Did you ever hear a tax term and think: “What does THAT mean?” Well, here’s a list of commonly used tax terms, defined:
8879 – The IRS’s E-fie Signature Authorization Form. This form must always be signed by the taxpayer (and spouse if applicable) once they’ve reviewed their completed tax return, before the tax return can be e-filed. 26 states currently also have e-file authorization forms that must be signed before the taxpayer’s state tax return can be e-filed. This form does not go to the IRS; rather, it is solely for our records.
1040 – Individual Income Tax Return. This is the standard federal income tax form used to report an individual’s gross income.
1120 – Corporation Tax Return. This is the standard form used to report corporate income taxes to the IRS.
1065 – Partnership Tax Return. This the standard form used to report federal income taxes by partnerships and multiple-member Limited Liability Companies (LLCs).
ACP – Audit Correspondence Plan. If your income tax return is randomly selected for a correspondence audit, we will represent you before the IRS so you don’t have to deal with the IRS agent. This is basically audit insurance.
Estimated Tax Payments Vouchers – As the IRS requires tax payments are made throughout the year instead of all at once, our tax preparation software automatically generates these vouchers if they are deemed necessary. These estimates are for the following tax year, based on the tax returns from the prior year. See FAQ page for more information.
P&L or Income Statement – Profit & Loss. This is a financial statement that summarizes income and expenses incurred over a specific period of time.
Balance Sheet – This is a financial statement of assets, liabilities, and capital of a business at a particular point in time.
1099s – These forms report the movement of money from one entity or person to another entity or person. However, various 1099s serve different purposes as follows:
-MISC – Subcontractor Payments
-INT – Interest Income
-DIV – Dividends
-R – Retirement
K-1 – This form reports a partner or shareholder’s portion of business income, deduction, and credit. K-1 reporting varies depending on whether it comes from a trust, partnership, or S Corporation, but all K-1’s provided detailed information about the type of income, deduction, or loss so that it is accurately reported on the tax return.
Income & Expense Spreadsheet – We have excel spreadsheets for each type of business entity (1065, 1120, Schedule C) as well as more specific spreadsheets for realtors and rental properties. Clients can download the documents, fill in the blanks and return it to us so that we can complete their tax return. These spreadsheets are especially useful for clients for whom we don’t provide bookkeeping services for. This is a useful and handy method for clients to organize their business information that we need to prepare their tax return. Clients can request these ahead of time, or you can also find them here. (link)
Tax Organizer – This is a helpful device at ensuring you have all of the information that we’ll require to successfully and accurately prepare your tax return. This packet will show you all of the tax information that was provided to our firm for last year’s tax return, leaving space so that you can fill in the corresponding information for this year’s tax return. If you would like a tax organizer, please let us know by emailing firstname.lastname@example.org.
Portal – Our online portal is our firm’s secure way of providing you with electronic copies of your tax returns. If you select “Portal” on your tax return questionnaire, we’ll upload your completed return for you to review, and you’ll receive an email when it’s ready. You can also request to use your portal as a File Exchange system to upload your own tax documents to our firm so that we can retrieve them quickly and securely.
CPA – Certified Public Accountant. CPA’s are licensed by the State and have passed the Uniform CPA Examination. They must also work in accord with ethical requirements and enroll in specified levels of continuing education in order to keep an active CPA license. They specialize in creating and interpreting financial statements. CPA’s have unlimited representation rights, so they can represent their clients on any matters, such as audits, payment/collection issues, and appeals.
EA – Enrolled Agent. They are licensed by the IRS and are proficient in federal tax planning, individual and business tax return preparation, and representation. Just like CPA’s, they too must engage in continuing education programs (72 hours every 3 years).
Bookkeeping– This is the process of recording, retrieving, and analyzing financial transactions for an entity. This could include paying suppliers, monitoring accounts receivables, developing financial reports, and recording receipts.
Financial Statements – These usually include income statements, balance sheets, statements of retained earnings and cash flows. These financial statements should coincide with generally accepted accounting principles (GAAP). These statements can be audited by government agencies, accountants, and firms to ensure accuracy.
If you have any questions about the terms listed here please feel free to contact email@example.com. Our team is eager to assist.