Taxation Legal Terms and Definitions

Subchapter S The S-Corporation must complete and file IRS Form 1120s to report its annual income to the IRS each year. Employee Works for an employer. Employers can control when, where, and how the employee performs the work. Excise tax A tax on the sale or use of specific products or transactions. Compulsory payroll tax An automatic tax collected from employers and employees to finance specific programs. Dependent A person, other than the taxpayer or spouse, who entitles the taxpayer to claim a dependency exemption. 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. 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. 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. Family daycare providers A family daycare provider is a person engaged in the business of providing family daycare. Standard Mileage Rate For 2004, the standard mileage rate for the cost of operating your car, van, pickup, or panel truck is increased to 37.5 cents a mile for all business miles.

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	Did You Know?
	Form 8308 is Report of a Sale or Exchange of Certain Partnership Interests Report the sale or exchange by a partner of all or part of a partnership interest where any money or other property received in exchange for the interest is attributable to unrealized receivables or inventory items.