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Tax Terms and Glossary: P

Partial Payment Installment Agreement (PPIA) – An IRS installment agreement where the taxpayer will make payments to satisfy their tax debt, however the amount paid will not pay the liability in full. The IRS determines eligibility based on a taxpayers financial statement when they can make a payment, but not enough to pay off the entire debt within the time allotted by the IRS statutory time period.
Partnership – A business relationship between two or more persons. A partnership is required to file a tax return, but is not taxes. The partners are individually responsible for their share of the partnership’s income, profit, losses, expenses, and tax credits on their personal return.
Payroll Tax Deposits – Federal law requires employers to collect federal taxes from their employee’s earnings, and sending in the collected amount to the government on a regular basis. The deposit is made with a licensed financial institution or Federal Deposit bank. If the employee fails to make the deposit, they can be asses a trust fund recovery penalty.
Payroll Taxes – Employee withholding taxes, employer and employee Social Security tax, and Medicare Tax which is placed in trust. Payroll taxes are only deducted from employees who file a W-4, and does not apply to independent contractors.
Penalties – A fine assessed by the IRS, most commonly for failure to pay, and or failure to file.
Penalty Abatement – The IRS will abate a portion or all of the taxpayer’s penalties if the individual or entity can prove that they had a good reason for not paying the taxes on time.
Petition – IRS form requesting a hearing in United States Tax Court to argue an IRS judgment or tax liability.
Power of Attorney (IRS Form 2848) – The IRS form which gives legal power for an authorized individual (CPA, Enrolled Agent, or Tax Attorney) the authority to represent you before the IRS. In order for the professional to represent you in regards to the IRS they must have power of attorney.
Primary Residence – A taxpayer’s home, or place of residence where they live the majority of their time. A taxpayer may only have one primary residence at one time.
Profit and Loss Statement (or income statement) – Financial statement with a rundown of the revenues, costs, and expenses of an individual or business during a specific period of time. The profit or loss (net income) is calculated by revenue generated (e.g. income, gross receipts, interest etc, ) minus any sustained expenses.
Profit Sharing Plan – A plan for sharing a predetermined percentage of a company’s profit with its employees. A Profit Sharing Plan also helps a company align the interest of its employees with the shareholders.
Proration – A way of dividing the costs and expenses of a household. This helps to determine liable taxpayer’s monthly expenses when a portion of the expense is shared with other household members. The calculation is done by comparing the liable taxpayer’s gross income with the other members of the household. The liable taxpayer is responsible for the same percentage of shared expenses.
Protracted Installment Agreement – An IRS installment agreement which extends beyond the time period allowed under the IRS guidelines.
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