GlossaryGuide

Telephone Tax Refund Taxpayers are eligible to file for refunds of all excise tax they have paid on long-distance service billed to them after Feb. 28, 2003.

Tax Shift The process that occurs when a tax that has been levied on one person or group is in fact paid by others.

Tax Preparation Software Computer software designed to complete tax returns. The tax preparation software works with the IRS electronic filing system.

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.