Exam (elaborations)
TAX 4001 - Final Exam Vocab (Chp 14, 15, 16)
TAX 4001 - Final Exam Vocab (Chp 14, 15, 16)
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TAX 4001 - Final Exam Vocab (Chp 14, 15,16)
Above-the-line deduction - ANS-An allowable deduction for an individual taxpayer that
can be subtracted from total income to compute AGI
Adjusted Gross Income (AGI) - ANS-Total income less adjustments as computed on
page 1, Form 1040. AGI is an intermediate step in the calculation of individual taxable
income
Bargain element - ANS-the excess of fair market value over cost of stock acquired on
exercise of a stock option
Bunching - ANS-a tax planning technique to concentrate itemized deductions into one
year so that the total exceeds the standard deduction for the year
Cafeteria plan - ANS-A compensation plan under which employees may choose among
two or more benefits, including both cash and noncash items
Child Credit - ANS-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
Deferred compensation - ANS-A nonqualified plan under which an employer promises
to pay a portion of an employee's current compensation in a future year.
Defined-benefit plan - ANS-A qualified plan under which participants are promised a
targeted benefit, usually in the form of a pension, when they retire
Defined-contribution plan - ANS-A qualified plan under which an annual contribution is
made to each participant's retirement account.
Dependent - ANS-A member of a taxpayer's family or household who receives more
than half of his or her financial support from the taxpayer
Dependent care credit - ANS-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 - ANS-A refundable income tax credit that offsets the impact of
the payroll tax on low-income workers
Employee - ANS-An individual who performs services for compensation and who works
under the direction and control of an employer
Employee Stock Ownership Plan (ESOP) - ANS-a qualified defined contribution plan in
which contributions are invested primarily in the corporate employer's common stock
Employer-provided plan - ANS-A retirement plan sponsored and maintained by an
employer for the benefit of the employees
Estimated tax payments - ANS-quarterly installment payments of estimated current year
tax liability required of both corporate and individual taxpayers
excess social security tax withholding credit - ANS-An overpayment of employee Social
Security tax allowed as a credit against income tax
Expatriate - ANS-An individual who is a U.S. citizen and resides and works for an
extended period in a foreign country
Filing status - ANS-a classification for individual taxpayers reflecting marital and family
situation and determining the rate schedule for the computation of tax liability
Foreign Earned Income Exclusion - ANS-An annual amount of foreign source earned
income on which expatriates are not required to pay federal income tax
Fringe benefits - ANS-any economic benefit subject to valuation received by an
employee as additional compensation
Head of household - ANS-filing status for an unmarried individual who maintains a
home for a child or dependent family member
Incentive stock option (ISO) - ANS-A qualified stock option for federal tax purposes.
Individuals do not recognize the bargain element as income on the exercise of an ISO
Independent contractor - ANS-A self-employed individual who performs services for
compensation and who retains control over the manner in which the services are
performed.
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