What Is a Tax Expense? A tax expense is a liability owed to federal, state/provincial, and/or municipal governments within a given period, typically over the course of a year. Tax expenses are calculated by multiplying the appropriate tax rate of an individual or business by the income received or generated before taxes, after factoring in
What is Tax Fraud? Tax fraud occurs when an individual or business entity willfully and intentionally falsifies information on a tax return to limit the amount of tax liability. Tax fraud essentially entails cheating on a tax return in an attempt to avoid paying the entire tax obligation. Examples of tax fraud include claiming false
What Is Tax Free? Tax free refers to certain types of goods and financial securities (such as municipal bonds) that are not taxed. It also refers to earnings that are not taxed. The tax free status of these goods, investments, and income may incentivize individuals and business entities to increase spending or investing, resulting in
WHAT IS Tax Freedom Day Tax Freedom Day refers to the day an average American has theoretically earned enough money to pay off his or her total tax obligations for the year. The calculation used to determine this date assumes that everyone in the nation works for eight hours a day beginning January 1, and
What Is a Tax-Free Savings Account? A tax-free savings account (TFSA) is a Canadian savings account in which contributions, interest earned, dividends, and capital gains grow tax free. Money withdrawn from it is also tax free. The money deposited in TFSAs is an after-tax contribution, meaning it’s made with money that’s already been taxed. Therefore
What Is a Tax-Free Spinoff? A tax-free spinoff refers to a corporate action in which a publicly traded company spins off one of its business units as an entirely new company without tax implications. This type of transaction is deemed to be “tax-free” because the parent company is still able to divest the business it
What Is Tax-Loss Harvesting? Tax-loss harvesting is the timely selling of securities at a loss to offset the amount of capital gains tax owed from selling profitable assets. This strategy is commonly used to limit short-term capital gains, commonly taxed at a higher rate than long-term capital gains, to preserve the value of the investor’s portfolio while
What Is a Tax Holiday? A tax holiday is a temporary tax break. In the United States, tax holidays often suspend state and local sales taxes paid by consumers. Governments also use tax holidays as investment incentives that may exempt a new plant from property taxes for a number of years, for example. Key Takeaways
What Is a Tax Home? A tax home is the general locality of an individual’s primary place of work. It is the entire city or general vicinity where their principal place of business, employment, or post of duty is located, regardless of the location of the individual’s primary residence. An individual’s tax home affects their
What Is a Tax Identification Number (TIN)? A Tax Identification Number (TIN) is a nine-digit number used as a tracking number by the Internal Revenue Service (IRS). It is required information on all tax returns filed with the IRS. All U.S. tax identification numbers (TIN) or tax I.D. numbers are issued directly by the IRS except Social
