Federal Tax Glossary – BUS 463

Flashcards covering key terms and definitions from the Federal Tax Glossary relevant to BUS 463.

Assessment

The formal recording and establishment of a taxpayer’s liability, fixing the amount owed by the taxpayer.

Cohan Rule

A federal tax law rule allowing taxpayers to rely on reasonable estimates for expenses when they cannot produce actual expenditure records.

Collection Due Process (CDP)

A procedure to control IRS overreach in collecting liabilities, granting taxpayers an opportunity to contest before a collection hearing.

Currently Not Collectible (CNC)

A status for tax liabilities where levy action would create hardship, as the taxpayer has limited assets or income.

Deficiency

The amount by which the tax value imposed by the IRS exceeds what the taxpayer reported on their return.

Levy

The IRS's legal ability to confiscate or encumber a taxpayer’s property to satisfy tax liabilities.

Liability

The amount owed by a taxpayer under tax laws, which may include penalties or deficiencies.

Lien

The government’s legal claim against a taxpayer’s property for unpaid tax debts.

Notice of Deficiency (NOD)

A legal notice issued by the IRS to inform a taxpayer of a tax deficiency and their right to petition the Tax Court.

Offer in Compromise (OIC)

An agreement that allows a taxpayer to settle their tax debt for less than the full amount owed.

Penalty (addition to tax)

Financial penalties imposed by the IRS to encourage compliance with tax laws.

Power of Attorney (POA)

A form authorizing an individual to represent a taxpayer before the IRS.

Refund Suit

A lawsuit by a taxpayer to recover a tax liability claimed to have been unlawfully collected.

Statute of Limitation (SOL)

The legally established period for the IRS or taxpayer to address tax-related issues.

Tax Court

A specialized court for prepayment judicial review of tax deficiencies and certain IRS determinations.

Tax Assessment

The formal determination of tax liability by the IRS.

Tax Deficiency

The difference between the amount of tax owed and the amount reported by the taxpayer.

Tax Liability

The total amount of tax owed by a taxpayer, including any penalties and deficiencies.