Taxation Legal Terms and Definitions

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). 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. 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. 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. Earned Income Credit A tax credit for certain people who work, meet certain requirements, and have earned income under a specified limit. Employee Works for an employer. Employers can control when, where, and how the employee performs the work. Self-Employment Tax The self-employment tax rate on net earnings remains the same for 2003. This rate, 15.3%, is a total of 12.4% for social security (old-age, survivors, and disability insur­ance) and 2.9% for Medicare (hospital insurance). 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. Family daycare providers A family daycare provider is a person engaged in the business of providing family daycare. Form W-4, Employee's Withholding Allowance Certificate Completed by the employee and used by the employer to determine the amount of income tax to withhold.

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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).