Taxation Legal Terms and Definitions

Compulsory payroll tax An automatic tax collected from employers and employees to finance specific programs. Self-Employment Tax The self-employment tax rate on net earnings remains the same for 2003. This rate, 15.3%, is a total of 12.4% for social security (old-age, survivors, and disability insur­ance) and 2.9% for Medicare (hospital insurance). Work Opportunity Credit and Welfare-to-Work Credit The work opportunity credit and the welfare-to-work credit are scheduled to expire for wages paid to individuals who began working for you after 2003. Acquisition The purchase of one corporation by another, through either the purchase of its shares, or the purchase of its assets. Federal Insurance Contributions Act (FICA) Tax Provides benefits for retired workers and their dependents as well as for disabled workers and their dependents. Also known as the Social Security tax. Dependent A person, other than the taxpayer or spouse, who entitles the taxpayer to claim a dependency exemption. Income taxes Taxes on income, both earned (salaries, wages, tips, commissions) and unearned (interest, dividends). Income taxes can be levied on both individuals (personal income taxes) and businesses (business and corporate income taxes). Form W-4, Employee's Withholding Allowance Certificate Completed by the employee and used by the employer to determine the amount of income tax to withhold. Estate and Gift Tax One of the oldest and most common forms of taxation is the taxation of property held by an individual at the time of their death. Such a tax can take the form, among others, of estate tax (a tax levied on the estate before any transfers). An estate tax is a charge upon the decedent's entire estate, regardless of how it is disbursed. Earned Income Credit A tax credit for certain people who work, meet certain requirements, and have earned income under a specified limit.

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	Form 5471 is Information Return of U.S. Persons With Respect to Certain Foreign Corporations Report information with respect to certain foreign corporations. A domestic partnership may have to file Form 5471 if it: Controls a foreign corporation; or Acquires, disposes of, or owns 5% or more in value of the outstanding stock of a foreign corporation; or Owns stock in a corporation that is a controlled foreign corporation for an uninterrupted period of 30 days or more during any tax year of the foreign corporation, and it owned that stock on the last day of that year.