax Return

People classified as nonresident aliens by the IRS must generally use this version of Form 1040 to file their federal tax returns. Among other differences from the standard Form 1040, this form does not include an option to claim a standard deduction, since that option is not available to nonresident aliens.

Form 1040 Schedules

The IRS uses the term schedule to refer to a variety of specialized tax forms that accompany a more general form. For example, Form 1040 has a number of accompanying schedules that a person may need to complete to report income or claim tax benefits. The most commonly used Form 1040 schedules include:

• Schedule 1, Additional Income and Adjustments to Income

Use this form to report income not accounted for on Form 1040 itself, including business income and certain capital gains. Schedule 1 also enables you to claim various above-the-line deductions, such as the educator expense deduction, the deduction for one-half of self-employment tax and the deduction for student loan interest.

• Schedule 2, Additional Taxes

Many people must use this form to report other federal taxes they must pay besides income tax. These additional taxes may include alternative minimum tax (AMT), self-employment tax and household employment taxes.

• Schedule 3, Additional Credits and Payments

This form enables people to claim credits and report payments not shown on Form 1040 itself. Credits that may be claimed on Schedule 3 include the foreign tax credit, the credit for child and dependent care, various education credits and the healthcare Premium Tax Credit.

• Schedule A, Itemized Deductions

People who choose to itemize deductions instead of claiming the standard deduction use this form to list their deductions and calculate their total deduction amount.

• Schedule B, Interest and Ordinary Dividends

It may be necessary to use this form to report unearned income from interest and ordinary dividends, and also to report foreign financial accounts that you hold or control.

• Schedule C or C-EZ, Profit or Loss from Business

People classified as sole proprietors by the IRS must generally use one of these two forms to report their business income and deduct business expenses. For tax purposes, the sole proprietor designation includes many self-employed people, such as independent contractors, freelancers and gig economy workers. Net profits shown on Schedule C are usually subject to self-employment tax.

• Schedule D, Capital Gains and Losses

If you have capital gains or losses, you will summarize them on this schedule, and compute your net gain or loss. In most cases, you will also have to complete Form 8949 to report the details of each transaction that resulted in a gain or loss.

• Schedule E, Supplemental Income and Loss

People use this form to report rental income, real estate royalties, and some other types of income that are not accounted for on Form 1040 or other schedules.

• Schedule EIC, Earned Income Credit

If you are claiming the Earned Income Tax Credit (EITC), you must file this form if you have one or more qualifying children.

• Schedule H, Household Employment Taxes

People use this form to calculate the taxes they must remit on wages paid to household employees like nannies, housekeepers or gardeners. If you owe such household employment taxes, you will generally also report them on Schedule 2.

• Schedule SE, Self-Employment Tax

You typically must file this schedule if you earn more than $400 during a year through self-employment activities, such as operating a business, freelancing, or working as an independent contractor or gig economy worker. Use Schedule SE to calculate your self-employment tax, which you must also report on Schedule 2.

Form 1040-SR, Tax Return for Seniors

People of age 65 or older may use either the standard Form 1040 or the specialized Form 1040-SR to file their annual tax returns. Form 1040-SR uses larger fonts and emphasizes tax benefits available to many seniors, including a larger standard deduction.

Form 1040-X, Amended Individual Income Tax Return

Use Form 1040-X to make corrections or adjustments to a tax return that you have already filed. You may need to file an amended return if you made a significant error when completing your original return, such as miscalculating or failing to report income, or neglecting to claim a tax credit or tax deduction. In order to complete Form 1040-X, you will need a copy of your previously filed return.

Form 1041, Income Tax Return for Estates and Trusts

Many trusts and estates have annual tax return filing obligations, just like individuals and businesses. The responsibility for filing required returns typically falls to an authorized representative of the trust or estate (such as an executor, manager or primary trustee), often called the fiduciary. Generally, the fiduciary files Form 1041 to report the trust or estate's gross income, deductions, taxable income, tax credits and, if applicable, tax liability.

Form 1041 Schedule K-1, Beneficiary's Share of Income, Deductions, Credits, etc.

When Form 1041 must be filed for a trust or estate, the income, deductions, credits and other amounts reported on that return usually get allocated to beneficiaries. A Schedule K-1 (Form 1041) must then be filed for each beneficiary, showing that person's share of income, credits and deductions. The main advantage of allocating figures from Form 1041 to beneficiaries is that individuals can often claim more tax benefits than an entity like an estate or trust. Therefore, assigning trust or estate income to individual beneficiaries may result in lower overall tax liability.

