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Tax Terms and Glossary: I

Independent Contractor - A worker contracted to perform a service that is not under the control of an employer, except for the results of your work. An Independent contractor most often files a 1099, without any taxes deducted by the person who contracted them.
Individual Retirement Account (IRA) – An investment vehicle used by individuals to save for their retirement. IRA’s can also be tax deferred or tax deductable depending on a taxpayers filing status, income, and employee coverage. Monies placed in an IRA are not taxed until they are withdrawn; however there are sever tax and other penalties for withdrawing from your IRA early.
Individual Tax Liability – Tax liability owed by an individual s reported on IRS form’s 1040, 1040a, and 1040ez. Taxpayers on both join and individual returns are responsible for their individual tax liability. Married taxpayers filing jointly will owe taxes both jointly and as individuals.
Individual taxpayer Identification Number - A nine digit provided by the IRS for workers who do not qualify for a Social Security number but still have to file and pay taxes.
Injured Spouse Relief - The IRS will give a separate tax refund to someone who filed jointly and their return was used to pay for their spouse’s past due child support or other federal debt which they were not responsible for. The Innocent spouse can request that the IRS give them their portion of the refund which was used to satisfy their spouse’s debt. To qualify you must have no legal obligations to the debt which was paid, made and reported tax payments such as employee withholdings, earned income, and claimed the earned income credit, or claimed another refund credit.
Innocent Spouse - The IRS provides Innocent Spouse relief for taxpayers who filed a joint return with the spouse or ex-spouse, and were unaware, and did not benefit from any errors on the returns. If a taxpayer does not qualify for Innocent Spouse relief both are equally liable for the tax debt plus penalties and interest. See Innocent Spouse Relief for more information.
Installment Agreement – IRS program which allows you to pay off a delinquent tax debt over a pre determined period of time. To learn more about IRS installment agreements, click here.
Installment Agreement Processing Fee – The IRS charges this fee when you set up an installment agreement or payment plan with them. The fee is currently $105.00
Installment Agreement Reinstatement Fee – The IRS charges this fee if you default on an installment agreement. The IRS will usually place you back in the installment agreement if it is within 3 months of the delinquency. The current fee is $43.00.
Interest Rate – The rate at which a borrower is charged for the use of money they borrow from a lender.
Internal Revenue Service (IRS) – The government agency which is responsible for the administrating, collection and enforcement of tax, and internal revenue for the Department of the Treasury of the United States.
Investment – Funds committed, or an asset bought in order to generate future revenue.
IRS Allowable Expenses – The IRS has predefined allowable expenses which are necessary for a taxpayer and or their family’s health, welfare, or production of income. The expense must be reasonable and fall under the standards which the IRS has defined. The minimum amount between the taxpayers actual spending and the national or local standard is always used by the IRS to determine the allowable expense.
IRS Customer Service – A call center division of the IRS which handles inbound calls from taxpayers. The IRS customer service department is not able to issue, release, or enforce and collection action.
IRS Federal Tax Lien – A legal claim secured to your property, asset, or credit to ensure payment of a tax debt.
IRS Managerial Review – Any case which a taxpayer owes in excess of $5,000 in tax debt must be reviewed and approved by a group manager top ensure that the debt is accurate and reflects the taxpayers financial statement, ability to pay, and a reason for not seizing the taxpayers assets. The group manager must approve any resolution which is proposed as fitting for the case.
IRS Office of Appeals – The IRS office is a separate and independent from all other IRS office’s and provides an unbiased location to appeal and resolve and disagreement of tax law. The appeals office reviews are usually handled in an informal, manner by phone, correspondence, or in person without the time and expense of going to court.
IRS Revenue Agents – An IRS accountant whose job is to audit the financials of individual and business entities to ensure that their tax liabilities have been fully satisfied. The Revenue Agent is not involved in the collection process.
IRS Revenue Officers – An employee of the IRS whose responsibility is collecting back taxes. A revenue officer usually works out of a field office, and tends to the collection of taxpayers in their geographical vicinity.
IRS Summons – A legal order by the IRS, for a taxpayer or third party to appear and / or provide financial information or documents to the IRS. The summons can be enforced with force if the information is relevant to the IRS investigation.
IRS Tax Liability – Tax debt owed to the IRS, also known as IRS back taxes.
IRS Taxpayer Advocate Service (TAS) – An independent organization within the IRS which assists taxpayer in resolving their tax problems if the usual channels are not working, or they are experiencing extreme hardship.
Itemized Deductions – An expense reported on an individual’s tax return, which is subtracted from the adjusted gross income to determine what income is taxable. Common itemized deductions include medical expenses, charity, interest and contributions to a tax deferred or tax free investment account
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