Dictionary - Your Money
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A Ton of Money

"A ton of money" is a slang term for "a lot of money" For example, if something is very expensive, you might say, "It costs a ton of money." If you're optimistic about a new investment, you might say, "This stock is going to make me a ton of money." The phrase does not refer to the actual, literal weight of the money, but to the idea that it would take a big pile of currency to get to 2,000 pounds (one ton). Money slang is widely used in personal finance, investing and business. Read more


An abacus is a counting device that performs basic mathematical functions. Developed in the ancient Near East in the third millennium BCE, the abacus has been used continuously by mankind for thousands of years. Read more


An abatement is a reduction in a tax rate or tax liability. Property taxes are a common subject of abatement (though the term is often used when discussing overdue debt). Read more

Ability to Pay

Ability to pay refers to a borrower’s capacity to make good on his loan obligations.In banking, ability to pay is often called “financial capacity.” When considering a loan, a banker will first and foremost consider the borrower’s ability to pay, which can be viewed as the financial capacity of the borrower to service his existing debts. Read more

Ability-to-Pay Taxation

Ability-to-pay taxation is a tax that's assessed based on the taxpayer's ability to pay the tax. John Doe earns $40,000 a year. Read more

Above-the-Line Deduction

An above-the-line deduction is a tax deduction that reduces adjusted gross income.   For example, let's assume that John Doe had $100,000 of total income for 2012. Read more

Abusive Tax Shelter

An abusive tax shelter is an investment strategy that illegally shields assets from tax liability.   For example, let’s say John Doe and his wife have a child who begins college this year. Read more

Account Balance

An account balance is a statement of how much money is in an account. For example, let's say John Doe deposits $100 into a new bank account. Read more

Account Freeze

Also called an account hold, an account freeze occurs when a bank or other financial institution prevents any transactions from hitting an account. For example, let's say John Doe is selling drugs for a living. Read more

Ad Valorem Tax

An ad valorem tax is a property tax levied based on the value of the property in question. Ad valorem (Latin for "according to the value") taxes are levied solely as a percentage of a property's market value without regard to quantity or intrinsic value. Read more

Adjusted Balance Method

The adjusted balance method determines the finance charges on an account once all credits and debits for the accounting period have been posted. The adjusted balance method is used to determine the periodic finance charges on an account, such as a bank or credit card account. Read more

Adjusted Cost Base (ACB)

Adjusted cost base (ACB) is an income tax term that refers to an adjustment in an asset's book value resulting from the cost of improvements, payouts, and similar improvements or dispositions. Let's assume Company XYZ buys a factory building for $1,000,000. Read more

Adjusted Gross Income (AGI)

Adjusted gross income (AGI) is the figure used by the Internal Revenue Service to determine a taxpayer's eligibility for certain tax benefits. AGI is calculated by adding together all qualified income and subtracting all qualified deductions. Read more


Alimony is a series of payments made to an ex-spouse or separated spouse according to a divorce decree or separation agreement. Also known as "spousal support," the idea behind alimony is to provide a spouse with lower income or lower income potential with financial support. Read more

Alternative Minimum Tax

The alternative minimum tax (AMT) is income tax owed using a parallel tax code designed to ensure that every taxpayer, particularly rich ones and corporations, pay at least some income tax each year. Congress created the AMT in 1969 as a way to ensure that people with high incomes and corporations could not avoid taxes by using various tax shelters. Read more

Amended Return

An amended return is a Form 1040X filed by a taxpayer to correct mistakes made on a Form 1040, Form 1040A, Form 1040EX, Form 1040NR or Form 1040NR-EZ (U.S.Individual Income Tax Return) filed in the previous three years. Read more

American Opportunity Tax Credit

The American Opportunity Tax Credit (formerly known as the Hope Tax Credit) is a tax credit available to college students or their parents to help pay for college expenses. Eligible taxpayers can qualify for up to $2,500 under the American Opportunity Tax Credit. Read more


In the tax world, an audit refers to the review of a taxpayer's tax return for accuracy.  In the accounting world, an audit is the examination and verification of a company's financial statements and records, and in the United States, examination for their compliance with Generally Accepted Accounting Principles (GAAP). Read more

Automated Clearing House (ACH)

ACH, which stands for or Automated Clearing House, is a fund transfer system operated by NACHA, the National Automated Clearing House Association.  Launched in 1974, ACH is used for a wide range of financial transactions. Read more

Average Daily Balance Method

The average daily balance method is a way of calculating interest by considering the balance owed or invested at the end of each day of the period rather than the balance owed or invested at the end of the week, month or year. The frequency of interest compounding affects how lenders and borrowers use the average daily balance method. Read more

Back Taxes

Back taxes are state, federal, or local taxes that are past due. For example, let’s assume that John Doe forgets to file his tax return for 2011. Read more

Back to Back Loan

With back to back loans two parties, each in a different country, lend money to each other in an effort to hedge against currency risk.They are also called "parallel loans." Company XYZ is in the United States and Bank ABC is in Germany. Read more

Backup Withholding

Backup withholding is a way for the Internal Revenue Service to withhold taxes from a taxpayer who does not provide or have a taxpayer identification number or Social Security number. In general, the employer or entity that is making payments to the payee must withhold a percentage in federal income taxes (about 28%) from their payments. Read more

Bad Credit

Bad credit refers to the status of your credit history and reveals the likelihood of you being a risky borrower. Read more

Bad Debt

In business, bad debt is the portion of a loan or portfolio of loans a lender considers to be uncollectable.In personal finance, bad debt generally refers to high-interest consumer debt. Read more

