Taxation Legal Terms and Definitions

Acquisition The purchase of one corporation by another, through either the purchase of its shares, or the purchase of its assets. Excise tax A tax on the sale or use of specific products or transactions. 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. Employee Works for an employer. Employers can control when, where, and how the employee performs the work. 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. 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. Meal Expense Deduction Generally, you can deduct only 50% of your business-re-lated meal expenses while traveling away from your tax home for business purposes. Also, you can generally de­duct only 50% of certain reimbursements you make to your employees for meal expenses they incur while traveling away from home on business. 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. Dependency exemption Amount that taxpayers can claim for their eligible dependents. Each exemption reduces the income subject to tax. The exemption amount is a set amount that changes from year to year. 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.

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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.