Taxation Legal Terms and Definitions

Partnership return If you need more time to file a partnership return, file Form 8736, Application for Automatic Extension of Time To File U.S. Return for a Partnership, REMIC, or for Certain Trusts, for an automatic 3-month extension. File Form 8736 by the regular due date of the partnership return. Gross income Money, goods, services, and property a person receives that must be reported on a tax return. Includes unemployment compensation and certain scholarships. It does not include welfare benefits and nontaxable Social Security benefits. Federal income tax The federal government levies a tax on personal income. The federal income tax provides for national programs such as defense, foreign affairs, law enforcement, and interest on the national debt. Family daycare providers A family daycare provider is a person engaged in the business of providing family daycare. Installment Agreements To be eligible for an installment agreement, all returns that are due must first be filed. Installment agreements generally require equal monthly payments. The amount of an installment payment will be based on the amount owed and on the taxpayer’s ability to pay that amount within the time legally available for the IRS to collect. Excise tax A tax on the sale or use of specific products or transactions. Exemptions Amount that taxpayers can claim for themselves, their spouses, and eligible dependents. There are two types of exemptions-personal and dependency. Each exemption reduces the income subject to tax. The exemption amount is a set amount that changes from year to year. 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. Acquisition The purchase of one corporation by another, through either the purchase of its shares, or the purchase of its assets. Limited Liability Company An LLC may be classified for Federal income tax purposes either as a partnership, a corporation, or an entity disregarded as an entity separate from its owner by applying the rules in Regulations section 301.7701-3. See Form 8832, Entity Classification Election, for more details.

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	Did You Know?
	There are tax rules if change in accounting method is made Generally, the partnership must get IRS consent to change its method of accounting used to report income (for income as a whole or for any material item). To do so, it must file Form 3115, Application for Change in Accounting Method. See Form 3115 and Pub. 538, Accounting Periods and Methods.