Bail Bond

Bail is a set amount of money (or property) required to be paid by a defendant for release from custody, with the promise of returning for an appointed court date. Read more

Balanced Budget

A balanced budget exists when a household's (or country's) revenues are equal to its expenses. For example, let's assume that John Doe and his wife Jane Doe earn $100,000 a year. Read more

Balloon Loan

A balloon loan is a loan with a large payment made near or at the end of the loan term. Unlike a loan whose total cost (interest and principal) is amortized -- that is, paid incrementally during the life of the loan -- a balloon loan's principal is paid in one sum at the end of the term. Read more

Balloon Payment

A balloon payment is a large payment made at or near the end of a loan term. Unlike a loan whose total cost (interest and principal) is amortized -- that is, paid incrementally during the life of the loan -- a balloon loan's principal is paid in one sum at the end of the term. Read more

Bank Debits

Bank debits are reductions in customer accounts. Let's say you write a check at Target for $50. Read more

Bank Guarantee

A bank guarantee is a promise from a bank or other lending institution that if a particular borrower defaults on a loan, the bank will cover the loss.note that a bank guarantee is not the same as a letter of credit (see the differences between those two below). Read more


Basis refers to the original price of an asset.It is sometimes called cost basis or tax basis. Read more

Belt and Suspenders

Belt and suspenders is a term to describe a risk-averse person or situation.The term refers to the act of wearing redundant items to hold up a pair of pants. Read more

Bracket Creep

In the tax world, bracket creep occurs when inflation drives income up and into higher tax brackets. Let's say John Doe makes $100,000 a year and is in the 28% federal income tax bracket. Read more

Broker Loan

A broker loan is a loan that the lender can obligate the borrower (a brokerage house) to repay at any time. Also known as a call loan or demand loan, a broker loan is granted to a brokerage house in need of short-term capital for financing clients' margin portfolios. Read more

Buffett Rule

The Buffett Rule is a tax rule change included in President Barack Obama's 2013 budget proposal.If implemented, the rule would ensure that individuals who earn more than one million dollars per year pay a minimum effective tax rate of at least 30 percent. Read more


Bullet is usually short for bullet payment, which is typically a large payment made near the end of a loan that does not amortize over time. Unlike a loan whose total cost (interest and principal) is amortized – that is, paid incrementally during the life of the loan -- a bullet loan's principal is paid in one sum at the end of the term. Read more

Bullet Loan

A bullet loan is a loan that does not amortize over time and must be repaid with a single large payment (also called a balloon payment) at the end of the term of the loan. Unlike a loan whose total cost (interest and principal) is amortized -- paid incrementally during the life of the loan -- a bullet loan's principal is paid in one sum at the end of the term. Read more

Canceled Check

A canceled check is a check that has cleared or prevented from clearing. Let's say John Doe writes a $100 check to Jane Smith. Read more

Cancellation of Debt

Cancellation of debt occurs when a lender tells a borrower that he or she no longer must repay a loan. Let's assume that John Doe borrowed $100,000 from Bank XYZ for a luxury car. Read more

Capital Gains Tax

A capital gains tax is a tax on the increase in the value of an investment. A capital gain is the difference between the purchase price (the basis) and the sale price of an asset. Read more

Capital Gains Treatment

Capital gains treatment refers to whether capital gains are taxed as short-term capital gains, long-term capital gains, or in another manner. Let's assume you purchase 100 shares of XYZ Company for $1 per share. Read more

Car Allowance Rebate System (CARS)

The Car Allowance Rebate System (CARS), also known as "cash for clunkers," was a U.S.federal government funded program that provided economic incentives for people to purchase a more fuel-efficient car when trading in their old, less fuel-efficient car. Read more

Cash Advance

A cash advance is a high interest loan typically taken out on a credit card or a line of credit from a bank.Interest on a cash advance begins accruing immediately upon disbursement. Read more

Cash Flow Loan

A cash flow loan is a loan, usually to a company, intended to meet daily cash needs during times when cash flow is inconsistent.These loans are short-term in nature; borrowers usually must repay them in 30 to 180 days. Read more

Certified Financial Planner (CFP)

Certified Financial Planner (CFP) is a professional designation attained by a financial planner or advisor who has successfully completed the requirements set by the Certified Financial Planner Board.  The CFP is a respected designation that denotes a person is a competent, professional and ethical financial planner.CFP professionals must adhere to a code of ethics and professional responsibility, and every applicant must pass a background check before obtaining his or her designation.  Those who obtain the CFP designation usually go on to provide professional financial advice to individuals. Read more

Chapter 11

Chapter 11 bankruptcy refers to the section of U.S.bankruptcy law under which companies and individuals can attempt to restructure their debts in order to repay them. Read more

Chapter 13

Chapter 13 refers to the section of U.S.bankruptcy law under which individuals may attempt to restructure their finances in order to repay their debts. Read more

Chapter 7

Chapter 7 refers to the section of U.S.bankruptcy law under which companies and individuals liquidate their assets in order to repay their debts. Read more

Charge Card

A charge card is a plastic card issued by a financial institution that allows the user to make purchases with funds borrowed from that financial institution. Colloquially speaking, a charge card is the same as a credit card. Read more

Child Tax Credit

The child tax credit is a tax-bill reduction given to people with qualifying children under 17 years old. The Internal Revenue Service (IRS) allows taxpayers to reduce their federal income taxes by a fixed amount for each qualifying child. Read more

Christmas Club

Banks offer different types of savings accounts any time of year.A way to save money toward holiday shopping and seasonal spending is a Christmas Club account. Read more

