Taxes & Compliance Glossary

Business Expense

A cost incurred in the ordinary course of running a business that may be deductible from taxable income, reducing the total tax owed.

Estimated Tax

Advance tax payments made by self-employed individuals throughout the year to cover federal (and often state) income taxes and self-employment taxes, in the absence of employer withholding.

Sales Tax

A state and local government tax applied to the sale of goods and certain services, collected by the seller at the point of sale and remitted to the relevant tax authority.

Self-Employment Tax

A US federal tax consisting of Social Security and Medicare contributions that self-employed individuals must pay, covering both the employee and employer portions typically split in traditional employment.

Tax Deduction

A business or personal expense that can be subtracted from gross income to reduce the total taxable income, thereby lowering the amount of tax owed.

Tax Year

The 12-month accounting period used to report income and expenses for tax purposes, most commonly the calendar year (January 1 through December 31) for individuals and many small businesses.

VAT

Value Added Tax — a consumption tax applied at each stage of a supply chain, collected by businesses on behalf of the government and charged to the final consumer.

W-9 Form

An IRS form used to provide a taxpayer identification number (SSN or EIN) to a client or business that needs to report payments to the IRS via a 1099 form.

Write-Off

The act of removing a business asset or uncollectable receivable from financial records, or the process of deducting a legitimate business expense from taxable income.