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Below is an A to Z list of definitions for a number of common terms and phrases related to income tax.

Adjusted gross income. Gross income minus allowable reductions.

Adjustment to income. An expense that can be deducted even if the taxpayer does not itemize deductions.

Adoption credit. A nonrefundable credit for qualified adoption expenses.

Advance earned income credit. Prepayments of the earned income credit by an employer to an employee.

Audit. When the IRS examines and verifies your return or any other transaction with tax consequences.

Casualty loss. A loss caused by the complete or partial destruction of property that results from an unexpected event, i.e., floods, storms, fires, etc.

Charitable contribution. Money or property donated to a qualified charity.

Child and dependent care credit. A tax credit in the amount of a percentage of the amount expended on child or dependent care by an employed individual.

Child tax credit. A tax credit available to people with children under the age of seventeen.

Compensation. Wages, commissions, tips, fees, or self-employment income from services rendered.

Credits. Reductions of tax liability allowed by Congress for various purposes.

Deduction. A subtraction from taxable income.

Dependent. A person who meets the five tests of dependency and thereby qualifies to be claimed as a dependent for tax purposes.

Depreciation. Deduction for the wear and tear of an item used for business.

Earned income. Income derived from personal services - wages, tips, bonuses, and any other type of compensation.

Earned income credit. A tax credit allowed to employed individuals whose income and modified gross income is less than a certain amount.

Employment expenses. Ordinary and necessary expenses necessary to perform the duties for which an employee was hired.

Entertainment expenses. Employment expenses that have an element of entertainment that is directly related to conducting business.

Estimated tax. What the taxpayer expects to owe in taxes over the course of the year, generally paid quarterly with vouchers.

Exemption. A reduction of income that would otherwise be taxed.

Foster child. A child other than a natural or adopted child who lived with the taxpayer for the entire year and whom the taxpayer treated as his or her own child.

Head of the household. A filing status used by an unmarried taxpayer who pays over half of the cost of maintaining the home of a qualified individual.

Hobby loss. A nondeductible loss from a hobby.

Home office expense. Expenses arising from operating a business in a qualified manner in your home.

Internal Revenue Service. The Treasury Department division responsible for collecting taxes.

Itemized deductions. Expenditures that the tax code deems appropriate for reducing adjusted gross income.

Married filing jointly. A filing status used by a couple that is married at the end of the tax year and uses one tax return.

Married filing separately. The filing status used by a couple that is married at the end of the year and chooses to file separate tax returns.

Modified adjusted gross income. There are different definitions for different purposes. It is usually the adjusted gross income with various items added back in.

Nontaxable income. Income that is not taxed.

Permanent and total disability. A disability that is expected to last at least a year and keeps an individual from any gainful activity.

Proprietorship. A business that is owned and controlled by one person.

Qualifying widow(er). The filing status used by a qualified person for the two years following a spouse's death.

Schedules. IRS forms that are used to report various kinds of income, deductions, and credits.

Self-employed. A person who individually decides when and where to work and pays his or her own expenses. Self-employed individuals must pay self-employment taxes.

Standard deduction. A predetermined amount of income that is not subject to taxes and is claimed when an individual does not itemize deductions.

Taxable income. Adjusted gross income minus deductions and exemptions.

Unearned income. Income that is not derived from services performed, such as interest, dividends, and royalties.

Worksheet. An IRS document that is provided to the taxpayer to compile information and is not usually filed with the return.

IRS logo with Department of the Treasury and Internal Revenue Service text

IRS logo with Department of the Treasury and Internal Revenue Service text

A woman working at a desk with a laptop, papers, and a background showing a logo for Tax Advantage Ink LLC and the text 'IRS Audit Red Flags? Protect Your Business'.

A woman working at a desk with a laptop, papers, and a background showing a logo for Tax Advantage Ink LLC and the text 'IRS Audit Red Flags? Protect Your Business'.