Closed End Lease

A closed end lease, also called a "walk away lease", is usually a kind of car lease that allows the lessee to return the car at the end of a lease period. Let's assume John Doe leases a 2021 Ford Mustang. Read more


Collateral is an asset pledged by a borrower to a lender, usually in return for a loan.The lender has the right to seize the collateral if the borrower defaults on the obligation. Read more

College Work Study Program (CWSP)

The College Work Study Program (CWSP) is a type of financial aid that a school awards to a student who has completed a FAFSA and has demonstrated a financial need.The student is given a job (usually on-campus) and is paid by the school not to exceed a determined amount. Read more


A conservatorship is the legal establishment of a court appointed manager for the personal and financial affairs of someone who is legally incapacitated, also referred to as a ward.The ward may be physically or mentally incapacitated, or be a minor. Read more

Contactless Payment

Contactless payment technology allows transactions through a chip embedded in payment cards, tags, key fobs, or mobile phones.A chip or QR code communicates with a reader device using radio frequency or Near Field Communication (NFC) standards. Read more

Cost Basis

Cost basis refers to the original price of an asset.Cost basis is sometimes called tax basis. Read more


Credit is an agreement whereby a financial institution agrees to lend a borrower a maximum amount of money over a given time period.Interest is typically charged on the outstanding balance. Read more

Credit Bureau

A credit bureau is an agency that collects, organizes, and disseminates credit information to creditors and potential creditors.Credit bureaus generally collect information on individuals and small businesses. Read more

Credit Crunch

A credit crunch occurs when loans are very expensive and difficult to obtain. During a credit crunch, lending institutions are limited as to the amount of funds they can use to make loans. Read more

Credit Limit

A credit limit is the maximum amount that a person may charge on a credit card or borrow from a financial institution. After a financial institution has approved an applicant's request for a credit card or another type of revolving credit, the lender will decide on the maximum amount of credit it's willing to extend to that person; this maximum amount is known as the credit limit. Read more

Credit Quality

Credit quality is a measure of an individual's or company's creditworthiness, which is ability to repay debt. A FICO score, which is created and calculated by the Fair Isaac Corporation, is a measure of an individual's credit quality. Read more

Credit Rating

In personal finance, the term credit rating commonly refers to a score issued by the Fair Isaac Corporation (a "FICO score").A person's credit rating indicates how creditworthy he or she is. Read more

Credit Report

A credit report is a report detailing a person's financial history specifically related to their ability to repay borrowed money. There are three major credit bureaus in the United States: TransUnion, Experian and Equifax. Read more

Credit Risk

Credit risk is the chance that a bond issuer will not make the coupon payments or principal repayment to its bondholders.In other words, it is the chance the issuer will default. Read more

Credit Score

Credit score refers to the FICO score, which is created and calculated by the Fair Isaac Corporation and is a measure of an individual's creditworthiness.It is a mathematical summary of the information on a person's credit report. Read more

Credit Union

A credit union is a financial institution that is owned and controlled by its members rather than shareholders.The members of the credit union pool their deposits and provide loans and other financial services to each other. Read more

Credit Utilization Rate

The credit utilization rate is a calculation comparing an individual's total debt balances to total available credit. The credit utilization rate is also referred to as the credit utilization ratio. Read more

Credit Utilization Ratio

Credit utilization, commonly referred to as the credit utilization ratio or credit utilization rate, is a calculation comparing an individual's total debt balances to total available credit. The credit utilization ratio is also referred to as the utilization ratio. Read more


A creditor is an individual or institution that lends money or services to another entity under a repayment agreement. There are generally two types of creditors: personal and real. Read more

Dangerous Asset

A dangerous asset is an asset (usually a physical asset rather than a security) that carries a high degree of liability for its owner. For example, let's say John Doe has a 10-foot-deep pool in his back yard, which is in a neighborhood full of kids. Read more

Death Tax

A death tax, also called an estate tax, is a tax assessed on all or a portion of an inherited estate.Life insurance, pensions, real estate, cars, belongings and debts are all part of one's estate. Read more


In the business world, debt is an amount borrowed. For example, let's assume Company XYZ has invented a new product that will revolutionize the widget market. Read more

Debt Discharge

A debt discharge is a legal action that relieves a borrower from his or her obligations to a lender.  Debt discharge typically happens during bankruptcy, which is a legal process under which a borrower protects and or liquidates assets in order to repay debts. Read more

Debt Financing

Debt financing is the use of borrowing to pay for things. For example, the basic idea behind acquisition debt financing is that the acquirer purchases the target with a loan collateralized by the target’s own assets. Read more

Debt Service

Debt service is the act of making interest and principal payments on debt. For example, let's say Company XYZ borrows $10,000,000 and the payments work out to $14,000 per month. Read more


In the finance world, deductible is usually short for tax-deductible, which refers to an expense that reduces the amount of income that is subject to tax.In the insurance world, a deductible is a required payment from the insured to the insurer in order to trigger coverage. Read more


A deduction is a reduction in taxable income, which thereby lowers the amount of taxes owed.Federal, state, and local tax codes determine what kinds of items or expenses are deductible and which taxpayers are eligible for deductions. Read more


A default is a violation of a promise to pay debt in agreed amounts at agreed times. Let's assume Company XYZ has a line of credit for $10 million from Bank ABC, and $5 million of that line is outstanding. Read more


In finance, to dehedge is to engage in an investing strategy that does not protect an investment or portfolio against loss.It usually involves securities that move in the same direction. Read more


