A tax shelter is a financial method or investment scheme that is created primarily to reduce or delay a person’s or businesses taxable income or tax liability. Common tax shelters include retirement accounts like a 401k, which allows an individual to defer taxes until they withdraw that income from their accounts.
Tax withholding is the practice of an organization keeping part of compensation owed to an individual to cover part of the taxes on the income. Both the Federal government and states may have withholding systems in place for specific types of taxes.
Tax-deferred exchange refers to the ability of taxpayers to replace one investment property with another similar property rather than taking the sale proceeds. In certain transactions, this exchange allows deferral of capital gains taxes until the replacement property is sold.
Tax-exempt income is income from any source which the Federal, state, or local government does not include when implementing its income tax. Individuals and organizations may have to report this income on a tax return, but the income will not be considered when determining their tax liability. Examples of tax exempt income include employer sponsored health insurance and Social Security benefits.
Taxable income is the amount of income subject to tax after subtracting all allowable deductions from an individual’s or business’s gross income. In U.S.
Taxing power is a government’s ability to implement and collect taxes from individuals and businesses.
A taxpayer identification number (TIN) is a unique nine-digit number assigned to a person or entity. The Internal Revenue Service (IRS) uses TINs for tax purposes to identify and track taxpayers.
Trust fund recovery penalty (TFRP) is a hefty fine charged for an employer knowingly or willfully keeping employee FICA and income taxes owed to the IRS.
