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Don't Mess With Taxes

Translating taxes into money-saving English

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Tax Glossary F through J

NOTE: The Tax Glossary, which debuted in this form on Dictionary Day 2015, has five sections. If a term you think should be here isn't, or you can add to or clarify a definition that is here, let me know via Twitter or Facebook.

One of the hardest things about filing your taxes is trying to decipher the forms. You practically have to learn a new, tax-specific language.

Dictionary_3_1 Unfortunately, IRS-speak is a native tongue for very few folks.

And it's not easy to decipher. In fact, reading tax documents makes that dang VCR manual (yes, a few of us still use those antiquated devices!) seem almost coherent!

To help out, Don't Mess With Taxes has gathered some common tax terms and phrases and their plain English meanings in this Tax Glossary (and the Tax Glossary's precursor, a mini tax dictionary, if you will, that was a blog post back in 2007). Yes, I've been working on this for a while! 

As you can imagine, the IRS dictionary gives Merriam-Webster a run for its money, so I've broken the Don't Mess With Taxes glossary into several sections for ease of page loading. Terms in the second group, F through J, are below.

You can check out the other sections by clicking the links below:

  • A through E
  • K through O
  • P through T
  • U through Z

And since tax laws are continually changing (thank you, Congress ... Not!), this is an ongoing list. I'll do my best to keep it updated, but if you find a tax word that's got you stumped, e-mail it to me and I'll to make sure it and its definition is added. The same goes for any tax term I've overlooked.

 

Alphabet_F 401(k) plan -- An employer-sponsored retirement savings program in which employees contribute part of their salary to a tax-deferred investment account. Salary put in the plan is not taxed until it is later withdrawn. Employers often match part or all of employees' contributions. Penalties usually apply to pre-retirement age withdrawals. Most plans, however, allow employees to borrow limited amounts tax- and penalty-free from their accounts.

Fair market value -- The price at which property or the right to use property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy, sell, or transfer property or the right to use property, and both having reasonable knowledge of relevant facts.

Federal Insurance Contributions Act (FICA) tax -- These taxes go toward Social Security and Medicare to provide benefits for retired workers and their dependents as well as for disabled workers and their dependents. It typically is referred to by its FICA acronym. The combined FICA tax rate is 15.3 percent. The current tax rate for the Social Security portion is is 6.2 percent for both the worker and his/her employer, or 12.4 percent total. The current rate for Medicare is 1.45 percent for the employee and employer, or 2.9 percent total.

Federal Unemployment Tax Act (FUTA) -- Taxes collected under FUTA fund unemployment benefits.

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. Qualifying widow/widower also is sometime referred to as surviving spouse with dependent child.

Flat tax -- In its most basic form, a flat tax applies a single tax rate to individual income. Depending on the specific proposal, a base exemption may be allowed to exclude low-income families from the tax. Some flat tax proponents also retain certain deductions to determine the amount subject to tax.

Flexible spending account (FSA) -- With this workplace account, an employee can divert some salary to a special account that is used to reimburse medical or child-care expenses. There are maximum contribution limits and in the case of medical FSAs, the money might be forfeited if not used within a specific time period.

Foreign Account Tax Compliance Act (FATCA) -- This law took effect in March 2010. FATCA targets tax non-compliance by U.S. taxpayers with foreign accounts. It focuses on reporting by U.S. taxpayers of certain foreign financial accounts and offshore assets, as well as reporting by foreign financial institutions about financial accounts held by U.S. taxpayers or foreign entities in which U.S. taxpayers hold a substantial ownership interest. Individual taxpayers must report information about certain foreign financial accounts and offshore assets on Form 8938 and attach it to their income tax return, if the total asset value exceeds the appropriate reporting threshold. Form 8938 reporting is in addition to Foreign Bank Account Report (see below) reporting.