Delinquent means “something or someone who fails to accomplish that which is required by law, duty, or contractual agreement, such as the failure to make a required payment or perform a particular action.”   In financing and investing, delinquency occurs when a person or business with an obligation to make payments against a debt, such as loan payments, does not make those payments on time or in a regular, appropriate manner.The term "delinquent" usually refers to a situation where a borrower is late or overdue on a payment, such as for income taxes, a mortgage, an automobile loan, or a credit card account. Read more


A dependent relies on someone else for most or all of his or her financial support.   In general, dependents are exemptions that reduce a taxpayer's taxable income. Read more

Direct Deposit

Direct deposit refers to the electronic transfer of a cash payment into the recipient's bank account. Direct deposit is a method of payment where a paying party, such as an employer or government agency, electronically transfers a payment in cash from its bank account into the bank account of the payee. Read more

Direct Tax

A direct tax is any tax levied on companies or individuals that cannot be transferred to another party.It is the opposite of indirect tax. Read more

Discretionary Income

Discretionary income is the income left over after paying taxes and normal living expenses. Discretionary income is the income remaining after the essentials (taxes, food, clothing, shelter, etc.) have been paid for. Read more

Disposable Income

Disposable income, also known as net pay, refers to the income that’s left for personal spending after direct taxes, such as federal and state income taxes, have been accounted for.It is a key concept in personal budgeting and economic policy. Read more

Dividend Tax Credit

The dividend tax credit generally refers to a Canadian tax program whereby Canadian residents receive a reduction in taxes owed on dividends received from Canadian corporations. In Canada, dividends are considered taxable income to investors. Read more

Double Taxation

Double taxation occurs when a tax is imposed more than once on the same asset, income stream, or transaction. The most well-known example of double taxation in the U.S. Read more


In the tax and import/export world, a duty (or customs duty) is money collected under a tariff.   A duty is a federal tax on imports or exports. Read more

Early Withdrawal

Early withdrawal refers to a depositor's or investor's withdrawal of funds from an account before the agreed-upon withdrawal date.Early withdrawals usually incur penalties. Read more

Earned Income

Earned income is an IRS term for income that is obtained by participating in a business or trade.Earned income typically includes salaries and bonuses, wages, commissions and tips. Read more

Earned Income Tax Credit (EIC)

The earned income tax credit (EIC) is a tax credit for low-income workers.  Earned income is an IRS term for income obtained by participating in a business or trade -- typically, this means salaries, bonuses, wages, commissions, and tips.Union strike benefits are also considered earned income, as are long-term disability benefits received prior to minimum retirement age. Read more

Earning Potential

Earning potential often refers to the top salary for a particular field or profession.In the finance world, the meaning is not much different: earning potential is the biggest profit a company could potentially make. Read more

Education Credit

An education credit is a tax credit associated with the payment of education expenses during the tax year. Currently, there are three major education credits in the United States (amounts subject to change by the IRS). Read more

Education IRA

An education IRA, now more formally known as a Coverdell Education Savings Account (or Coverdell ESA), is a tax-advantaged savings account intended to help parents and guardians prepare for the expense of their child’s education. An education IRA may be opened on behalf of a minor under the age of 18. Read more

Educator Expenses Deduction

The educator expenses deduction is an IRS deduction that allows teachers to exclude out-of-pocket teaching expenses from income. In order to qualify for the educator expenses deduction, a person must have worked at least 900 hours in an elementary or secondary school during a given school year. Read more

Effective Tax Rate

The effective tax rate is the average rate at which an individual is taxed on earned income, or the average rate at which a corporation is taxed on pre-tax profits. The formulas for effective tax rate are as follows: Individual: Total Tax Expense / Taxable Income Corporation: Total Tax Expense / Earnings Before Taxes Effective tax rates simplify comparisons among companies or taxpayers. Read more

Electronic Filing

Electronic filing, or e-File, is the online tax return filing system developed by the Internal Revenue Service (IRS) Individual taxpayers, businesses, large and mid-sized corporations, and non-profits can file their required tax returns, including quarterly filings, directly online with the IRS through its automated e-File system.The e-File system allows taxpayers to make payments from a credit or debit card, or through the U.S. Read more

Electronic Funds Transfer (EFT)

An electronic funds transfer (EFT) allows payments between two parties via electronic signals.Electronic funds transfers began in the 1960s but became widespread in the 1970s with the introduction of the automatic teller machine (ATM).  Since then, electronic fund transfers have become ubiquitous, with millions of transactions taking place every day. Read more

Employer Identification Number (EIN)

An employer identification number (EIN) is a number assigned to businesses by the IRS.It is also known as the Federal Employer Identification Number (FEIN) or the Federal Tax Identification Number. Read more


An encumbrance is a limitation on the ownership of a property. In the real estate world, an encumbrance is similar to a lien. Read more

Enrolled Agent (EA)

An enrolled agent (EA) is person who is authorized to represent a taxpayer before the Internal Revenue Service (IRS). To become an EA, a person has to pass a three-part comprehensive IRS test of individual and business tax returns or be a former IRS employee with appropriate experience. Read more

Estate Tax

An estate tax is levied on assets inherited by the heirs to a deceased person's estate.  The estate tax is applied differently according to U.S.Federal and state laws as well as international law. Read more


An executor administers the distribution of an estate to beneficiaries. A will is a legal document that indicates how a person wants his or her estate (money and property) to be distributed after death. Read more

Expected Family Contribution (EFC)

The expected family contribution (EFC) is the amount of money that a family is expected to contribute toward a student's college tuition or expenses in a given year. Upon completion and submission of the FAFSA, the student's financial information will be reviewed by the federal and state government education departments. Read more

