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April 9, 2018 Facebook Twitter LinkedIn Google+ Tax Terms


earned income
Includes wages, salaries, tips, includible in gross income, and net earnings from self-employment earnings.
Earned Income Credit
A tax credit for certain people who work, meet certain requirements, and have earned income under a specified limit.
electronic filing (e-file)
The transmission of tax information directly to the IRS using telephones or computers. Electronic filing options include (1) Online self-prepared using a personal computer and tax preparation software, or (2) using a tax professional. Electronic filing may take place at the taxpayer’s home, a volunteer site, the library, a financial institution, the workplace, malls and stores, or a tax professional’s place of business.
electronic preparation
Electronic preparation means that tax preparation software and computers are used to complete tax returns. Electronic tax preparation helps to reduce errors.
Electronic Return Originator (ERO)
The Authorized IRS e-file Provider that originates the electronic submission of an income tax return to the IRS. EROs may originate the electronic submission of income tax returns they either prepared or collected from taxpayers. Some EROs charge a fee for submitting returns electronically.
Works for an employer. Employers can control when, where, and how the employee performs the work.
excise tax
A tax on the sale or use of specific products or transactions.
exempt (from withholding)
Free from withholding of federal income tax. A person must meet certain income, tax liability, and dependency criteria. This does not exempt a person from other kinds of tax withholding, such as the Social Security tax.
Amount that taxpayers can claim for themselves, their spouses, and eligible dependents. There are two types of exemptions-personal and dependency. Each exemption reduces the income subject to tax. While each is worth the same amount, different rules apply to each.


Federal/State e-file
A program sponsored by the IRS in partnership with participating states that allows taxpayers to file federal and state income tax returns electronically at the same time.
federal income tax
The federal government levies a tax on personal income. The federal income tax provides for national programs such as defense, foreign affairs, law enforcement, and interest on the national debt.
Federal Insurance Contributions Act (FICA) Tax
Provides benefits for retired workers and their dependents as well as for disabled workers and their dependents. Also known as the Social Security tax.
file a return
To mail or otherwise transmit to an IRS service center the taxpayer’s information, in specified format, about income and tax liability. This information-the return-can be filed on paper, electronically (e-file).
filing status
Determines the rate at which income is taxed. The five filing statuses are: single, married filing a joint return, married filing a separate return, head of household, and qualifying widow(er) with dependent child.
financial records
Spending and income records and items to keep for tax purposes, including paycheck stubs, statements of interest or dividends earned, and records of gifts, tips, and bonuses. Spending records include canceled checks, cash register receipts, credit card statements, and rent receipts.
flat tax
This is another term for a proportional tax.
formal tax legislation process
This is another term for a proportional tax.
Form W-4, Employee’s Withholding Allowance Certificate
Completed by the employee and used by the employer to determine the amount of income tax to withhold.
foster child
A foster child is any child placed with a taxpayer by an authorized placement agency or by court order. Eligible foster children may be claimed by taxpayers for tax benefits.


gasoline excise tax
An excise tax paid by consumers when they purchase gasoline. The tax covers the manufacture, sale, and use of gasoline.
gross income
Money, goods, services, and property a person receives that must be reported on a tax return. Includes unemployment compensation and certain scholarships. It does not include welfare benefits and nontaxable Social Security benefits.