Foreign Bank Account Report (FBAR) -- If you have a financial interest in or signature authority over a foreign financial account exceeding certain thresholds, the Bank Secrecy Act may require you to report the account yearly to the Department of Treasury by electronically filing a Financial Crimes Enforcement Network (FinCEN) 114, Report of Foreign Bank and Financial Accounts (FBAR). Failure to do so carries stiff penalties.

 

Alphabet_G Gift tax -- This tax is levied on an individual who gives more than a certain amount, adjusted annually for inflation, each year to another individual. When the gift exceeds the gift exclusion level, a return detailing the amount must be filed.

Gross dividends -- The total dividends you received. Your gross dividends are the sum of any ordinary dividends, capital gains distributions and nontaxable distributions you received during the tax year.

Gross income -- All the money, goods and property you receive during the year before you reduce it by using adjustments, deductions or exemptions. People who use the barter system have to include the value of whatever they've received in exchanged for services as part of their gross income.

Gross income test -- One of five tests a person must meet for you to claim him or her as a dependent so that you can take an exemption. It generally is the amount of the tax year's standard deduction amount for a single taxpayer. If this person is your child under 19 years old, or a full-time student under 24 years old, he or she does not need to meet this test.

 

Alphabet_H Head of Household -- An unmarried taxpayer who provides more than half of the cost of keeping up a home that was the main residence, for more than six months, for the taxpayer and a qualifying relative can use this filing status. Head of household provides a larger standard deduction and more generous tax brackets than the single status. Similarly, some tax breaks are more favorable for head of household filers than for singles.

Health savings account (HSA) -- A special account tied to a high-deductible health insurance policy. Earnings inside the HSA are tax deferred. HSA money can be used tax- and penalty-free to pay the insurance policy deductible, co-payments and any other qualifying medical expenses. Money left in the account at the end of a year can be rolled over to the next year. A 20 percent penalty is assessed for withdrawing HSA funds for non-qualifying purposes before age 65. After age 65, you cannot contribute to an HSA and non-qualifying withdrawals are taxed but not penalized.

Hobby loss -- Loss from a hobby or other activity you do not pursue for profit, i.e., something you do for fun and earn a little money versus a business activity. You cannot claim expenses from a hobby that exceed the amount of income that you report. For example, if you had a part-time job and made $10,000 and spent $12,000 on rebuilding an antique auto as a hobby, you cannot claim the hobby loss because it would mean you would have no earned income for tax purposes. 

Holding period -- The length of time you hold an asset. Your holding period determines the maximum tax rate you will pay on a gain from the sale of a capital asset. The capital gains tax on assets held for longer periods are usually taxed at lower rates.

Home equity debt -- Debt secured by your home. Home equity interest usually is deductible as an itemized deduction.

Home office -- A part of your home or other structure on your property that you use exclusively and regularly to conduct business. Doing so might qualify you to take a deduction for the home office's use. 

Homestead exemption -- A dollar amount that is not counted by state or county tax officials when determining the value of your primary residential real estate for property tax calculation purposes.

 

Alphabet_I

Income tax -- Finally! A tax term we all know (and hate). The main source of revenue for the federal government and many states. The tax is based on your earned and unearned income. You are allowed certain deductions, allowances, exclusions and credits to reduce your tax.

Independent contractor -- A worker whose employer has the right to control or direct only the result of the work done, This is the status of freelancers and sole proprietors. On the business side, independent contractors are treated as non-employees for employment tax purposes. From the contractors' standpoint, the worker is responsible for all income and self-employment taxes due on earnings.

Individual Retirement Arrangement (IRA) -- Yes, arrangement is the official IRS term, although most of us call them Individual Retirement Accounts or IRAs for short. This type of savings account offers tax benefits for money designated for withdrawal in retirement. There are a variety of IRA options, including a traditional IRA (deductible and nondeductible) and a Roth IRA.

Individual Taxpayer Identification Number (ITIN) -- The taxpayer identification number for persons who do not qualify for a Social Security number. It is usually assigned to aliens in the United States.

