Glossary of Business Taxations Terms
Accounting methods:
A taxpayer is required to compute taxable income under the method of accounting the taxpayer uses for keeping its books.
Accrual. Under the accrual method, income is reported as earned, and expenses are deducted when incurred.
Cash. Under the cash method, income is reported as received, and expenses are deducted when paid.
Employer identification number. A nine-digit number used to identify the tax account of employers, sole proprietors, corporations, partnerships, estates, certain trusts, and other entities. This number is required if you pay wages to one or more employees, file returns, statements or other documents, you are a withholding agent required to withhold taxes on income other than wages paid to a nonresident alien, you file Schedule C, Profit or Loss From Business, Schedule C-EZ, Net Profit From Business, or Schedule F, Profit or Loss From Farming, or Form 1040, U.S. Individual Income Tax Return, and have a Keogh plan, or are required to file employment, excise, alcohol, tobacco, or firearms tax returns. Apply for an EIN using Form SS-4.
Employment tax. Federal income tax withholding, Social Security tax, Medicare tax, and federal unemployment tax that an employer must submit on behalf of employees.
Excise tax. Tax paid if a business manufactures, sells or uses certain products or tax imposed on a particular occupation or activity.
Information tax returns. A return filed by an entity to report some economic information other than tax liability, includes a return that reports the income or loss of an entity that is not subject to tax (e.g. partnerships).
Sales tax. State and local government taxes on the sale and purchase of goods.
Self-employment tax. Social Security and Medicare tax paid on the net earnings of individuals who work for themselves.
Tax year. An annual accounting period for reporting income and keeping records. There are three types of tax years. A calendar year runs from January 1 until December 31. A fiscal year generally runs for twelve consecutive months ending on the last day of any month except December. A 52-53 week year can be elected by a taxpayer who regularly computes income on the basis of an annual period which varies from 52 to 53 weeks and always ends on the same day of the week and always on either whatever date the day last occurs in a calendar month or on whatever date the day falls which is nearest to the last day of the of a calendar month.
Disclaimer
This publication and the information included in it are not intended to serve as a substitute for consultation with an attorney. Specific legal issues, concerns and conditions always require the advice of appropriate legal professionals.
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