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April 9, 2018 Facebook Twitter LinkedIn Google+ Tax Terms


Glossary Sponsered by: New York Tax Directory
ability to pay
A concept of tax fairness that states that people with different amounts of wealth or different amounts of income should pay tax at different rates. Wealth includes assets such as houses, cars, stocks, bonds, and savings accounts. Income includes wages, interest and dividends, and other payments.
adjusted gross income
Gross income reduced by certain amounts, such as a deductible IRA contribution or student loan interest
amount due
Money that taxpayers must pay to the government when the total tax is greater than their total tax payments
To call for a review of an IRS decision or proposed adjustment.
Authorized IRS e-file Provider
A business authorized by the IRS to participate in the IRS e-file Program. The business may be a sole proprietorship, a partnership, a corporation, or an organization. Authorized IRS e-file Providers include Electronic Return Originators (EROs), Transmitters, Intermediate Service Providers, and Software Developers. These categories are not mutually exclusive. For example, an ERO can at the same time, be a Transmitter, a Software Developer, or an Intermediate Service Provider, depending on the function being performed.


benefits received
A concept of tax fairness that states that people should pay taxes in proportion to the benefits they receive from government goods and services.
Compensation received by an employee for services performed. A bonus is given in addition to an employee’s usual compensation.
A continuous and regular activity that has income or profit as its primary purpose.


Citizen or Resident Test
Assuming all other dependency tests are met, the citizen or resident test allows taxpayers to claim a dependency exemption for persons who are U.S. citizens for some part of the year or who live in the United States, Canada, or Mexico for some part of the year.
Compensation received by an employee for services performed. Commissions are paid based on a percentage of sales made or a fixed amount per sale.
compulsory payroll tax
An automatic tax collected from employers and employees to finance specific programs.


The result of the government taking in less money than it spends.
dependency exemption
Amount that taxpayers can claim for a “qualifying child” or “qualifying relative”. Each exemption reduces the income subject to tax. The exemption amount is a set amount that changes from year to year. One exemption is allowed for each qualifying child or qualifying relative claimed as a dependent.
A qualifying child or qualifying relative, other than the taxpayer or spouse, who entitles the taxpayer to claim a dependency exemption.
Direct Deposit
This allows tax refunds to be deposited directly to the taxpayer’s bank account. Direct Deposit is a fast, simple, safe, secure way to get a tax refund. The taxpayer must have an established checking or savings account to qualify for Direct Deposit. A bank or financial institution will supply the required account and routing transit numbers to the taxpayer for Direct Deposit.
direct tax
A tax that cannot be shifted to others, such as the federal income tax.