Taxation Legal Terms and Definitions

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. Partnership return If you need more time to file a partnership return, file Form 8736, Application for Automatic Extension of Time To File U.S. Return for a Partnership, REMIC, or for Certain Trusts, for an automatic 3-month extension. File Form 8736 by the regular due date of the partnership return. Income taxes Taxes on income, both earned (salaries, wages, tips, commissions) and unearned (interest, dividends). Income taxes can be levied on both individuals (personal income taxes) and businesses (business and corporate income taxes). Depreciation and Section 179 Expense 50% special depreciation allowance. For qualified property you acquire after May 5, 2003, you can take a special depreciation allowance that is equal to 50% of the property's depreciable basis. However, instead of claiming the 50% special allowance, you can elect to claim the 30% special allowance or elect not to claim any special allowance. Acquisition The purchase of one corporation by another, through either the purchase of its shares, or the purchase of its assets. Subchapter S The S-Corporation must complete and file IRS Form 1120s to report its annual income to the IRS each year. Self-Employment Tax The self-employment tax rate on net earnings remains the same for 2003. This rate, 15.3%, is a total of 12.4% for social security (old-age, survivors, and disability insur­ance) and 2.9% for Medicare (hospital insurance). Dependent A person, other than the taxpayer or spouse, who entitles the taxpayer to claim a dependency exemption. 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. Compulsory payroll tax An automatic tax collected from employers and employees to finance specific programs.

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	Corporate Reorganizations; Transfers of Assets or Stock Following a Reorganization These proposed regulations address the effect of transfers of the assets or the stock of parties to a reorganization pursuant to transactions intended to qualify as reorganizations within the meaning of section 368(a) of the Internal Revenue Code. REG-130863-04. Published August 17, 2004.