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Additional Tax Credit -  A refundable credit for certain individuals who get less than the full amount of the Child Tax Credit.

Adjusted Basis - Your basis in property (usually cost) increased or decreased by various events, such as improvements, depreciation and casualty losses.

Adopted Child - For tax purposes, a child placed with a family for adoption by an authorized placement agency, even if the adoption is not yet final.

Adoption Taxpayer Identification Number (ATIN) - a nine digit number issued by the IRS for an adopted child when a social security number for the child is not yet available.

Advanced Earned Income Credit (EIC) - Advanced payment of the EIC paid to you throughout the year in your paycheck.

Alien - For tax purposes, an individual who is not a U.S. citizen.

Alimony - A payment to or from a spouse or a former spouse under a divorce or separation instrument. It does not include voluntary payments that are not made under a divorce or separation instrument.

Annuity - a series of payments under a contract made at regular intervals over a period of more than one year. They can be  either fixed (under which you receive a definite amount) or a variable (not fixed). You can purchase a private annuity contract or participate in an employer plan. 

Authorized IRS e-file Provider - A tax professional or business that is accepted to participate in the IRS e-file program, a program in which your return is sent to the IRS electronically instead of through the mail.

Capital Gain Distribution - Amounts paid to you or credited to your account by regulated investment companies (RICs) and real estate investment trusts.  Also known as "capital gains dividends".

Casualty - The damage, destruction, or loss of property resulting from an identifiable event that is sudden, unexpected, or unusual.

Charitable Contribution - A donation or a gift given to or provided for the use of a qualified organization.  It is voluntary and is made without getting or expecting anything of equal value.

Church Employee - An employee, other than the minister or member of a religious order, of a qualified church or qualified church-controlled organization that is exempt from employer Social Security  and Medicare taxes.     

Cohabitation - A man and a woman living together in an intimate relationship when not legally married.

Common Law Marriage - A marriage in which a man and a woman are considered to be married without a marriage license or a formal ceremony. Only certain states recognize common law marriages. 

Constructive Receipt - When income is credited to an account or set apart in any way that makes it available to you.  Physical possession of the income is not necessary.

Covered Disaster Area - A presidentially declared disaster area in which the IRS has decided to postpone tax-related filing deadlines for up to one year.

Custodial Parent - The parent who has custody of the child for the greater part of the year or for the entire year.

Custodian - An individual or organization such as a bank or trust company, that is responsible for over seeing and safe guarding assets on behalf of the beneficiary or owner of the assets (for example a minor).

Decedent - A deceased person.

Deferred Interest Account - An account that postpones payment of interest to a future date. Interest may be credited to the account at fixed intervals of one year or less, or maybe distributed as a lump sum at maturity. Interest amount must be included as income on your tax return provided you are entitled to receive it without paying a penalty. 

Dependent Care Benefit - Amounts your employer pays directly to your your care provider for the care of your qualifying dependent while you work or the fair market value of care in a daycare facility provided or sponsored by your employer. Your salary may be reduced to pay for these benefits.

Descendant - A person who descended from you. For example, your great grandchild is your descendant.

Direct Rollover - The transfer of a distribution directly from one qualified plan to another qualified plan (if permitted) or a traditional IRA. This transfer must be made by the administrator of the distributing plan.

Dividends - Distributions of money stock or other property paid to you as a shareholder by a corporation.  You also may receive dividends through a partnership, estate, trust, or association that is taxed as a corporation.

Dividend Reinvestment Plan - A plan that allows you to choose to use your dividends to buy (through an agent) more share of stock in the corporation  instead of receiving the dividends in cash.

Divorce or Separation Instrument - A divorce or separation maintenance decree or a written instrument  or court order that happens as a result of that divorce or separation requiring a spouse to make payments for the support of maintenance of the other spouse. This includes a temporary decree, an interlocutory (not final) decree, and a decree of alimony pendente lite (while awaiting action on the final decree or agreement).

Due Diligence - The requirement that an agent must show a serious and earnest effort to obtain accurate and complete information.

Early Distribution - An amount distributed from your pension, annuity, or traditional IRA account before the person is age 59 1/2.

