--- title: "Tax Glossary: 40 Tax and Accounting Terms Defined | Wallace CPA" description: "Plain-English definitions of 40 tax and accounting terms, from S corporation to offer in compromise, each with its official source and the service that helps." url: https://wallacecpa.multisites.ai/glossary publisher: Wallace CPA phone: +1-877-682-1171 quote: https://wallacecpa.multisites.ai/contact --- # Tax and accounting glossary 40 tax and accounting terms in plain English. Every definition links to its official source. Search the glossary No terms match. Try a shorter word. ## A [Accrual accounting](https://wallacecpa.multisites.ai/glossary/accrual-accounting) Accrual accounting records income when it is earned and expenses when they are incurred, no matter when cash changes hands. [Appraisal district](https://wallacecpa.multisites.ai/glossary/appraisal-district) An appraisal district is the county office that sets the appraised value of property for local taxing units; Tarrant Appraisal District and Denton CAD are two examples. ## B [Balance sheet](https://wallacecpa.multisites.ai/glossary/balance-sheet) A balance sheet is a statement of what a business owns, what it owes and what the owners have left, shown as of one date. [Bookkeeping](https://wallacecpa.multisites.ai/glossary/bookkeeping) Bookkeeping is the routine recording of a business's daily transactions, such as income, expenses and payments, so the records support its tax returns and statements. [Business valuation](https://wallacecpa.multisites.ai/glossary/business-valuation) A business valuation is an estimate of what a business is worth, often based on fair market value, used for a sale, buy-out, gift or estate. ## C [Capital gains](https://wallacecpa.multisites.ai/glossary/capital-gains) A capital gain is the profit from selling a capital asset for more than its adjusted basis; holding it over one year usually makes the gain long term. [Chart of accounts](https://wallacecpa.multisites.ai/glossary/chart-of-accounts) A chart of accounts is the list of named accounts, such as income, expense, asset and liability accounts, that a business uses to sort its transactions. [Cost basis](https://wallacecpa.multisites.ai/glossary/cost-basis) Cost basis is generally the amount you paid for an asset, and it is used to figure depreciation and any gain or loss when you sell. ## D [Depreciation](https://wallacecpa.multisites.ai/glossary/depreciation) Depreciation is the way a business recovers the cost of equipment or other long-lived property by deducting part of the cost each year. ## E [Employer identification number (EIN)](https://wallacecpa.multisites.ai/glossary/employer-identification-number-ein) An employer identification number is a federal tax ID number the IRS assigns to businesses, including those that hire employees or file certain business returns. [Estimated tax payments](https://wallacecpa.multisites.ai/glossary/estimated-tax-payments) Estimated tax payments are advance payments of income tax and self-employment tax that people make during the year when no employer withholds tax from their income. ## F [Form 1099-NEC](https://wallacecpa.multisites.ai/glossary/form-1099-nec) Form 1099-NEC is the IRS information return a business files to report payments of nonemployee compensation, such as fees paid to an independent contractor. [Form 2848 power of attorney](https://wallacecpa.multisites.ai/glossary/form-2848-power-of-attorney) Form 2848 is the IRS form that authorizes an eligible person, such as a CPA, to represent a taxpayer before the IRS. [Form 941](https://wallacecpa.multisites.ai/glossary/form-941) Form 941 is the Employer's Quarterly Federal Tax Return, which reports income tax withheld and the Social Security and Medicare taxes on employee wages. [Form W-2](https://wallacecpa.multisites.ai/glossary/form-w-2) Form W-2 is the Wage and Tax Statement an employer files for each employee, showing yearly wages paid and the taxes withheld from them. [Form W-9](https://wallacecpa.multisites.ai/glossary/form-w-9) Form W-9 is the form a person or business completes to give a payer a correct taxpayer identification number so the payer can file information returns. ## H [Homestead exemption](https://wallacecpa.multisites.ai/glossary/homestead-exemption) A homestead exemption lowers the taxable value of a Texas owner's main home, and the owner must apply for it with the county appraisal district. ## I [Innocent spouse relief](https://wallacecpa.multisites.ai/glossary/innocent-spouse-relief) Innocent spouse relief can free a person from extra tax on a joint return when a spouse understated tax and the person did not know about the errors. [Installment agreement](https://wallacecpa.multisites.ai/glossary/installment-agreement) An installment agreement is an IRS payment plan that lets a taxpayer pay a tax balance over time instead of all at once. [IRS audit](https://wallacecpa.multisites.ai/glossary/irs-audit) An IRS audit is a review of a taxpayer's books, accounts and financial