Form 1065, U.S. Return of Partnership Income

Most businesses that operate as partnerships (including many limited liability partnerships and LLCs) must file Form 1065 as their annual tax return. Generally, the partnership itself does not pay tax. Rather, the income, deductions, credits and other amounts reported on Form 1065 are allocated to partners or LLC members on Form 1065 Schedule K-1. The partners or members then report their shares of these amounts on their individual tax returns.

Form 1065 Schedule K-1, Partner's Share of Income, Deductions, Credits, etc.

Businesses that operate as partnerships use Schedule K-1 (Form 1065) to report each partner or member's share of the income, deductions and other amounts shown on the partnership's tax return (usually Form 1065). Partners or members then report the figures shown on their Schedule K-1s on their individual tax returns.

Form 1098-T, Tuition Statement

This form shows tuition and related fees that a person has paid to an eligible college, university, trade school or other educational institution. You will need this form to claim certain education tax credits, such as the American Opportunity Tax Credit (AOTC) or Lifelong Learning Credit.

Form 1099 Series

IRS Forms with the number 1099 are used to report forms of income that do not appear on other information returns like Form W-2. The person or organization that made the payments completes the appropriate 1099 form, and sends copies to the IRS and the payment recipient. In most cases, people who receive 1099 forms must report the income shown on them on their tax returns, and may face tax penalties for failing to do so. Here are the most commonly used forms in the 1099 series:

• Form 1099-DIV

This form shows ordinary dividends, qualified dividends and certain other distributions of corporate earnings, capital gains or profits to shareholders.

• Form 1099-G, Certain Government Payments

This form shows potentially taxable payments that a person received through a government program (such as unemployment compensation).

• Form 1099-INT

This form shows various types of interest income.

• Form 1099-K

This form shows payments received for goods or services through a third-party payment processor.

• Form 1099-MISC

This form covers various payments and income types not accounted for on other 1099 forms, such as rental income.

• Form 1099-NEC (Non-employee Compensation)

This form is used to report payments made by a business or self-employed person to independent contractors and other non-employees.

• Form 1099-R

This form reports distributions from pensions, annuities, IRAs, other retirement plans, profit-sharing plans, insurance contracts and similar sources.

• Form 1099-S

This form shows proceeds from real estate transactions, such as home sales. You may need to report information from Form 1099-S when claiming the home sale capital gain exclusion.

• Form 1099-SA

This form shows distributions received from a health savings account (HSA), Archer MSA or Medicare Advantage MSA.

• Forms RRB-1099 and RRB-1099-R

These forms show various payments made by the Railroad Retirement Board, including annuity and pension payments.

Form SSA-1099

This form shows Social Security benefit payments, which may or may not be taxable income, depending on the person's total income for the year.

Form 1120, Corporation Income Tax Return

Form 1120 is the standard federal tax return filed by C Corporations. These corporations generally must pay corporate income tax on net profits or earnings.

Form 1120-S, Income Tax Return for S Corporation

Form 1120-S is the standard federal tax return used by S corporations, as well as LLCs that elect to be taxed as S corporations. These companies file Form 1120-S to report income, expenses, deductions and credits. However, because S corporations are pass-through entities, they do not pay corporate income tax. Instead, the company allocates the amounts reported on Form 1120-S to owners, shareholders or members, who then pay individual income tax on their shares of net earnings. Each owner, member or shareholder's portion of income, deductions, credits, etc. is reported on a Form 1120-S Schedule K-1.

Form 1120-S Schedule K-1, Shareholder's Share of Income, Deductions, Credits, etc.

An S corporation uses this form to report each owner or shareholder's allocated portion of the income, expenses, deductions and credits reported on the corporation's tax return ( Form 1120-S). These allocations are based on percentages of ownership. Shareholders must report the figures shown on their Schedule K-1s on their personal tax returns, and pay any tax due. This process is known as pass-through taxation.

Form 2120, Multiple Support Declaration (Qualifying Child or Qualifying Other Relative)

In some cases, a person satisfies all the tests to be a qualifying child or qualifying other relative dependent, except that no one provides more than half of the person's support. Instead, the potential dependent's support comes from multiple different people. In these situations, the person who claims the dependent generally must file Form 2120. The form must list all other individuals who pay over 10% of the dependent's support, and include a statement certifying that they have waived their right to claim the dependent in writing. The IRS refers to these scenarios as multiple support agreements.

