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Tax Terms and Glossary: C

C- Corporations – A legal entity which is taxed separately from its owners. Most large corporations are C corporations for tax purposes.
Cafeteria plan – A plan provided by an employer which allows its employees to select from a variety of taxable and non taxable benefits.
Cancellation of Debt Income (COD) – When you take out a loan, and the repayment is cancelled, then the loan may be included in the taxpayer’s gross income, and incur taxes.
Capital expenditures (CAPEX) – Funds spent by a company to improve or acquire physical assets. The funds spent are not deductible, but rather added to the base value of the property.
Capital Gain or Loss - Profit or loss from the exchange or sale of real property, (personal and investment), or other “capitol asset.” Capital gains or losses often have preferred tax treatment.
Carrybacks and Carryforwards - A tax benefit that allows a corporation to deduct losses in order to reduce a tax liability. A entity may carryback the current year’s net profit from the past two years starting from the earliest year, and if it exceeds these two years, it can be carried forward for up to 20 years. Some examples of losses that this applies for are charitable contributions, and net operating losses.
Cash method (or cash basis) – A common method of accounting used to calculate taxes on a transaction. The cash method states that a transaction is taxable as soon as the payment is made, or the expenses when they are received, rather than when they are earned or incurred. (The other most common method is the accrual method).
Certificate of Release of Federal Tax Lien – The IRS issues this when a taxpayer has satisfied a tax debt in full, along with penalties, interest, and fee’s, and/or when the IRS can no longer legally collect the tax debt. This notifies the taxpayer that the IRS will be lifting the tax lien they placed on their credit and/or property.
Collection Due Process (CDP) Hearing – Taxpayers and business’s have the right to request an appeal hearing within 30 days of a notice of enforced collection action, or a Notice of Federal Tax Lien. This hearing allows the taxpayer to dispute or propose another resolution to the tax matter.
Certified Public Accountant (CPA) – A state licensed accountant, who has passed the Uniform Certified Public Accountant Examination, as well as state educational requirements. An accountant has a strong education in business, accounting and tax subject matters.
Chapter 11 - Business Bankruptcy. This bankruptcy is to help a business entity restructure itself, and allows it to pay off a portion of its debt while discharging the remainder.
Chapter 13 – Debt Repayment Plan. This type of bankruptcy helps a debtor pay back a portion of his debts through a trustee payment plan, while discharging the remainder. A chapter 13 can also remove liens, and reduce loan balances in certain situations.
Chapter 7 – Personal Bankruptcy. This allows debtors to discharge in full qualifying unsecured debts, and to liquidate all non exempt property to satisfy creditors.
Citizen or Resident Test - As long as all other dependency test are met, the citizen or resident test allows taxpayers to claim a dependency exemption for persons who are U.S. citizens for some part of the year or who live in the United States, Canada, or Mexico for some part of the year.
Collateral Agreement – An agreement which allows the government to collect additional funds above and beyond what the Offer in Compromise has secured. The IRS will do this if they think you are going to have a large amount of money coming in the future, from an increase in income, or a possible inheritance.
Collection Appeal Request (Cap Form 9423) - The process of appealing a decision by a revenue officer, for additional review. Some of the situations that this may cover are intrusion of privacy, asset seizure, early termination of an installment agreement, or a property lien that is stopping you from selling or refinancing a property to satisfy a tax debt.
Collection Division - The IRS department responsible for the collection of back taxes and unfiled tax returns for individuals and other entities which are in a delinquent status with the IRS. All revenue officers, the Service Center Collection Function, the Automated Collection Site, and the Field Collection Function, are all a part of the IRS Collection Division.
Collection Hold - The IRS will suspend collection activity on a tax debt for a limited period of time, in order to allow the taxpayer sufficient time to file their taxes, gather financial information, or acquire the funds to pay a payment or pay in full on the tax liability.
Collection Information Statement (CIS) - A statement of financial Affairs for an individual (Form 433-F) and businesses (Form 433-B) which lists all income, assets, and expenses. The IRS uses this to determine the collectability of a taxpayer or a business.
Collection Statute Expiration Date (CSED) - The date at which the Statute of Limitations for the IRS to collect a tax with penalties and interest ends.
Collection Statute of Limitation (Federal) - IRS code which places a limit on the time which the IRS can collect a tax liability. The collection statute of limitations runs from 3 to 10 years from the date of filing, and may be extended for a number of reasons.
Commission - Compensation by an employee for a service rendered. Commissions are paid to an employee based off their sales performance.
Community property – A method of defining ownership between spouses that is law in the states of Arizona, California, Idaho, Louisiana, Nevada, new Mexico, Texas, Washington, and Wisconsin. The effect of community property affects how taxes are reported for a married couple that files separately. In a state that community property is law, a spouse has to report one-half of the income earned by their spouse. In a state that holds common law, the spouse’s income does not have to be reported.
Compliance – When a taxpayer or entity has their tax returns filed and paid in full with the IRS.
Compulsory Payroll Tax - A - Tax collected from employers to fund specific programs such as Medicare, and social security.
Corporations – A legal entity which is separate from its owners (shareholders), with the ability to acquire property, assets, and incur tax and other debts.
Correspondence Audit — Audit which is performed through the mail. The IRS will send you a notice in the mail, with a request for documentation to pack up a claim on your tax return. The most common notice to receive is the CP2000, which is computer generated notice of under reported, or non reported income.
Current Market Value – The Amount a buyer would pay for an asset if sold today. The current market value of an asset may be different from what you paid or appraised an item for.
Currently Non-Collectible (CNC) - IRS Status 53, which is defined as a taxpayer who does not have to make tax payments on a delinquent debt due to severe economic hardship, or personal income restrictions. The IRS will remove the taxpayer from collections, until the taxpayer ahs the ability to pay on their tax debt again.
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