Glossary

Account Transcript

An IRS document showing your filing status, adjusted gross income, taxable income, total tax, payments, and penalties for each year. Updated quarterly and available for the current year and up to four prior years.

See Tax Return Transcript, Record of Account

Adjusted Gross Income (AGI)

Your total income minus specific deductions (contributions, student loan interest, etc.). AGI is a key number that determines eligibility for other deductions and credits.

Amended Return

Form 1040-X filed to correct errors on a previously filed return. Must be filed within three years of the original filing date or two years of paying the tax, whichever is later.

See Statute of Limitations

Appeals Process

The formal procedure to dispute an IRS examination, audit, or collection action. Handled by the IRS Appeals Office, separate from the examining agent.

See Examination, Audit

Audit

An IRS examination of your tax return to verify that income, deductions, and credits are accurate and supported by documentation. Audits can be office audits, field audits, or correspondence audits.

See Examination, Record of Account

Bank Levy

An IRS collection action where the IRS garnishes your bank accounts to collect unpaid taxes. A Notice of Levy is required. Funds are held for 21 days before IRS receives them.

See Levy, Notice of Intent to Levy

Compliance

Meeting all IRS requirements: filing required returns on time, reporting all income, paying taxes owed, and responding to IRS notices. "Current" compliance means no filing or payment obligations remain outstanding.

See Delinquent

Correspondence Audit

An IRS examination conducted entirely by mail. The IRS requests specific documents to support items on your return. Response required within 30 days of the notice.

See Audit, Examination

Delinquent

Having an outstanding tax liability, unfiled return, or unpaid penalty. A delinquent account is not in compliance.

See Compliance

Earned Income Tax Credit (EITC)

A refundable tax credit for low- and moderate-income working individuals and families. Can result in a refund even if no tax was owed.

See Refundable Credit

Examination

The formal IRS process to determine whether a return is accurate. Includes desk review, office audit, or field audit. Results in either acceptance, assessment, or dispute.

See Audit, Appeals Process

Extension of Time to File

An automatic 6-month extension (Form 4868) granted to file a return, moving the deadline from April 15 to October 15. Does not extend payment deadline.

See Failure-to-File Penalty

Failure-to-File Penalty

A penalty of 5% per month (up to 25%) of unpaid tax when you don't file by the due date. Can be abated if you file before statute expires or have reasonable cause.

See Penalty, Reasonable Cause

Failure-to-Pay Penalty

A penalty of 0.5% per month (up to 25%) of unpaid tax when you don't pay by the due date. Can be abated if you pay within 10 days of notice or have reasonable cause.

See Penalty, Reasonable Cause

Federal Tax Lien

A legal claim filed by the IRS against your property (real estate, vehicles, etc.) to secure payment of unpaid taxes. A Notice of Federal Tax Lien is filed in the county.

See Levy, Notice of Intent to Levy

Field Audit

An IRS examination conducted at your home, business, or tax professional's office. Typically more thorough than office audits and involves detailed review of records.

See Audit, Examination

Filing Status

Your tax classification: Single, Married Filing Jointly, Married Filing Separately, Head of Household, or Qualifying Widow(er). Determines tax rates and eligibility for certain credits.

Form 1040

The primary federal income tax return. All individuals must file either Form 1040 or an alternative form (1040-SR, etc.).

Form 1040-X

Amended Return. Filed to correct errors on a previously filed Form 1040. Must be filed within three years of the original filing date.

See Amended Return

Form 843

Claim for Refund and Request for Abatement. Used to request removal of penalties or correction of IRS errors. Must be filed within three years of penalty assessment.

See Penalty Abatement

Form 4506-C

Request for Tax Return Transcript or Account Transcript. Used to order official transcripts from the IRS.

See Account Transcript, Tax Return Transcript

Form 4868

Application for Automatic Extension of Time to File. Grants 6-month automatic extension to file, moving deadline to October 15.

See Extension of Time to File

Interest

Charge calculated daily on unpaid tax and penalties. Compounded daily at the federal rate plus 3% (adjusted quarterly). Must be paid even if penalties are abated.

See Penalty

Internal Revenue Service (IRS)

Federal agency responsible for administration and enforcement of federal tax laws. Part of the Department of Treasury.

Levy

An IRS collection action seizing your property or garnishing your income/bank accounts to pay unpaid taxes. Requires Notice of Intent to Levy (NTTL) unless hardship exception applies.

See Bank Levy, Federal Tax Lien, Notice of Intent to Levy

Notice of Assessment

IRS notification that tax has been assessed on your account. Creates a legal obligation to pay. Starts the statute of limitations (usually three years).

See Statute of Limitations

Notice of Deficiency

IRS notice that you owe additional tax based on examination or adjustment. Gives you 90-day right to dispute in Tax Court before assessment.

See Examination, Tax Court

Notice of Federal Tax Lien

Public notice filed in the county recorder's office when you have unpaid federal taxes. Becomes a claim against all your property. Filed after Notice of Intent to Levy.

See Federal Tax Lien

Notice of Intent to Levy (NTTL)

IRS notice of intent to seize property or garnish income to collect unpaid taxes. Provides 30-day right to request hearing before levy occurs.

See Levy, Notice of Federal Tax Lien

Penalty

Fixed or percentage-based charge added to tax for failing to comply with tax laws (filing late, paying late, underreporting income, etc.). Different from interest. Can be abated under certain circumstances.

See Failure-to-File Penalty, Failure-to-Pay Penalty, Interest

Penalty Abatement

Formal request (typically via Form 843) to remove or reduce IRS penalties. Requires demonstration of reasonable cause or qualification under First-Time Abatement.

See Form 843, Reasonable Cause

Reasonable Cause

The standard for abating IRS penalties. Requires showing you exercised ordinary business care and prudence but a circumstance beyond your control prevented compliance, and you acted promptly to correct.

See Penalty Abatement

Record of Account

Complete chronological history of all activity on your IRS account. Shows filing dates, payment dates, penalties, notices, collection activity, and enforcement actions. Most detailed transcript type.

See Account Transcript, Tax Return Transcript

Refund

Money returned to you by the IRS. Can result from: overpayment (tax withheld or estimated tax paid exceeds tax owed), or refundable credits (like EITC).

See Refundable Credit

Refundable Credit

Tax credit that can result in a refund if it exceeds your tax liability. Example: Earned Income Tax Credit (EITC). Opposite of non-refundable credit.

See Earned Income Tax Credit, Refund

Revenue Agent

IRS employee who conducts field audits and examinations. Has authority to assess additional tax and initiate collection actions.

See Examination, Audit

Statute of Limitations

The time period within which the IRS can assess or collect tax. Generally three years from filing date (or due date if filed early). Can extend to six years if substantial underreporting; no limit for fraud.

See Notice of Assessment

Tax Court

Federal court where you can dispute IRS determinations within 90 days of Notice of Deficiency. Does not require paying tax first (unlike District Court or Claims Court).

See Notice of Deficiency, Appeals Process

Tax Return Transcript

IRS document showing detailed line-by-line information from your actual filed return, including all schedules, deductions, and credits. More detailed than Account Transcript.

See Account Transcript, Record of Account

Wage Garnishment

IRS collection action seizing a portion of your paycheck to pay unpaid taxes. Employer required to withhold amount specified in IRS notice.

See Levy, Notice of Intent to Levy