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Found of Taxation
Ch. 14: The Individual Tax Formula
| Term | Definition |
|---|---|
| filing status | a classification for individual taxpayers reflecting marital and family situation and determining the rate schedule for the computation of tax liability |
| joint return | a return filed by husband and wife reflecting their combined activities for the year |
| joint and several liability | each spouse on a joint tax return is individually liable for the entire tax for the year |
| surviving spouse | filing status that permits a widow or widower to use the married filing jointly rate schedule for two taxable years following the death of a spouse |
| separate returns | a return filed by a married individual reflecting his or her independent activity and tax liability for the year. The tax liability is based on the married filing separately rate schedule |
| dependent | a member of a taxpayer’s family or household who receives more than half of his or her financial support from the taxpayer |
| head of household | filing status for an unmarried individual who maintains a home for a child or dependent family member |
| single taxpayer | an unmarried individual who is neither a surviving spouse nor a head of household |
| qualifying child | a child (or specified family member) who has the same principal residence as the taxpayer, who does not provide more than one-half of his or her own financial support, and who is younger than 19 years old or a student younger than 24 years old |
| qualifying relative | a specified family member or member of the taxpayer’s household who receives more than one-half of his or her financial support from the taxpayer and whose annual gross income is less than an amount prescribed by Congress (indexed annually for inflation |
| total income | the sum of the income items recognized by an individual during the year and listed on page 1, Form 1040. |
| adjusted gross income (AGI) | total income less adjustments as computed on page 1, Form 1040. AGI is an intermediate step in the calculation of individual taxable income |
| above-the-line-deductions | an allowable deduction for an individual taxpayer that can be subtracted from total income to compute AGI |
| standard deduction | A deduction from AGI based on filing status. The standard deduction amounts are indexed annually for inflation |
| itemized deductions | an allowable deduction for an individual taxpayer that cannot be subtracted in the calculation of AGI. |
| bunching | A tax planning technique to concentrate itemized deductions into one year so that the total exceeds the standard deduction for the year. |
| qualified business income (QBI) | active trade or business income from nonservice businesses eligible for the Section 199A deduction |
| kiddie tax | the tax on a child’s unearned income based on the tax rate applicable to estates and trusts |
| child credit | a credit based on both the number of dependent children under the age of 17, as well as other non-child dependents of the taxpayer |
| dependent care credit | a credit based on the taxpayer’s cost of caring for dependents either under age 13 or physically or mentally incapable of caring for themselves |
| earned income credit | A refundable income tax credit that offsets the impact of the payroll tax on low-income workers |
| excess Social Security tax withholding credit | An overpayment of employee Social Security tax allowed as a credit against income tax. |
| alternative minimum tax (AMT) | a second federal tax system parallel to the regular tax system. Congress enacted the AMT to ensure that every individual pays at least a minimal tax every year |
| AMTI | alternative minimum tax income |
| estimated tax payments | quarterly installment payments of estimated current year tax liability required of both corporate and individual taxpayers |
| safe-harbor estimate | estimated current year tax payments based on the preceding year’s tax liability that protect the taxpayer from the underpayment penalty |
Created by:
ryanriggs18
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