Form 4137, Social Security and Medicare Tax on Unreported Tip Income

Employees who receive tip income may need to use this form to report tips that they did not previously report to their employers. These tips may be subject to Social Security and Medicare ( FICA) taxes. Depending on the amount of tax due on the tips, a tax penalty may apply. Note also that only tips reported to an employer and shown on a year-end income statement like Form W-2 can qualify for the "No Tax on Tips" deduction.

Form 4868, Application for Automatic Extension of Time to File Individual Income Tax Return

You may use this form to request a six-month automatic filing extension to complete your tax return. Alternatively, you can submit your extension request electronically through the IRS website. It is important to remember that an automatic 6-month extension applies only to filing a tax return, not to paying any tax due. Payments made after the general filing deadline may be subject to tax penalties.

Form 8379, Injured Spouse Claim and Allocation

A person whose filing status is married filing jointly may use this form to request their share of a tax refund that was withheld by the IRS because of the other spouse's debts, such as past due child support. If the IRS accepts a claim made on Form 8379, up to half of the withheld refund will be issued to the injured spouse. Also see Form 8857.

Form 8582, Passive Activity Loss Limitations

The IRS limits the amount of losses from passive activities in business or real estate that a person may use to offset other income, and thus reduce their tax liability. If you have passive activity losses, use Form 8582 to calculate the limit on losses you can report for that particular year. Excess losses may generally be carried forward to future years.

Form 8857, Request for Innocent Spouse Relief

In most cases, couples whose filing status is married filing jointly share responsibility for their combined tax liability. In other words, the IRS holds both spouses responsible for paying any tax owed by the couple. However, in some situations, one spouse can legitimately claim that the other spouse should bear the sole responsibility for the couple's tax liability. A person with a sound basis for such a claim is called an innocent spouse. Innocent spouses may use Form 8857 to request relief from tax penalties and other consequences of the other spouse's actions. Residents of community property states whose filing status is married filing separately may also use this form to request relief from taxes or penalties related to community income or assets.

Form 8829, Expenses for Business Use of Your Home

Eligible people with business or other self-employment income may use this form to compute their home office deduction, which should then be reported on Schedule C.

Form 8938, Statement of Specified Foreign Financial Assets

Many people who are required to file an FBAR form must also include Form 8938 with their tax returns, providing detailed information about foreign bank accounts and assets. Note that the reporting thresholds for the FBAR and Form 8938 are different. The two forms also have different rules regarding which assets a person must report. Therefore, a person might need to file only an FBAR form, only Form 8938 or both forms. Also remember that Form 8938 should be filed with a person's federal tax return, whereas FBAR forms must be filed separately (and usually electronically) with FinCEN.

Form 8949, Sales and Other Dispositions of Capital Assets

Use this form to report transactions where you sold, donated or otherwise disposed of capital assets, including certain investments. For each transaction, you must state the selling price (if applicable), the amount realized, your basis or adjusted basis in the property, any other necessary adjustments, and any resulting capital gain or loss. Short-term gains and losses and long-term gains and losses must usually be reported separately. Report net gains and losses from this form on Schedule D.

Form 8962, Premium Tax Credit

People who purchase health insurance through the official Health Insurance Marketplace, and whose MAGI qualifies them for the Premium Tax Credit (PTC), use this form to compute the credit. If you receive the Advance Premium Tax Credit (APTC) during the year as a reduction in premiums, then you will use this form to reconcile those premium reductions with your actual credit amount. If your actual credit amount is more than the total APTC you received, you can claim the remaining credit on Form 1040, Schedule 3. However, if your total APTC was greater than your allowed PTC, then you may need to pay back a portion of your APTC, and may also have to pay a tax penalty.

Form 9465, Installment Agreement Request

If you are unable to pay the full amount of tax you owe to the IRS, you can request to make monthly payments over a period of up to 72 months (six years) to pay off the balance. You may request this installment agreement by filing Form 9465. Alternatively, you can submit your request online through the IRS website. Generally, people who enter into installment agreements must pay IRS interest charges with their monthly payments, so it is best to pay off a tax balance as quickly as possible.

