Taxation Legal Terms and Definitions

Gross income Money, goods, services, and property a person receives that must be reported on a tax return. Includes unemployment compensation and certain scholarships. It does not include welfare benefits and nontaxable Social Security benefits. Standard Mileage Rate For 2004, the standard mileage rate for the cost of operating your car, van, pickup, or panel truck is increased to 37.5 cents a mile for all business miles. Work Opportunity Credit and Welfare-to-Work Credit The work opportunity credit and the welfare-to-work credit are scheduled to expire for wages paid to individuals who began working for you after 2003. Dependency exemption Amount that taxpayers can claim for their eligible dependents. Each exemption reduces the income subject to tax. The exemption amount is a set amount that changes from year to year. Form W-4, Employee's Withholding Allowance Certificate Completed by the employee and used by the employer to determine the amount of income tax to withhold. Employee Works for an employer. Employers can control when, where, and how the employee performs the work. Earned Income Credit A tax credit for certain people who work, meet certain requirements, and have earned income under a specified limit. Electric and Clean-Fuel Vehicles For vehicles placed in service in 2004, the maximum clean-fuel vehicle deduction and qualified electric vehicle credit are scheduled to be reduced by 25%, as compared to 2003. Meal Expense Deduction Generally, you can deduct only 50% of your business-re-lated meal expenses while traveling away from your tax home for business purposes. Also, you can generally de­duct only 50% of certain reimbursements you make to your employees for meal expenses they incur while traveling away from home on business. Limited Liability Company An LLC may be classified for Federal income tax purposes either as a partnership, a corporation, or an entity disregarded as an entity separate from its owner by applying the rules in Regulations section 301.7701-3. See Form 8832, Entity Classification Election, for more details.

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	Did You Know?
	If you have employees, you are responsible for Federal Taxes If you have employees, you are responsible for several federal, state, and local taxes. As an employer, you must withhold certain taxes from your employees pay checks. Employment taxes include the following. Federal income tax withholding Social Security and Medicare taxes Federal unemployment tax act (FUTA).