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Accounting Method : The method used by a business or individual to keep its records. Most individuals and small businesses use the cash method, although businesses that maintain inventory are required to use the accrual method.

Accrual Method : The form of business accounting in which you report income in the year you earned it and you report expenses in the year you incur them, rather than reporting income and expenses when you receive payment or when you pay the expenses. If you own a business that maintains an inventory, you are required to use the accrual method for purchases and sales.

Aid : To help or furnish with help, support, or relief

Amortization : Deductible expense allowed as a means of spreading the cost of an intangible asset over a period of years. For instance, if you pay points to take out a home equity loan and the loan proceeds are not used for home improvements, you cannot deduct all the points in the year paid. Instead, you divide the cost of the points by the length of the loan and deduct only the amount that applies to the current year.

Bond : A type of debt owed by federal and municipal governments and corporations. If you invest in bonds, you will usually receive interest on it.

Capital Asset : An item that you own for investment or personal purposes, such as stocks, bonds, or stamp collections. The sale of a capital asset produces a capital gain or a capital loss. Assets you use in your business and inventory are not capital assets.

Capital Gain : Profit on the sale of a capital asset. Capital gains receive more favorable tax treatment than ordinary gains. Depending on your tax bracket and on how long you held a capital asset, you may pay about one-third to one-half less tax on a capital gain than you would have paid on the same amount of ordinary income.

Capital Loss : Loss from the sale of a capital asset.

Carry Forward : Using deductions or credits that cannot be taken in the current year to reduce your tax liability in a later year or years.

Deductions : Expenses allowed by the Income Tax Ordiance 2001 that reduce your taxable income.

Depreciation : A deduction you are allowed for the wearing away and expensing over time of assets, such as office equipment, vehicles, buildings, and furniture. For assets that have an expected useful life of more than one year, you spread the cost of the asset over its estimated useful life rather than deducting the entire cost in the year you place the asset in service. For tax purposes, tax law specifies the depreciation term for specific types of assets.

Direct Tax : A tax that you pay directly, as opposed to indirect taxes, such as tariffs and business taxes. Direct taxes include income and property taxes.

Dividends : Distributions from a company to its stockholders. The distributions may be ordinary dividends or capital gain distributions.

Exemption : A deduction from taxable income for you, your spouse, and your qualifying dependents.

Fair Market Value : The price an item would sell for, assuming the buyer and a seller both have reasonable knowledge and are not under undue pressure. To determine fair market value, it is common to compare other similar properties sold near the same time as your property.

Fine : A sum of money, which, by judgment of a competent jurisdiction, is required to be of money, which, by judgment of a competent jurisdiction, is required to be paid for the punishment of an offence

Fiscal Year : A 12-months year starting from 01 July and ending on a date 30 June.

Fringe Benefit : Employee compensation other than your wages, tips, and salaries, such as health insurance, life insurance, and pension plans.

Gain or Loss : The difference between your basis in an asset (usually your cost) and the value of property you receive when you sell or otherwise dispose of the asset.

Grant : To transfer real property from a title holder (grantor) or holders to another (grantee) with or without payment

Gross Income : Your total income before adjustments, deductions, or exemptions.

Gross Receipts : The total sales for your business during the year before deductions for returned items, allowances, and discounts.

Income Tax : 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, and credits to reduce your tax, based on laws made by Income Tax Ordinance.

Indirect Tax : A tax you do not pay directly, but which is passed on to you by an increase in your expenses. For instance, you do not pay a tariff directly. But when you buy imported merchandise, the price includes any tariff taxes paid.

Intangible Asset : Nonphysical resources or rights to other assets. Patents, goodwill, permits, and computer programs are examples of intangible assets.

Interest Expense : The amount you pay for borrowing money. When you pay back a loan or other debt, the additional amount you pay back is interest expense. Interest is calculated as a percentage of the amount of your loan for each period of time. Points paid for a mortgage are a form of prepaid interest.

Interest Income : Earnings on investments such as savings accounts, certificates of deposit, and seller-financed mortgages.

Inventory : Items held for resale in your business. If you own a manufacturing business, your raw materials, work in progress, working supplies, and finished goods are all inventory. Inventory is not a capital asset and does not qualify for capital gains treatment.

Medical Expenses : Your reasonable and necessary un-reimbursed expenses relating to health care for yourself and your dependents.

Ordinary Dividends : Dividends that are distributions of a company's profits. They are fully taxable.

Partnership : An unincorporated business or investment organization having two or more owners. A partnership is not subject to tax but passes income, losses, and other tax items through to its partners.

Payroll Tax : A tax based on wages, tips, and salaries paid. Part of the tax is deducted from the employee's pay, and the rest is paid by the employer.

Penalty : For taxes, a fine charged by the IRS for paying or filing your taxes late. You may be charged interest in addition to penalties. Tax penalties are not deductible.

Pension : A retirement plan funded by the employer. Payments made to retired employees are for past services rendered.

Property Tax : A tax levied by local governments, based on the value of property you own.

Refund : Relating to income tax, the excess of your withholding and estimated tax payments for the year over your tax liability.

Royalty Income : Payment for the use and exploitation of certain kinds of property, such as artistic or literary works, patents, and mineral rights.

Sales Tax : A tax based on the sales price of retail goods and services. You pay the tax at the time of the sale, and the seller turns it over to the state or other taxing authority.

Tariff : A tax on goods being brought into or exported from the homeland. When you buy imported goods, the price you pay includes the tariff. Tariff taxes that you pay for personal goods and services are not deductible.

Tax Liability : The amount of tax you owe.

Tax Year : The 12-month reporting period for which you are filing your tax return. Also refer to section 74 of IT ordinance 2001.

Taxable Income : The amount of net income used to calculate your income tax. Taxable income is your gross income reduced by all your adjustments, deductions, and exemptions.

Total Tax : The sum of all taxes that you owe for the tax year after all your credits, but not your payments, have been applied.

Unearned Income : Income such as interest, dividends, capital gains, or rents, as opposed to earned income, such as wages, tips, and salaries.

Useful Life : The number of years depreciable business property is expected to be productive and in use. vuzs For depreciation purposes, the IRS has predetermined useful lives for most types of business properties.

Withholding : Taxes that are taken out of your wages or other income before you receive them and that are deposited in an IRS account. Taxes are most commonly withheld from wages, but they may also be withheld from other income, such as dividends and interest. vuzs

Zero-Coupon Bond : A bond that has no stated interest rate and is sold at substantially less than its face value.

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