Form SS-4, Application for EIN

You may use this form to apply for an Employer Identification Number (EIN). Alternatively, you can apply online through the IRS website. You will need an EIN if you pay any employees other than yourself, including household employees.

Form W-2, Wages and Tax Statement

This form reports the total wages or salary, along with any reported tips, that an employee received during a tax year. Form W-2 also shows all taxes that have been withheld from the employee's pay. Employees need the information on their W-2s to complete their tax returns. If you do not receive a W-2 from your workplace by mid-February, first contact your employer and request one. If the employer still does not send you the form, contact the IRS for assistance.

Form W-2c, Corrected Wage and Tax Statement

If you receive an inaccurate Form W-2 from your employer, you may request a new form. Your employer should use Form W-2c to correct the information from the original W-2. Similarly, if you own a business and mistakenly provide an inaccurate W-2 to an employee, then you can file form W-2c and give a copy to the employee to correct the error. People who receive a Form W-2c may need to file an amended tax return based on the updated information.

Form W-4, Employee's Withholding Certificate

Employees must give their employers information needed to compute how much tax to withhold from their paychecks. Generally, employees provide this information on Form W-4. In addition to giving basic information on the form like their filing status, employees can request withholding adjustments for situations like working multiple jobs or earning self-employment income. Employees should submit a new W-4 anytime their tax circumstances change.

Form W-7A, Application for Taxpayer ID Number for Pending Adoptions

Parents in the process of adopting a child may file this form to request an ATIN for the child.

FSA - see Flexible Spending Arrangement.

FSA Carryover - see Use It or Lose It Rule.

FSA Grace Period - see Use It or Lose It Rule.

Fourteen-Day / 10% of Rental Time Rule for Rental Income and Expenses

IRS rules for reporting rental income and expenses vary depending on whether you also use the rental property as a personal residence. The IRS 14-day / 10% Rule states that you have used a rental property as your residence during a given year if you used it for personal purposes for more than the greater of 14 days, or 10% of the total number of days you rented it out at a fair price. Note that renting the property to someone at a substantially reduced price, or letting them stay there for free, generally counts as personal use for you. Also see the Minimal Rental Use exception.

Fourteen-Day Rental Exemption - see Minimal Rental Use.

FUTA

Federal Unemployment Tax, or FUTA, must generally be paid by employers for all of their employees. Also see Unemployment Tax.

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G

Gambling Winnings and Losses

Most winnings from gambling activities are taxable income that must be reported to the IRS. If you itemize deductions on your tax return, then you may be able to use gambling losses to offset winnings. However, you generally cannot deduct losses in excess of your winnings.

General Filing Deadline - see Filing Deadline.

Generation-Skipping Transfer / Generation-Skipping Transfer Tax (GSTT)

A generation-skipping transfer is the direct passing of property through gift or inheritance from a person to their grandchildren or other "skip" recipients. For IRS purposes, "skip" means that the recipient is separated from the donor by more than one generation, as defined by age difference and other tests. Generation-skipping transfers may be subject to the generation skipping transfer tax, or GSTT. The GSTT is assessed at a flat rate equal to the highest gift and estate tax rate currently in use. Therefore, the tax assessed on these transfers may be substantially greater than taxes on gifts and bequeathals that do not skip a generation. However, the GSTT only affects gifts above the annual exclusion, and only after the donor has exceeded the lifetime exclusion.

Ghost Preparer

The IRS uses this term to describe individuals and agencies that charge fees to prepare tax returns, but do not follow federal laws for paid tax preparers. Typically, these ghost preparers do not have a PTIN and do not sign the tax returns they prepare, both of which are violations of federal law. Do not trust ghost preparers to handle any tax matters.

Gift and Estate Tax

In general, the IRS classifies any transfer of property (including financial assets, fixed assets and intangible property) from one person to another as a potentially taxable event. If the property is transferred as a gift or inheritance, the federal gift and estate tax may apply. However, a person can give away an unlimited number of gifts each year tax-free, as long as the total value given to each recipient is below the annual exclusion threshold. In addition, transfers only become taxable events if the total value of property given away or bequeathed by a person exceeds the lifetime exclusion. Gift and estate tax exemptions also exist for gifts to spouses, charities and political organizations. Note also that paying medical or education expenses for another person generally does not count as a gift for tax purposes.