Innocent Spouse Rule -- The IRS usually holds both signers of a joint return liable for the entire tax due plus penalties and interest. That means that when you sign a joint return you are liable for the entire tax due, even if you later divorce your spouse, did not earn the income that generated the tax or did not know about the omission of income or claiming of erroneous deductions. Under the innocent spouse rule, a spouse may claim not to be jointly liable if he or she did not know about the errors and did not benefit from them.

Internal Revenue Service (IRS) -- And here's another tax term we all know (and hate). The IRS is the federal agency that collects income taxes in the United States. 

Itemized deductions -- Allowable expenses that are reported on Schedule A and help reduce a taxpayer's amount of adjusted gross income. 

Investment income -- Includes taxable and tax-exempt interest, dividends, capital gains net income, certain rent and royalty income, and net passive activity income. The IRS generally views investment income as unearned income. The distinction comes into play in determining application of some tax breaks.

 

Alphabet_j Job search expenses -- The costs of looking for a new job in your same line of work are deductible. Qualifying expenses include employment agency fees, printing and mailing resumes, and travel expenses for interviews, including transportation, lodging and some food if your job hunting takes you away from home overnight.

Joint return -- A tax return filed by a married couple using the Married Filing Jointly status. Here the couple combines the income and deductions of both spouses on the same tax return and shares the deductions and credits.

Joint return test -- One of the five tests a person must pass to qualify as a dependent. To meet this test, the person must not file a joint tax return with his or her spouse for the tax year in which you claim the person as a dependent. This test does not apply if the person is not required to file a return, files only to receive a refund and would have no tax liability for either spouse if they filed separate returns.

 

Continue alphabetically to more tax terms in
Tax Glossary K through O.

As with any language, terms are added and eliminated over the years, or the course of a Congressional session. Check back regularly for new tax terms.

Today's Tax Tip

  • Key 2023 federal tax deadlines — We made it through the first week of tax season 2023, but another deadline is looming. Jan. 31 is the filing, and tax payment, deadline for taxpayers who opted not to make their final 2022 estimated tax payment on Jan. 17. This tax calendar has that and other key individual tax due dates for the rest of this year. (Jan. 30, 2023)

  • Tax Tip; click pencil for all tax tip links

  • The 2023 Tax Tips offer ways to file your annual return, along with post-filing advice, important tax news and, of course, ways to cut your current tax year bill. You'll find the monthly assemblages on their own respective pages: January, February, March, April, May, June, July, August, September, October, November and December. Remember, tax tasks and tips don't stop after you file your annual return!

All About Kay

  • OK, some about Kay
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    Kay Bell — Native Texan
    (the blog title totally makes sense now, right?). Professional journalist. Tax geek.

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Tick ... Tick ... Tick

  • Tax Year 2023 Countdown!

    Happy New Tax Year! Are you ready to file your 2022 tax return? Me neither. But at least this year we're getting some extra time to file and pay any tax we owe. Even better, it's not COVID-19 pandemic related. Tax Day 2023 is Tuesday, April 18. This later date is because April 15, 2023, is on Saturday, and the next business day, Monday, April 17, is Emancipation Day.
    When this Washington, D.C., holiday falls on the day our federal taxes are due, it bumps Tax Day nationwide to the next business day. So this year, we have until Tuesday, April 18, to finish our federal forms and, if we find we owe, come up with the money for Uncle Sam. The states that follow the federal tax calendar, which is most of them, also tend to abide by this date change.

    The countdown clock below should help us from missing out on making important tax-saving moves the rest of this year. Plus, the Tax Moves below the counter will list some timely tasks to take care this first month of 2023, and each of the remaining 11 when they arrive. They'll speed by quickly when you're having tax fun!
    Note: I'm in the Central Time Zone, so adjust accordingly for where you live.