Earned Income - Income received from services, such as wages, salaries, tips, net earnings from self-employment, and profession fees, and any other income received as pay for work actually performed. This also includes taxable scholarships and fellowship grants.

Earned Income Credit - A refundable credit for certain people who work and have earned income under a specified amount (i.e., under $34,692 for non-married individuals for tax year 2003).

Employer Identification Number (EIN) - nine-digit number assigned by the IRS to an employer for tax filing and reporting purposes.

Escrow - When an individual places as amount in the care of a third party to make a payment in the future.

Exemption - An amount that reduces your taxable income. Generally you are allowed to take one exemption for yourself (personal exemption), one exemption for your spouse (personal exemption), and one exemption for each person that you claim a dependent (dependent exemption).

Fair Market Value (FMV) - The price that property would reasonably expect to sell for on the open market or the price that would be agreed upon between a willing buyer and a willing seller, with neither being required to buy or sell and both the having reasonable knowledge of the relevant facts.

Fair Rental Value (FRV) - The amount one could reasonably expect to receive from a stranger for lodging.  FRV is used in place of rent or taxes, interest, depreciation, paint, insurance, utilities, cost of furniture and appliances, etc. In some cases FRV may be equal to the rent paid.

Filing Requirements - Factors that determine whether a person must file a federal individual tax return.

Filing Status - The tax return status used to determine your filing requirements, standard deduction, correct tax, and whether you are allowed to take certain other deductions and credits. 

Fiscal Year - a 12-month period ending on any day other than December 31.

Gross Income - All income received in the form of money, goods, property, and services that is not exempt from tax. Gross Income includes earned income and unearned income. Some types of gross income are wages, tips, taxable interest, dividends, alimony payments received, self-employment income, IRA and pension distributions, unemployment compensation, and taxable social security benefits.

Holding Period -  The length of time property is held. Generally, the time between the date of purchase (or acquisition) and the date of sale (or disposition).

Home Mortgage Interest - Any interest paid on a loan secured by a house (either a main home or a second home). The loan may be a mortgage to buy a house, a second mortgage, a line of credit, or a home equity loan.

Individual Taxpayer Identification Number - (ITIN) - A nine-digit number issued by the IRS to resident and nonresident aliens who do not have a Social Security number (SSN) and are not eligible to get one. An ITIN is issued exclusively for tax reporting or filing purposes.

Interest - The fee received for lending, usually calculated as a percentage rate for a certain time period. Interest can be earned through depositing money in savings programs, buying certificates of deposit (CDs) or bonds, or lending your money to other people.

Joint Tenants - A form of property ownership where two or more people own the property jointly and in equal shares. When a joint tenant dies, the surviving owners are automatically entitled tot he decedent's share of the property.

Lump Sum Distribution - The distribution in one tax year of a plan  participant's entire balance from all

of the employer's qualified plans of one kind, for example, pension, profit-sharing, or stock bonus plans. A distribution from a nonqualified plan can not qualify as lump-sum distribution.

Medical Care Expenses - Amounts paid for the diagnosis, cure, relief, treatment, or prevention of disease and for any treatments affecting any part or function of the body. The medical care expenses must be primarily to relieve or prevent a physical or mental defect or illness.

Mortgage - A legal document signed when borrowing for the purchase of real estate.

Non-Custodial Parent - The parent who has custody of the child for the shorter part of the year, or who does not have custody at all.

Nonqualified Plan - A plan that does not meet the IRS requirement for qualified plans. These can include a privately purchased commercial annuity or a section 457 deferred compensation plan of a state or local government or tax-exempt organization.

Owner of Record - The person whose name is listed as owner in official documents.

Pension - Generally, a series of definitely determinable payments made to person after retirement. Pension payments are made regularly and are based on certain factors.

Period of Limitations - The period of time after which a person can bring no legal action against the IRS regarding a tax return or vice versa.

Periodic Payment or Distribution - A payment or distribution from a retirement plan that recurs on a regular basis, such as monthly or yearly.

Permanently and Totally Disabled - A condition that indicates a person cannot engage in any substantial gainful activity because of a physical or mental condition. A physician must certify that the condition has lasted and can be expected to last continuously for at least 12 months or that the condition can be expected to result in death.