Fair and Accurate Credit Transactions Act (FACTA)

The Fair and Accurate Credit Transactions Act (FACTA) allows consumers to get a free credit report from the three major credit reporting agencies every 12 months in order to help prevent identity theft.[InvestingAnswers Feature: The Hidden Costs of "Free" Credit Reports] FACTA does many things to protect consumers from fraud and identity theft. Read more

Fair Credit Reporting Act (FCRA)

The Fair Credit Reporting Act (FCRA) is the principle legislation for consumer credit rights in the U.S.It regulates the collection, distribution, and use of consumer credit information. Read more

Federal Farm Credit System (FFCS)

The Federal Farm Credit System (FFCS) is a group of lenders that provide loans and other credit services to farmers, ranchers, and producers or harvesters of aquatic products.  People or businesses that process or market products from farmers, ranchers, or aquatic producers may also be eligible for FFCS loans, as are certain rural homeowners, utility cooperatives, and farm-related businesses.  Although President Roosevelt created the system in 1933, the FFCS received most of its power in 1971 with the passage of the Farm Credit Act. Read more

Federal Funds

Federal funds are monies held by banks at the Federal Reserve to meet reserve requirements.Funds in excess of reserve requirements can be loaned to other banks in order for those banks to meet reserve requirements. Read more

Federal Income Tax

Federal income tax is a tax on a range of certain kinds of income.Taxpayers generally calculate and pay federal income tax by filing an IRS Form 1040 by April 15 of each year. Read more

Federal Insurance Contributions Act (FICA)

The Federal Insurance Contributions Act (FICA) is a US payroll tax used to fund the Social Security and Medicare programs.These programs are designed to support those without wage income: retirees, dependents of non-working adults, and those with disabilities. Read more

Federal Tax Bracket

A federal tax bracket is range of incomes for which a certain federal income tax rate applies. The United States has a progressive tax system, which means that different portions of a person's or company's income are taxed at increasing rates (that's why the rates are often referred to as marginal tax rates). Read more

Federal Work Study Program (FWSP)

The Federal Work Study Program (FWSP) is a form of financial aid awarded to a student who has completed a FAFSA and has demonstrated a financial need.The student is given a job (usually on-campus) and is paid by the school. Read more

FICO Score

A FICO score, created and calculated by the Fair Isaac Corporation, is a measure of an individual's creditworthiness.It is a mathematical summary of the information on a person's credit report. Read more


Fintech describes emerging technology that is used to deliver financial services in new and innovative ways, to both consumers and businesses alike. Read more

Flat Tax

A flat tax is a system under which all taxpayers pay taxes at the same percentage rate of their total income. Let's assume that you had $100,000 of taxable income last year. Read more

Form 1040X

Mistakes happen, and the IRS understands that (though the jury is still out regarding how forgiving the IRS is about mistakes).For this reason, the IRS provides the Form 1040X, which requires a line-by-line description of any necessary adjustments, as well as supporting documentation and explanations. Read more

Form 1045 Application for Tentative Refund

Taxpayers must file a Form 1045 within one year after the end of the year in which the loss or unused credit occurred, and they will likely also have to file amended returns.It is important to note that using Form 1045 can trigger the Alternative Minimum Tax for filers, so it is important to seek qualified tax counsel. Read more

Form 1065

Form 1065 is an IRS form used to report income, gains, losses, deductions and tax credits associated with partnerships. Let's say John Doe and Jane Smith operate a partnership that sells widgets. Read more

Form 1078

Form 1078 is only for people who became resident aliens before 2001.In our example, that means John Doe would've filed a W-9 after 2001. Read more

Form 1098

Form 1098 is an IRS form that reports how much mortgage interest a taxpayer paid during the tax year. Let's say John Doe borrows $100,000 for a house from Bank XYZ. Read more

Form 1099-B

Form 1099-B is useful for reporting and calculating taxes that apply to capital gains.For instance, the form will disclose the proceeds of the sale and how much of those proceeds are capital gains, as well as whether those gains are long-term or short-term in nature (this affects the taxability of the gain). Read more

Form 1099-DIV

Financial institutions must create Form 1099-DIV for dividends and distributions of at least $10 in a tax year.Taxable dividend distributions from life insurance contracts and employee stock ownership plans are not subject to 1099-DIV reporting (they are reported using Form 1099-R). Read more

Form 1099-INT

Interest is taxable income.The Form 1099-INT shows how much interest a person earned from an institution in a tax year. Read more

Form 1099-Misc

According to the IRS, a Form 1099-Misc is appropriate for reporting the following: Payments of $600 or more for services performed for a trade or business by people not treated as its employees (such as subcontractors).Prizes or awards ($600 or more) State and federal tax withheld in conjunction with any of the other activities reportable on the form. Read more

Free Application for Federal Student Aid (FAFSA)

The free application for federal student aid (FAFSA) is a form filled out by college or graduate students who are eligible for government-sponsored financial aid. Every year, a college or graduate student seeking financial aid must complete the FAFSA form found on the US Department of Education's website, www.fafsa.ed.gov. Read more

Free Lunch

Free lunch is a phrase used to describe getting something for nothing. There is no such thing as a free lunch. Read more

Frozen Account

A frozen account refers to a situation where an individual is unable to withdraw money from a bank account due to a court order. A bank account is commonly frozen when the account holder owes money to another party. Read more

Fully Vested

A person is fully vested when a financial instrument or account becomes wholly owned by the investor. Let's assume John Doe receives options to buy 2,000 shares of Company XYZ, his employer, for $10 a share. Read more

