Glossary

A 1099 form reports various types of income earned from non-wage sources, such as freelance work, investment income, or self-employment.

Form 155 for Foreign Investments and Assets is a crucial tax document for reporting overseas investments and assets.

The 401(k) contribution limit sets the maximum amount employees can contribute to their employer-sponsored retirement plan each year, offering significant tax benefits.

A 529 plan is a tax-advantaged savings account designed to help families save for future education expenses, offering tax-free growth and withdrawals for qualified expenses.

IRS Penalty Abatement reduces or eliminates penalties imposed for late filing or late payment, provided the taxpayer shows reasonable cause.

The accuracy-related penalty is imposed when a taxpayer underpays taxes due to negligence or substantial understatement of income.

Adjusted Gross Income (AGI) is the total income you report to the IRS, minus specific deductions, and is used to determine your taxable income.

The Alternative Minimum Tax (AMT) is a supplemental tax system that requires certain high-income taxpayers to calculate their taxes twice and pay the higher amount.

An Amended Return allows taxpayers to correct mistakes on a previously filed tax return by using IRS Form 1040X.

An amended tax return is filed to correct errors or omissions on a previously submitted tax return, using IRS Form 1040-X.

Amortization is the process of gradually deducting the cost of an intangible asset over its useful life for tax purposes.

Back taxes are unpaid taxes from previous years, and failure to pay them can result in penalties, interest, and collection actions by the IRS.

Backup withholding is a tax withholding requirement that applies to certain types of income, such as interest or dividends, to ensure taxes are paid.

Bankruptcy can discharge certain IRS tax debts, but it depends on the type of tax owed and the age of the debt.

A barred refund claim is a request for a tax refund made after the deadline for claiming the refund has passed, preventing the taxpayer from receiving the refund.

The capital gains exclusion on home sales allows homeowners to exclude up to $250,000 ($500,000 for married couples) of profit from the sale of their primary residence.

Capital gains tax is a tax on the profit from the sale of an asset, such as stocks, real estate, or other investments.

Capital loss carryover lets taxpayers apply capital losses from one year to offset capital gains or ordinary income in future tax years.

The IRS uses certified mail to send important tax notices, ensuring proof of delivery and tracking of critical correspondence, such as levy or lien notices.

The charitable contribution deduction allows taxpayers who itemize deductions to reduce their taxable income by donating to qualified charitable organizations.