Personal Representative - A court- appointed executor or administrator of an estate or anyone who is in charge of a deceased person's property.

Phaseout - The gradual reduction in the amount allowed as a deduction or an expense. The amount allowed decreases as your income level increases.

Points - Mortgage interest fees paid to reduce the initial interest rate on the loan. Points may also be called 'loan origination fees' or 'mortgage loan charges',  or 'loan discount', or 'discount points'.

Preferred Stock - A type of share in the ownership of a company that usually does not provide voting rights, but the preferred stock shareholders' claim to dividends comes before shareholders owning common stock. 

Qualified Dividends - Ordinary dividends received in tax years beginning after 2002 that are subject to the same 15% maximum tax rate that applies to net capital gains.

Qualified Employee Plan - An employer's stock bonus, pension, or profit-sharing plan that is for the exclusive benefit of employees or their beneficiaries and that meets Internal Revenue Code requirements.

Qualified Organization - A charitable organization that generally must apply tot he IRS to be considered for a qualified tax-exempt entity (unless it is a church and government)  You can deduct your charitable contributions if you make them to qualified organizations.

Real Estate Investment Trust - REIT- A trust that primarily invests in real estate or real estate secured loans. Most of the assets in a real estate mutual fund include REITs.

Real Estate (also called 'Real Property') - land and generally, anything built on, growing on or attached to land.

Recovery - A return of an amount deducted or taken as a credit in an earlier tax year.

Redemption - Sale of preferred stock or presentation of a bond for repayment at or before its maturity date.

Refundable Credit - A credit of overpaid taxes.

Required Minimum Distributions - The smallest amount that must be distributed to prevent the additional tax on excess accumulation.

Rollover - A tax-free withdrawal of cash or other assets from one qualified retirement plan or traditional IRA and its reinvestment into another qualified retirement plan or traditional IRA.

Separate Maintenance Decree - A legal document, court, or agreement specifying amounts paid to one spouse by another spouse while they live apart.

Simplified Method - The method for calculating  the taxable portion of retirement benefit that you must use if your annuity starting date is after November 18, 1996, and your payments are from qualified plan.  Under the Simplified Method, you calculate the tax-free part of each monthly annuity payment by dividing your cost by the total number of expected monthly payments.

Standard Deduction - A predetermined dollar amount that reduces the amount of income on which you are taxed. It is based on filing status, age, blindness, and dependency status.

Statutory Employee - Someone who is treated as an employee for Social Security and Medicare tax purposes and as self-employed for income tax purposes. For this employee, the employer should mark the 'statutory employee' check box on Form W-2, Box-13.

Stock - A share in a company that represents the portion of the company's earnings and assets that are owned.

Stock Rights - The ability to buy more shares in a company at a specified price for a limited time.

Surviving Spouse  - The widow or widower of the decedent. For tax purposes, this person must sign the return if they file a joint return with the decedent.

Taxable Income - Gross Income minus any adjustments to income, any allowable exemptions, and either itemized deductions or the standard deduction.

Tax Exempt Interest - Interest Income that is not subject to income tax. This includes interest earned from bonds issued by states, cities, counties, or the District of Columbia. Interest may be exempt from tax for federal income tax purposes but may be taxable for state income tax requirements (i.e. municipal bond interest from another state).

Tax Year - The annual period used for keeping tax records and reporting income and expenses. The most common tax year is the calendar year which ends December 31.

Tenancy by Entirety - A form of property ownership where a husband and wife own the property jointly. If one owner dies, the survivor is entitled to the decedent's share of the property.

Tenancy in Common - A form of property ownership where two or more people own the property separately. If one owner dies, the survivors are not automatically entitled to the decedent's share of the property.

Time Savings Account - An interest-bearing savings account that restricts access to its funds for a defined time limit.

Trustee - An individual who is responsible for managing the assets of a trust for the benefit of the beneficiaries and who is usually independent of the person who created the trust.

Unearned Income - Investment income (such as interest, dividends, and capital gains) and other income that is not earned income (such as unemployment compensation, taxable Social Security benefits, pensions, annuities, and alimony).

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