Category: IRS

Tax Liability (or total tax bill) The amount of tax that must be paid. Taxpayers meet (or pay) their federal income tax liability through withholding, estimated tax payments, and payments made with the tax forms they file with the government.

Tax Exemption A part of a person’s income on which no tax is imposed.

Tax-Exempt Interest Income Interest income that is not subject to income tax. Tax-exempt interest income is earned from bonds issued by states, cities, or counties and the District of Columbia.

Tax Evasion A failure to pay or a deliberate underpayment of taxes.

Taxes Required payments of money to governments that are used to provide public goods and services for the benefit of the community as a whole.

Tax Deduction An amount (often a personal or business expense) that reduces income subject to tax.

Tax Cut A reduction in the amount of taxes taken by the government.

Tax Credit A dollar-for-dollar reduction in the tax. Can be deducted directly from taxes owed

Tax Code The official body of tax laws and regulations.

Tax Avoidance An action taken to lessen tax liability and maximize after-tax income.