Taxes

Question 1

Audit

Answer 1

An audit is an objective examination and evaluation of the financial statements of an organization to make sure that the records are a fair and accurate representation of the transactions they claim to represent.
It can be done internally by employees of the organization, or externally by an outside firm.

Question 2

Deduction

Answer 2

A deduction is any item or expenditure subtracted from gross income to reduce the amount of income subject to tax.
Also called allowable deduction

Question 3

Dependent

Answer 3

A dependent is an individual whom a taxpayer can claim for credits and/or exemptions.

Question 4

Exemption

Answer 4

An exemption is a deduction allowed by law to reduce the amount of income that would otherwise be taxed.

Question 5

Income tax

Answer 5

An income tax is a tax that governments impose on financial income generated by all entities within their jurisdiction.

Question 6

IRS

Answer 6

The Internal Revenue Service is a United States government agency that is responsible for the collection and enforcement of taxes.
It was established in 1862 by President Lincoln and operates under the authority of the United States Department of the Treasury.
It is primarily engaged in the collection of individual income taxes and employment taxes, but also handles corporate, gift, excise and estate taxes.

Question 7

Adjusted gross income

Answer 7

The net worth of the deceased’s estate after deducting the cost of any outstanding debts and admistrative costs associated with the individual.
The adjusted gross estate is also the value in which estate taxes are levied upon.