Gambling Income

Gambling income is any money that is earned from games of chance. Income from gambling is taxable money earned from games such as lotteries and keno or from institutions such as casinos or racetracks.  For example, someone plays a state lottery and wins $1 million. Read more

Gambling Loss

A gambling loss is any money lost in lottery tickets, slot machines, table games (craps, poker, blackjack, etc.), bingo games, racing bets and keno. For example, let's say John Doe goes on a bender in Las Vegas and wins $12,000 the first night but loses $10,000 at the craps table in the Bellagio the next night. Read more


Also called wage execution, a garnishment is a process under which money owed or paid to a borrower is given to a creditor instead. Let's say John Doe has stopped paying child support to his ex-wife. Read more

Gas Guzzler Tax

The purpose of the gas guzzler tax is to discourage the manufacture of inefficient cars.The sticker on a new car should disclose the amount of gas guzzler tax that a manufacturer has paid on a car. Read more

Gift Tax

A gift tax is a federal tax on anything of value that one person gives to another. Let's say Jane Smith gives her son John $25,000 because John is going through a tough time and just lost his job. Read more

Goods and Services Tax (GST)

A goods and services tax (GST) is simply a tax on goods and services for domestic consumption.This tax system is in place in about 160 countries, including Canada, India, Vietnam, Australia, United Kingdom, Spain, Italy, Brazil, and South Korea. Read more

Grace Period

A grace period is a period of time, usually about 10 days, during which a past due amount can be paid with little or no penalty. Let's assume your credit card payment is due on December 15. Read more

Gross Earnings

Gross earnings, also known as gross income, represents income before taxes or adjustments.In the accounting world, gross earnings are usually the same thing as gross profit (that is, revenue minus cost of goods sold). Read more

Guaranteed Loan

With a guaranteed loan, a party other than the borrower has promised to take responsibility if the borrower cannot make the payments.The entity assuming this responsibility is called the guarantor. Read more

Half-Commission Man

A half-commission man introduces potential clients to financial advisors in return for a cut of the commissions those advisors earn from the new clients. Let's say John Doe knows Jane Smith, who has a net worth of $40 million. Read more

Halloween Massacre

In the investing world, the Halloween Massacre occurred in October 2006, when Canada began taxing all income trusts in the country. Many oil companies created income trusts in Canada, and they issued popular high-yield securities. Read more

Hard Inquiry

A hard inquiry is a lender's investigation of an applicant's credit history for the purpose of approving or declining a loan or extension of credit. A hard inquiry helps a bank or credit card company assess the risk that an applicant will default on his or her repayment obligations. Read more

Hard Money Loan

A hard money loan is a short-term loan that uses the value of real property owned by the borrower as its collateral. A hard money loan provides money for short-term expenses similar to a bridge loan. Read more

Head of Household

Head of household is a formal IRS filing status for people who are single but provide financial support to at least one other person in his or her home. Let's say Jane Doe is a single mother with three children. Read more

High Earners, Not Rich Yet (HENRYs)

High Earners, Not Rich Yet (HENRYs) are young, usually well educated, and highly paid but have not accumulated significant wealth yet.HENRYs often earn $250,000 to $500,000 per year per household, usually placing them in the top 2% of American household income. Read more

Home Office Expense

Home office expenses are those costs incurred by working from a home-based office.  These expenses are tax-deductible. In order to qualify as fully tax-deductible, home office expenses must go toward the consumption of utilities or the purchase and use of goods (e.g. Read more

Household Employee

A household employee is a person who provides paid services within a private home.These services are often subject to payroll taxes. Read more

Identity Fraud Reimbursement Program

An identity fraud reimbursement program is an insurance-like product that reimburses the holder for expenses related to dealing with being a victim of identity theft. Let's say John Doe happens to see some paperwork on a coworker's desk. Read more

Imputed Interest

Imputed Interest refers to interest that is considered by the IRS to have been paid for tax purposes, even if no interest payment was made.The IRS uses imputed interest as a tool to collect tax revenues on loans that don't pay interest, or stated interest is very low. Read more


Income is an actual or recorded inflow of cash or other assets.The term is used in many different contexts. Read more

Income Tax

Income tax refers to taxes imposed by the government on individuals and businesses based on annual income.In the US, income tax is collected on taxable income by the Internal Revenue Service (IRS). Read more


In most usages, insolvency is the inability of a company or individual to meet its financial obligations as they come due.In the legal sense of the word, an entity is considered insolvent if its total liabilities exceed its total assets. Read more

Installment Debt

Installment debt refers to any loan that is repaid by the borrower in periodic (usually monthly) installments that include principal and interest. Installment debt, also called an installment loan, is granted to the borrower with a preset number of monthly payments of equal amount. Read more

Internal Revenue Service (IRS)

The Internal Revenue Service (IRS) is a bureau of the Department of Treasury that is tasked with the enforcement of income tax laws and oversees the collection of federal income taxes.In addition, it is also the responsibility of the IRS to determine pension-plan qualification. Read more


The term IOU is the phonetic spelling of the phrase "I Owe You." In bookkeeping, it signifies an outstanding debt. Usually, an IOU is a signed informal notice of an unpaid debt, sometimes because of partial payment and an outstanding balance due. Read more

IRS Form 1099

The IRS Form 1099 is used to report a variety of unique income payments to the IRS.This form is usually used when the taxpayer has received income from other sources besides a wage-paying job. Read more

Itemized Deduction

An itemized deduction is a reduction in taxable income that is dependent on calculations specific to the taxpayer's expenses or situation.Federal, state and local tax codes determine what is deductible and which taxpayers are eligible for itemized deductions. Read more


