Ability to Pay

Ability to pay means different things to different people. It can mean having cash on hand to pay for a product or a rendered service. Ability to pay can also…

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Adjusted Gross Income

Adjusted gross income is the income earned before taxes are applied to it with specific subtractions deducted from it. This is different from net income which already has the taxes…

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Affordable Care Act

The healthcare reform law that expands access to health coverage for all Americans…

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Amount Due

Amount due in terms of tax returns for taxpayers is pretty straightforward. When calculating one’s tax return, one must subtract deductions and exemptions from all income earned throughout the year…

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Appeal

An appeal can mean many things depending on where it is used. For the purposes of taxation, an appeal is basically one of two things. It can be a request…

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Authorized IRS E-File Provider

An authorized IRS e-file provider is basically a tax professional like any other, a CPA or other tax preparer, who has applied an been accepted into the IRS’ e-filing program.…

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Benefits Received

The benefits received principle is a theory that, at its core, states that one should only pay tax based on what the government provides or what benefits are received from…

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Bonus

Bonus is a financial addition to normal wages that is added to an employee’s wage as a reward for good performance. Generally, a bonus is added without taking out income…

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Business

Business can be defined as an activity that one does as a means of earning a living. Most people think of a business as something larger, more commercial, and, often,…

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Citizen or Resident Test

The citizen or resident test is one of the five requirements that the IRS calls to be met so that a person can be qualified as a dependent. The citizen…

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Commission

Commission is a percentage based upon the value of a commercial transaction that is paid to an employee. Commission based employees must decide how much to take out of their…

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Compulsory Payroll Tax

Compulsory payroll tax is how the government collects money from employers and employees in order to be able to fund specific programs, such as Medicare and Social Security. As the…

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Deductions

Deductions are expenses that the Internal Revenue Service allows you to subtract from your AGI to arrive at your taxable…

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Deficit

A deficit occurs any time expenses exceed a budget or earned income. Deficit and loss are basically the same term when talking about spending. When running on a deficit, it…

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Dependency Exemption

A dependency exemption can be taken by taxpayers who want to reduce the amount they have to pay in income taxes. The dependency exemption exists so that the taxpayer’s burden…

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Dependent

A dependent is a person who can be claimed on a taxpayer’s tax return because that person has been depending on the taxpayer for financial support during the tax year.…

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Direct Deposit

Direct deposit is a familiar term to those who no longer receive checks from their employers to take to the bank. Instead, direct deposit electronically moves funds from their employer’s…

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Direct Tax

A direct tax is one that is tied to a taxpayer’s income, profits from sales, property or assets. This is paid to the government imposing the tax, such as in…

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Earned Income Tax Credit

A refundable tax credit for people who earn low to moderate incomes. You may be able to claim a credit…

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Exempt from Withholding

This phrase means you are free from the withholding of federal income tax from your paycheck. You must meet certain income, tax liability,..

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Exemption

This is an amount that the IRS lets you subtract from your income to reflect all the people who count on your income. Exemptions can be claimed…

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Itemized Deductions

These are expenses that can be deducted from your AGI to help you reach a smaller income amount upon which you must calculate your tax bill. Itemized deductions include…

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Standard Deduction

This is a fixed dollar amount that a taxpayer can subtract from his or her income. The standard deduction is…

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