Tax Definitions And Terms (A)
Accelerated Cost Recovery System: The process of allowing accelerated rates for certain properties that are used in income producing ventures and other business activities.
Accelerated Depreciation: Depreciation methods used to garner quicker write-offs in the earlier periods of an assets useful life, usually with larger depreciation amounts in the early years and lesser amounts in the later years.
Accounts Payable: Money that is owed but not paid right away when the bill is received for merchandise or other items that are purchased by businesses.
Accrual Method of Accounting: An accounting method used by businesses that require income to be reported as it is earned but may not be claimed until the performance has taken place.
Accrued Compensation: Money that is reserved or set aside by companies that is to be paid to employees at a later date, usually after retirement. It is listed as a company liability that must someday be paid.
Acquisition Debt: An accrual of debt that is used to construct a principal place of residence or second home.
Active Participation: The ability of an employee to take part in an employer's retirement, savings, or pension plan.
Adjusted Basis: The cost of property plus the costs of improvements minus depreciation.
Adjusted Gross Income: Wages, salaries, tips, and other forms of income that are calculated before subtracting itemized deductions.
After Tax Contributions: Contributions made to a retirement plans after the money has already been taxed.
Alternative Minimum Tax: A system designed to prevent higher income earners from paying too little in taxes by taking too many deduction.
Amended Return: The ability to file an amended tax return, on a form 1040X to correct a mistake or claim a refund within 3 years of the initial filing.
Annuity: Investment vehicles that are backed by insurance companies allowing capital to grow while taxes are deferred until the money is withdrawn, usually annually.
Appreciation: An increase in value of property that is instigated by market conditions. Taxes are usually paid on the appreciated value since the date property is purchased.
Assessment: A bill for tax, determined by the IRS or other taxing agency, that shows a balance due.
Assets: An investment, stock, bond, real estate, mutual fund, farm machinery, crops, or other property, that has value if sold.
Asset Allocator: A tool designed to help determine the types of investments that will provide the best chance of meeting financial goals without unnecessary risk.
Audit: An examination of filed tax returns by the Internal Revenue Service (IRS). Usually within three years after a filing.
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