A jackpot is a big winning -- often the largest a competition or event has to offer. Let's say John Doe goes to Las Vegas to get away from his wife for a few days. Read more

Jingle Mail

Jingle mail occurs when a property owner sends his/her keys to the mortgage lender because he/she is unable to continue to make payments. Jingle mail -- denoting the jangling sound of keys in an envelope -- is the act of relinquishing one's obligations on a property by literally mailing the keys to the lending bank. Read more

Job Hunting Expenses

Job hunting expenses are costs that job seekers incur while searching for a new job. Job hunting involves research and networking using various resources and services. Read more

Joint Account

A joint account is any type of bank account held by two or more persons. All members of a joint bank account are responsible for any liabilities in connection with the account. Read more

Joint Endorsement

Joint endorsement is a requirement by many banks that checks be endorsed by all parties of a joint account. If two or more individuals jointly hold a bank account, the bank may require a joint endorsement on checks made payable to any individual holder of the account. Read more

Joint Return

A joint return is a tax return filed by two people based on their marital status at the end of the year or at the time of death of either one of the individuals. There are generally two ways for a married couple to file a federal tax return. Read more

Joint Return Test

The joint return test is used by the IRS to determine whether or not a taxpayer may be validly claimed as a dependent by another taxpayer.This test also determines whether or not a married taxpayer may file a joint income tax return with his or her spouse. Read more

Judgment Lien

A judgment lien allows a creditor to take possession of a piece of a debtor's property if the debtor does not pay his or her debts. Let's say John Doe owns a pit bull breeding company that borrows $1 million from Bank XYZ. Read more

Judgmental Credit Analysis

Judgmental credit analysis occurs when a banker approves or denies a credit application based on his or her experience with similar projects rather than the applicant's creditworthiness.   Let's say Company XYZ needs to borrow $1 million to lease a new factory. Read more

Kiddie Tax

Kiddie tax is the colloquial term for certain taxes owed on interest, dividends or other investment income earned by children under 17 years old. Let's say John Doe has a son, Jake Doe, who is 16 years old. Read more

Lame Duck

A lame duck is a person who has gone bankrupt or is in default.In politics, a lame duck is a politician whose tenure is about to end. Read more

Land Value Tax (LVT)

A land value tax (LVT) is a tax on undeveloped property. Local governments that impose an LVT specifically target pieces of property that someone owns but has not developed or modified for residential or commercial purposes. Read more


A lender is a creditor or any entity to which you owe money for services provided. If you borrow money from XYZ Bank, XYZ Bank becomes your lender. Read more

Letter of Credit

A letter of credit is a bank's written promise that it will make a customer's (the holder) payment to a vendor (called the beneficiary) if the customer does not. Letters of credit are most common in international transactions, where buyers and sellers may not know each other well or laws and conventions may make certain transactions difficult. Read more


Leverage is any technique that amplifies investor profits or losses.It's most commonly used to describe the use of borrowed money to magnify profit potential (financial leverage), but it can also describe the use of fixed assets to achieve the same goal (operating leverage).  Financial Leverage Let's look at selected balance sheet and income statement information for Company XYZ. Read more


A levy is the seizure of property in order to repay debt.In the U.S., the IRS has the authority to levy. Read more


In finance and investing, a liability is a claim on a company's assets. For example, let's assume that XYZ Company sold $1,000,000 of gift certificates during the holidays. Read more


A lien is a lender's claim against a collateral asset that may be legally sold should the borrower fail to repay a loan. When someone takes out a sizeable loan, such as a home mortgage or an auto loan, the lender often requires an asset that can be held as collateral against the loan. Read more

Lien Sale

A lien sale is the sale of a lien by a relevant authority to a third party in an effort to recoup money owed. Let’s assume John Doe owns a house in the country and the annual property taxes are $4,000. Read more

Line of Credit (LOC)

A line of credit (sometimes called revolving credit) is a pre-arranged amount of money lent by a financial institution.Unlike a traditional loan – which is usually a lump sum payment that is repaid on a fixed schedule – a line of credit is flexible.  The borrower can draw from the line of credit until they reach their credit limit. Read more


Liquidation refers to the selling of assets in return for cash.  The term liquidation is most often used in discussions about Chapter 7 bankruptcy -- a section of U.S.bankruptcy law under which companies and individuals liquidate their assets in order to repay their debts. Read more


A loan is a sum of money that is borrowed by an individual or business from a lender (typically a financial institution or another party with money). Under a typical loan agreement, the lender expects the borrower to repay the loan over an agreed-upon period of time and/or with the expectation that they will pay back the loan regularly (often every month). Read more

Loan Loss Provision

A loan loss provision is an expense that is reserved for defaulted loans or credits.  It is an amount set aside in the event that the loan defaults. Generally, banks conduct their business by taking deposits and making loans using those deposits.  It is a bit more complicated (e.g. Read more

Loan Syndication

Loan syndication is a lending process in which a group of lenders provide funds to a single borrower. When a project is unusually large or complex, it may exceed the capacity of a single lender. Read more

Long-Term Capital Gain or Loss

A long-term capital gain or loss is the profit or loss on the sale of an investment that has been held for longer than a certain IRS-defined period of time.  Let’s assume you purchase 100 shares of Company XYZ for $1 per share. Read more


A loophole is an exception that allows a system to be circumvented or avoided.  It usually refers to legal, taxation, or security strategies that are exploited for personal gain. Loopholes are failures of a system to account for all conditions, variables, or exceptions.   To illustrate a legal loophole, consider a local development law that requires even an unoccupied building to pay real estate taxes so long as it receives a certificate of completion.  In order to avoid paying taxes, a builder may exploit this loophole and choose not to "complete" the building. Read more