Gig Economy

This informal term refers to a wide variety of work activities for which people earn income without being classified as employees. Common examples of gig economy work include dog walking, errand running, driving for a ride share service and obtaining work through an online freelancing platform. The IRS classifies many gig economy workers as independent contractors who must pay self-employment tax on their earnings. Also see Employee vs. Independent Contractor.

Green Card Test

Along with the substantial presence test, the green card test is one of the two main criteria that the IRS uses to determine whether a person is a resident alien for tax purposes. This test states that people should file their tax returns as resident aliens if, at any time during the tax year, they were granted lawful status to work and live in the U.S. Generally, immigrants with this status receive an alien registration card, commonly known as a green card, from U.S. Customs and Immigration Services (USCIS).

Gross Income / Total Income

For tax purposes, your gross income (also called total income) is the total of your earned income and unearned income from all sources during a year, with the exception of certain forms of excludable income. In addition to money, gross income may include goods, property and services that you receive. Also see Taxable Income, Adjusted Gross Income (AGI) and Nontaxable Income.

Gross Profit

Businesses (including individuals with self-employment income) generally compute their gross profit by subtracting the cost of goods sold (COGS) from gross revenue. Subtracting all other allowed business expenses from gross profit yields a person's or enterprise's net profit (net earnings) for the year.

Gross Revenue

The gross revenue of a business is generally the total value of all money, goods, property and services that the business receives during a year. Depending on the accounting method used, gross revenue may also include payments owed to the business but not yet received.

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H

Half-Year Convention

This term refers to any method of calculating depreciation deductions that essentially splits up the deduction for the first year when an asset is placed in service. Part of the deduction is taken during that first year, while the remainder is effectively deferred until the year following the end of the asset's useful life. A half-year convention is built into MACRS depreciation calculations, and may also be incorporated into the straight-line method or other depreciation techniques.

Head of Household (HoH) Filing Status

You may qualify for this special filing status if you are unmarried, pay more than half the cost of maintaining a home, and have a qualifying child or qualifying relative dependent. Head of household (HoH) filers generally receive a larger standard deduction than people who file under single status. HoH status may also entitle you to higher income limits for various tax credits and deductions, and/or higher credit or deduction amounts.

Health FSA - see Flexible Spending Arrangement.

HDHP - see High-Deductible Health Plan.

Health Insurance Marketplace / Insurance Marketplace / Insurance Exchanges

The Affordable Care Act (ACA) established the official Health Insurance Marketplace, also called the Insurance Exchanges, for people to purchase individual or family healthcare coverage. If you qualify for the Premium Tax Credit (PTC), you must purchase your health plan through the official marketplace in order to receive the credit. If you qualify, you may elect to receive the Advance Premium Tax Credit (APTC) as a reduction in your monthly premiums. You can access the official Insurance Marketplace through healthcare.gov. Depending on where you live, you will use either the national website or an exchange operated by your state to purchase an ACA-approved plan. The system will also show which insurance plans qualify as high-deductible health plans (HDHPs).

Health Savings Account (HSA)

A health savings account is a tax-advantaged account that an individual may create to set money aside for future medical expenses. If you have an HSA, you (or another person) can make pre-tax contributions to the account up to an annual limit. Your employer may also contribute to your HSA (generally through a cafeteria plan arrangement). As with a health flexible spending arrangement (FSA), withdrawals can be taken from an HSA tax-free, as long as the funds are used for qualified medical expenses. However, unlike FSAs, HSAs do not have an annual " use it or lose it" rule. Generally, to be eligible to contribute to an HSA, you must be enrolled in a high-deductible health plan (HDHP). In addition, it must not be possible for another person to claim you as a dependent.

High-Deductible Health Plan (HDHP)

The IRS classifies certain health insurance plans as high-deductible health plans, or HDHPs. To qualify as an HDHP, a healthcare plan must have an annual deductible equal to or higher than a threshold set by the IRS. The maximum yearly out-of-pocket expense for the insured person or family must also be equal to or LESS than the limit set by IRS rules. In addition, IRS rules restrict the types of healthcare procedures and expenses that an HDHP can cover. Generally, HDHPs have lower premiums than more comprehensive health insurance plans, but require the insured person or family to pay a larger share of medical expenses. You must have an HDHP in order to contribute to an HSA. The Health Insurance Marketplace shows which available plans qualify as HDHPs.

Holding Period

This term refers to the length of time that a person or business has possession of a capital asset or other item of investment property before selling or disposing of it. Generally, a holding period of one year or less results in a short-term capital gain or loss when the asset is sold, whereas longer holding periods result in long-term gains or losses.