Time for Tax Tasks


  • monthly tax moves


  • Hello February, and ❤ to our new 2023 Valentine, the Internal Revenue Service. OK, maybe love for the IRS is a little much, but we at least want to make nice with Uncle Sam's tax collector this month as it goes into the first full, albeit short, month of the tax season. That means some taxpayers will be getting their refunds in February!

    via GIPHY

    With just 28 days, it will mean some full days for both IRS employees, some of whom are still trying to catch up on that lingering COVID-19 pandemic backlog, and all of us who'll file this month. So let's not waste anymore time, and get to some tax tasks for this shortest month of the year!

    Feb. 1: Employers and other third-party payers were to have issued us our W-2 and associated 1099 forms by Jan. 31. If you're still waiting, be patient and give them a tad more time. And don't forget to check your email, as many issuers sent out electronic notices of the online availability forms and other statements you need to file your taxes instead of relying on the U.S. Postal Service.

    Feb. 2: Happy Groundhog Day!

    Fat Groundhog; click image for Groundhog Day details

    The main reason to wait for the correct tax statements is to avoid getting caught in a Bill Murray kind of tax loop, where you have to file an amended tax return because you entered wrong info on your original 1040.

    Feb. 7: Black History Month is celebrated every day this month, commemorating the achievements by black Americans and recognizing the role of African Americans in U.S. history.

    The National Association for the Advancement of Colored People (NAACP), the nation's oldest and largest grassroots-based civil rights organization, was founded on this month, specifically on Feb. 12, 1909, the centennial anniversary of the birth of Abraham Lincoln, who issued the Emancipation Proclamation twice.

    One of the NAACP's key divisions is its Legal Defense and Educational Fund.
    If you want to support the Fund's work, during Black History Month or any day of the year, you can donate to it and, since it is a 501(c)(3) organization, claim your gift as a charitable tax deduction if you itemize. Sorry, filling out Schedule A is your only option this filing season, since Congress didn't renew the option to claim cash gifts of up to $300 for single filers or $600 for married filing jointly couples directly on Form 1040.

    Feb. 10: Do you work as a server at a restaurant or at any other establishment where gratuities from customers are part of your compensation? I hope you got lots of financial thanks for doing your job well, but remember that those tips are taxable income.

    restaurant check tip iStock
    Whether you're dining in or, still COVID leery and getting food delivered to your home, if a tip isn't included on your restaurant or delivery bill, click the image above to calculate how much to tip the person who brought it to you.

    If you got at least $20 in gratuities in January, you must account for the tips today by using Form 4070 to report last month's tips total to your employer.

    Feb. 12: Are your ready Chiefs, Eagles, and special television commercial fans? It's finally Super Bowl Sunday! Not only will today's 57th Super Bowl decide American professional football's champion, it's also the biggest single betting day of the year. The NFL, like the other professional U.S. sports leagues, have embraced betting. Just remember, if any of your wagers pay off, you owe tax on your winnings. Note, too, that even if your winnings are part of a fantasy sports bet, the associated taxes are very real.

    Feb. 14: Happy Valentine's Day! Do you and your better half file a joint return? Most married couples do. Remember to look over the 1040 carefully before you sign it. When both spouses sign their jointly filed 1040, each is jointly and severally liable for the entire tax amount due. I don't want to spoil your Heart Day celebration, but this means the IRS can come after either spouse for payment of a tax bill, even the husband or wife who is in more dire financial circumstances.

    Feb. 15: Today is the day that the Internal Revenue Service finally can issue refunds to filers who claimed the Earned Income Tax Credit (EITC) or additional Child Tax Credit. But don't spend the money just yet. Even if you're getting your tax refund directly deposited, the IRS' general processing time plus protocols of financial institutions receiving the refunds you’re your tax cash probably won't actually show up in your account until the end of this month.

