Taxation Legal Terms and Definitions

Excise tax A tax on the sale or use of specific products or transactions. 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. 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. Earned Income Credit A tax credit for certain people who work, meet certain requirements, and have earned income under a specified limit. 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. 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. Employee Works for an employer. Employers can control when, where, and how the employee performs the work. Compulsory payroll tax An automatic tax collected from employers and employees to finance specific programs. 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). Electric and Clean-Fuel Vehicles For vehicles placed in service in 2004, the maximum clean-fuel vehicle deduction and qualified electric vehicle credit are scheduled to be reduced by 25%, as compared to 2003.

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	Did You Know?
	If you have employees, you are responsible for Federal Taxes If you have employees, you are responsible for several federal, state, and local taxes. As an employer, you must withhold certain taxes from your employees pay checks. Employment taxes include the following. Federal income tax withholding Social Security and Medicare taxes Federal unemployment tax act (FUTA).