Home Daycare Exception

People who use a portion of their home as a daycare facility may qualify to claim the home office deduction, even if they also use the same area for personal purposes. Typically, the area used as a daycare center must be well-defined, and must be used exclusively for daycare during specified time periods (such as Monday through Friday from 8 a.m. to 3 p.m.). If you provide daycare services and qualify for this exception, then you will use modified methods to compute your home office deduction. These methods take into account the percent of time when the designated area is used for daycare, in comparison to the percent of time when it is available for personal use.

Home Mortgage Interest - see Mortgage Interest Deduction and Mortgage Interest Credit.

Home Office Deduction / Home Office Expenses

Officially called the Deduction for Expenses for Business Use of a Home, the home office deduction can reduce the tax liability of independent contractors, small business owners and other self-employed people. To claim the deduction, you typically must have a well-defined area of your home that you use regularly and exclusively for business purposes (unless the home daycare exception applies). With a few exceptions, the workspace must also be your principal place of business. Generally, home office expenses fall into two categories:

• Direct Expenses:

These are expenses that pertain only to your home workspace, such as the cost to repair light fixtures in that specific area or room.

• Indirect Expenses:

These are costs paid for your entire home, such as utilities, rent or a mortgage. Generally, you may deduct a portion of these expenses based on the area of your workspace in relation to the area of your entire home.

• In most cases, you will report home office expenses on Form 8829, and claim the deduction on Schedule C. However, if you elect to use the Simplified Home Office Deduction Method, then you do not need to file Form 8829.

Home Sale Capital Gain Exclusion / Primary Home Sale Exclusion / Main Home Sale Exclusion

Selling your home may result in a capital gain, which would usually be subject to capital gains tax. However, eligible people may exclude a substantial portion or even all of the gain from selling their main home from their gross income for tax purposes. To claim this exclusion, you generally must have owned the home and lived in it as your primary residence for at least two of the five years preceding the sale. (Military personnel may qualify for an exception called the five-year test suspension.) If the gain from selling your main home is less than the allowed exclusion, you may not even have to report the sale to the IRS. However, if you receive a Form 1099-S, then you must report the sale, even if you owe no tax on it.

Household Employee

The IRS defines household employees, also called domestic employees, as people who work in or on the grounds of your home, under terms giving you significant control over how they perform their duties. Common examples of household employees include nannies, babysitters, housekeepers and gardeners. In general, if you pay any household employee more than $2,000 during a year, or $1,000 or more during any calendar quarter, then you may need to pay household employment taxes, sometimes called the "Nanny Tax." Failure to pay these taxes could result in substantial tax penalties.

Household Employment Taxes ("Nanny Tax")

If you pay any household employee more than $2,000 during a year, or $1,000 or more during any calendar quarter, then you may need to pay household employment taxes (sometimes called the "Nanny Tax") for that employee. These taxes may include the employer and employee shares of FICA taxes ( Social Security Tax and Medicare Tax), as well as federal unemployment tax (FUTA). In order to manage and remit household employment taxes, you will need a federal Employer Identification Number (EIN), which you can obtain for free from the IRS. Generally, you do NOT need to pay household employment taxes on wages paid to your spouse, or to your child under the age of 21. You also may not need to pay these taxes on wages paid to your parent, or to a household employee under 18 years old.

Hybrid Accounting

The term hybrid accounting refers to any bookkeeping system that uses accrual accounting methods for some transactions, and cash accounting for others. For tax purposes, the IRS only allows a few forms of hybrid accounting. Most commonly, a small business might use accrual methods for inventory accounting to calculate the cost of goods sold, and cash accounting for all other purposes.

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I

Identity Protection PIN / IP PIN / Taxpayer PIN

To prevent identity theft and protect people from scammers who file fraudulent tax returns in other people's names, the IRS offers the option of getting an Identity Protection (IP) PIN. Originally provided only to victims of identity theft or tax-related scams, IP PINs are now available to everyone with a Social Security number (SSN) or Individual Taxpayer Identification Number (ITIN). Obtaining and using an IP PIN helps ensure that the IRS will not accept a bogus return filed in your name, or issue your refund to the wrong person. You can apply for an IP PIN through the IRS website.

Income Adjustments - see Above-the-Line Deductions.

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