Taxation Legal Terms and Definitions

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. 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. Dependent A person, other than the taxpayer or spouse, who entitles the taxpayer to claim a dependency exemption. 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). 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. Family daycare providers A family daycare provider is a person engaged in the business of providing family daycare. 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. 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. Subchapter S The S-Corporation must complete and file IRS Form 1120s to report its annual income to the IRS each year.

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	Did You Know?
	Form 5471 is Information Return of U.S. Persons With Respect to Certain Foreign Corporations Report information with respect to certain foreign corporations. A domestic partnership may have to file Form 5471 if it: Controls a foreign corporation; or Acquires, disposes of, or owns 5% or more in value of the outstanding stock of a foreign corporation; or Owns stock in a corporation that is a controlled foreign corporation for an uninterrupted period of 30 days or more during any tax year of the foreign corporation, and it owned that stock on the last day of that year.