records to confirm that a tax return is correct. [IRS CP2000 notice](https://wallacecpa.multisites.ai/glossary/irs-cp2000-notice) An IRS CP2000 notice says income or payment data from third parties does not match a tax return, and it proposes changes to the tax. [Itemized deduction](https://wallacecpa.multisites.ai/glossary/itemized-deduction) An itemized deduction is an allowed expense, such as mortgage interest or state tax, that a filer lists on Schedule A instead of taking the standard deduction. ## L [Limited liability company (LLC)](https://wallacecpa.multisites.ai/glossary/limited-liability-company-llc) A limited liability company is a state-created business entity whose owners are called members; the IRS taxes it by default as a sole proprietorship or a partnership. ## N [No tax due report](https://wallacecpa.multisites.ai/glossary/no-tax-due-report) A no tax due report was a Texas franchise tax filing for entities under the revenue threshold; since the 2024 report year, many such entities file an information report instead. ## O [Offer in compromise](https://wallacecpa.multisites.ai/glossary/offer-in-compromise) An offer in compromise is an IRS program that may let a taxpayer settle a tax debt for less than the full amount owed, based on ability to pay. ## P [Payroll tax](https://wallacecpa.multisites.ai/glossary/payroll-tax) Payroll tax is the federal income, Social Security and Medicare tax an employer withholds from wages, plus the employer's own share of certain taxes. [Penalty abatement](https://wallacecpa.multisites.ai/glossary/penalty-abatement) Penalty abatement is the IRS removing or reducing a penalty, usually for a first-time issue, reasonable cause or a statutory exception. [Profit and loss statement](https://wallacecpa.multisites.ai/glossary/profit-and-loss-statement) A profit and loss statement, also called an income statement, shows a business's income and expenses over a set period of time. [Property tax protest](https://wallacecpa.multisites.ai/glossary/property-tax-protest) A property tax protest is a formal challenge to an appraisal district's value or action, heard by the appraisal review board, usually due by May 15. ## Q [Qualified business income deduction](https://wallacecpa.multisites.ai/glossary/qualified-business-income-deduction) The qualified business income (QBI) deduction lets many owners of pass-through businesses deduct up to 20 percent of qualified business income. ## R [Reasonable compensation](https://wallacecpa.multisites.ai/glossary/reasonable-compensation) Reasonable compensation is the fair salary an S corporation must pay an owner who works in the business before the owner takes other distributions. ## S [S corporation](https://wallacecpa.multisites.ai/glossary/s-corporation) An S corporation is a corporation that passes its income and losses through to its shareholders, who report them on their personal tax returns. [Sales and use tax](https://wallacecpa.multisites.ai/glossary/sales-and-use-tax) Sales and use tax is the Texas tax on retail sales and taxable services; the state rate is 6.25 percent and local rates can bring the total to 8.25 percent. [Section 179 deduction](https://wallacecpa.multisites.ai/glossary/section-179-deduction) The Section 179 deduction is an election that lets a business deduct all or part of the cost of qualifying property in the year it is placed in service. [Self-employment tax](https://wallacecpa.multisites.ai/glossary/self-employment-tax) Self-employment tax is the Social Security and Medicare tax that people who work for themselves pay on their net earnings. [Standard deduction](https://wallacecpa.multisites.ai/glossary/standard-deduction) The standard deduction is a set dollar amount, based on filing status, that reduces the income an individual is taxed on if they do not itemize. ## T [Tax extension](https://wallacecpa.multisites.ai/glossary/tax-extension) A tax extension gives more time to file a return, usually until October 15, but it does not give more time to pay any tax owed. [Tax levy](https://wallacecpa.multisites.ai/glossary/tax-levy) A tax levy is the legal seizure of property, such as wages or bank funds, to pay a tax debt; it differs from a lien, which is only a claim. [Tax lien](https://wallacecpa.multisites.ai/glossary/tax-lien) A federal tax lien is the government's legal claim against a person's property when a tax debt goes unpaid; it is a claim, not a seizure. [Texas franchise tax](https://wallacecpa.multisites.ai/glossary/texas-franchise-tax) The Texas franchise tax is a state privilege tax on LLCs, corporations and other entities formed in or doing business in Texas, reported every year by May 15. ## Talk to Wallace CPA Call the Southlake office and say what you need: a return, an IRS letter, your books or a new business. Have the notice or last year's return nearby if you have one. [Call (877) 682-1171](tel:+1-877-682-1171)[Send a message](https://wallacecpa.multisites.ai/contact) 180 State Street, Suite 225, Southlake, TX 76092