    Feb. 20: Today is one of the reasons for tax refund delays. It's the Washington Birthday federal holiday, officially honoring George Washington, the Father of Our Country. Over the years, however, this federal (three-day, yay!) holiday has come to commemorate the contributions of all our Commanders in Chief, and is popularly known as Presidents' Day. That means we've got to give another shout out to Abraham Lincoln, who essentially was father of our income tax system, signing into law a tax on earnings to help pay Civil War costs.

    Feb. 24: You're ready to work on your tax return, but you're on a budget. No worries. The IRS and its Free File Alliance partners again offer no-cost online tax preparation and electronic filing to eligible taxpayers at the IRS' special Free File web page. This year, seven tax software companies are participating.

    IRS Free File; click image for details

    The Free File income threshold this year remains at adjusted gross income (AGI) of $73,000 or less, regardless of your filing status.

    Feb. 28: Wow! February really did speed by, especially since we were having so much tax fun. Or maybe you weren't having any fun at all trying to do your taxes yourself, even with software's prompts, and have decided to turn to professional tax help. That's a smart move, and here are some tips on how to find the perfect tax professional for your filing and planning needs. Note, though, that at this point in the filing season, you're likely to be placed at the end of that tax pro's very long client queue, as reputable tax preparers' calendars fill up fast. So again, be patient. You're at least now in tax filing line.

    Small Business Tax Calendar: Important filing, deposit and record keeping dates throughout the year that your company needs to know. You can get more tax calendar information at the IRS' online calendar page and view the full year's important business and individual tax dates in IRS Pub. 509.

State Tax Help

  • Don't forget your state taxes!
    Forty-three states and D.C. collect personal income taxes. But even if you live in of the seven states without an income levy, you still face other state (and local) taxes.

    State Tax Departments provides links to your state's Web page. The companion page, Tax Tidbits, is the compilation of blurbs about each state's tax laws. And for more state tax news, check out all our state tax bloggings.

Tax Forms

  • Tax Forms
    Thanks to our increased use of tax preparers and computer software, many of us don't see our tax forms until we sign and file them. But knowing what's on these documents, either in paper or digital form, and why the IRS wants it is key to understanding our tax system. And knowledge definitely is power, especially when it comes to tax savings. Find this valuable information in the ol' blog's special Tax Forms 2023 page.

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I gotta tell ya ...

  • AKA Disclaimer:
    I am a professional journalist who has been covering tax issues since 1999.
    I am not a professional tax preparer.
    The content on Don't Mess With Taxes is my personal opinion based on my study and understanding of tax laws, policies and regulations. It is provided for your private, noncommercial, educational and informational purposes only. It is not a recommendation of any specific tax action(s) you should or should not take. Similarly, mentions of products or services are not endorsements. In other words, my ramblings on the ol' blog are free advice and you know what they say about getting what you pay for. That's why when it comes to filing your taxes, I urge you to get additional, professional, paid-for guidance from an accountant, Enrolled Agent or other qualified tax preparer who is familiar with your individual tax circumstances.

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COVID-19 & Taxes

  • COVID-19
    Coronavirus has wreaked havoc
    on the 2020 and 2021 tax seasons.
    These three Coronavirus (COVID-19) and Taxes pages have details:
    March-July 2020,
    August-December 2020,
    January-December 2021, and
    January-December 2022
    You can find medical coronavirus resource links in the next section.

COVID-19 Resources

  • COVID-19
    Need help finding a coronavirus vaccine in the United States?
    Call 1-800-232-0233
    or TTY 1-888-720-7489.
    More information and resources at:
    CDC Vaccines
    CDC Booster Shots
    HHS Combat COVID
    USA.Gov COVID Info

February 2023

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Tell it to the Hill

  • DMWT Politics Posts
  • While it's easy to rail at the IRS, for the most part we can thank — or blame — our tax laws on Congress and the White House. So if you have an issue with tax legislation or want a tax bill passed, you need to let your federal legislators and the White House occupant know of your concerns. You can find out who in Washington, D.C., to contact (and how), as well as get information on your local lawmakers for matters, tax or otherwise, closer to home, at USA Gov.

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