A woman in a gray blazer and blue shirt smiling and holding a smartphone displaying a message that confirms a tax refund deposit of $3,500.00 via IRS Direct Deposit. The background has text that says, 'Goodbye, paper checks! IRS goes digital for refu

A woman in a gray blazer and blue shirt smiling and holding a smartphone displaying a message that confirms a tax refund deposit of $3,500.00 via IRS Direct Deposit. The background has text that says, 'Goodbye, paper checks! IRS goes digital for refunds.' The logo and slogan of Tax Advantage Inc. LLC are in the lower right corner.

Four diverse people celebrating with laptops and light bulbs above their heads, representing ideas. The text asks if they are missing out on hidden tax credits and encourages finding out how much they could save, with a logo for Tax Advantage Inc. LL

Four diverse people celebrating with laptops and light bulbs above their heads, representing ideas. The text asks if they are missing out on hidden tax credits and encourages finding out how much they could save, with a logo for Tax Advantage Inc. LLC.

A diverse group of five professionals having a meeting in a modern conference room with large windows, a city view, and a presentation on opportunity zones projected on the wall.

A diverse group of five professionals having a meeting in a modern conference room with large windows, a city view, and a presentation on opportunity zones projected on the wall.

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JpRVO2o6cOl.webp

The image shows a laptop and a smartphone on a white surface with digital graphics. The laptop screen displays an IRS Payment Portal with red and green warning icons. Text on the image reads "IRS Audit Red Flags for Payments." There is a logo of Tax

The image shows a laptop and a smartphone on a white surface with digital graphics. The laptop screen displays an IRS Payment Portal with red and green warning icons. Text on the image reads "IRS Audit Red Flags for Payments." There is a logo of Tax Advantage Inc. LLC with the slogan "Success Is Our Mission!" in the bottom right corner.

A digital illustration promoting the message 'Go Digital, Stay Compliant!' with IRS paper checks transforming into electronic payments. The illustration shows paper checks on the left, with arrows pointing to digital payment icons and a phone and clo

A digital illustration promoting the message 'Go Digital, Stay Compliant!' with IRS paper checks transforming into electronic payments. The illustration shows paper checks on the left, with arrows pointing to digital payment icons and a phone and cloud. On the right, a woman is holding a phone with a payment confirmation, and a man is showing a laptop screen with a 'Payment Processed' message and a rising graph. The logo of Tax Advantage Inc. LLC is in the bottom right corner.

A diverse group of five people sitting around a table in an office, smiling and working on laptops and documents with a monitor displaying the IRS.gov website. The office is decorated with hanging and potted plants, and there is a bulletin board on t

A diverse group of five people sitting around a table in an office, smiling and working on laptops and documents with a monitor displaying the IRS.gov website. The office is decorated with hanging and potted plants, and there is a bulletin board on the wall.

A happy family of four, including a woman, man, boy, and girl, celebrating a tax refund approval with a sign that says 'Tax Refund Approved' in a cozy living room with colorful pillows and plants. The top left has a slogan 'Missed Credits = Missed Mo

A happy family of four, including a woman, man, boy, and girl, celebrating a tax refund approval with a sign that says 'Tax Refund Approved' in a cozy living room with colorful pillows and plants. The top left has a slogan 'Missed Credits = Missed Money!' and a blank space for a logo at the top right. The bottom right has a logo for Tax Advantage Ink, LLC with the tagline 'Success Is Our Mission!'

Split image showing on the left a family celebrating around a table with a laptop displaying a rising graph, with the text '2026 Tax Bracket Surprises! TAX SAVINGS!'. On the right, a family of three with surprised expressions looking at a tax bill, w

Split image showing on the left a family celebrating around a table with a laptop displaying a rising graph, with the text '2026 Tax Bracket Surprises! TAX SAVINGS!'. On the right, a family of three with surprised expressions looking at a tax bill, with the logo of Tax Advantage Inc., LLC in the bottom right corner.