Marginal Tax Rate

Marginal tax rate is the rate at which an additional dollar of taxable income would be taxed.It is part of a progressive tax system, which applies different tax rates to different levels of income. Read more

Marital Deduction

The marital deduction refers to the deduction the IRS allows for a taxpayer to transfer some or all of his assets tax free to his spouse prior to the calculation of estate tax owed by his estate. The marital deduction is also known as the unlimited marital deduction. Read more

Marital Property

Marital property is property owned by a married couple. Let's say John Doe and Jane Smith get married. Read more

Marriage Tax

The marriage tax, also known as the "marriage penalty," refers to the higher taxes a couple pays when they file a joint tax return versus the amount a couple pays when filing two separate tax returns. The marriage tax was created in 1969, when Congress attempted to give a tax advantage to married couples. Read more

Married Filing Jointly

Married filing jointly is a tax status that some couples use on their tax returns. Let's say John and Jane Doe are married. Read more

Master of Business Administration (MBA)

A Master of Business Administration (MBA) is a graduate degree in business. An MBA typically involves the study of accounting, financial markets and instruments, corporate strategy, negotiation, business ethics, statistical analysis, marketing and management. Read more

Master of Public Administration (MPA)

A Master of Public Administration (MPA) is a graduate degree in public administration. An MPA typically involves the study of management, government, public policy, ethics and law. Read more

Mileage Allowance

The term mileage allowance refers to a variety of travel allowances allowed by the IRS at a specific rate per mile traveled while on business or for other purposes recognized by the IRS. For an individual, the allowances would be applicable for travel required for medical reasons, moving purposes, employee travel that was not reimbursed, or charity efforts. Read more

Mobile Phone Banking

Mobile phone banking is the use of a smartphone or other cellular device to accomplish tasks such as checking account balances, transferring funds between accounts, bill payment and finding an ATM while away from a computer. Mobile phone banking typically operates across all major U.S. Read more

Money Market Rates

Money market accounts (also known as high-yield savings accounts) offer a safe way to earn returns on your money while still keeping access to the funds.The returns you earn are based on the money market rate.  The money market rate, or interest your money can earn, makes these accounts a popular choice for storing short term savings (like an emergency fund). Read more

Mortgage Credit Certificates (MCC)

Mortgage credit certificates (MCC) are issued by state or local governments and allow some taxpayers to receive a tax credit for the interest paid on a mortgage. A borrower pays a specific amount of interest over the course of a mortgage. Read more

Mortgage Interest Deduction

A mortgage interest deduction allows mortgage borrowers to reduce their income tax liability by listing the amount of mortgage interest paid as an itemized deduction. Each year, a mortgage borrower pays a combination of interest and principal to the lender. Read more

Nanny Tax

A nanny tax is a colloquial term for the Social Security, Medicare and federal unemployment taxes due on the pay to caregivers. For example, let's say John and Jane Doe hire Sally Smith to take care of their two preschool-age children while they are at work. Read more

Negative Carry

Negative carry means that the price of borrowing money is higher than the returns earned on borrowed money.It is the opposite of positive carry. Read more

Negative Income Tax

Negative income tax refers to transfer payments given to families whose reported household income fall below a predetermined amount and qualifies them for a supplemental payment from the government. For families whose household income qualifies as insufficient to fulfill their needs, the government provides a subsidy to help ensure their welfare. Read more

Negative Pledge Clause

A negative pledge clause is lending agreement language designed to prevent borrowers from pledging the same collateral to multiple lenders or otherwise taking actions that might jeopardize the security of existing lenders. For example, let's assume that Company XYZ borrows $10 million from Bank A. Read more

Nest Egg

A nest egg is a slang term describing money saved for the future. For example, let's say that John Doe works at Company XYZ. Read more

Net Borrower

A net borrower (also called a "net debtor") is a company, person, country, or other entity that borrows more than it saves or lends.Borrowing can take the form of traditional bank lending, but it also might come in the form of Treasury debt, publicly traded bonds, or even seller financing (accounts payable). Read more

Net of Tax

Net of tax simply means that the number in question is the amount left over after taxes. For example, let's say you win $1,000,000 on a game show. Read more

Net Proceeds

Net proceeds refers to the amount of money remaining after an asset has been sold and related expenses have been paid. For example, a homeowner sells his house for $100,000. Read more

Net Worth

Net worth refers to the total value of an individual or company expressed as total assets less total liabilities. The net worth of an individual is simply calculated as total assets (e.g. Read more

Nonperforming Assets

Nonperforming assets are a bank's nonperforming loans plus the real estate owned by the bank due to foreclosures. On a bank's balance sheet, loans made to customers are listed as assets. Read more


In the finance world, a note is debt. Notes are typically medium-term debt, but not always. Read more

Notice of Seizure

A notice of seizure is a bad thing.During this time, the IRS takes physical custody of the taxpayer's assets, which could range from cash accounts to homes, cars and other assets. Read more

Offer in Compromise (OIC)

An offer in compromise is an arrangement between a taxpayer and a taxing authority, whereby the taxing authority agrees to let a taxpayer settle a tax debt for less than the full amount. For example, let's say John owes the IRS $40,000 in back taxes. Read more

Office Audit

An office audit is a type of audit by the IRS. For example, let's say John Doe gets a letter from the IRS saying that he is being audited. Read more

Offset Mortgage

An offset mortgage is a mortgage held in the same bank as the borrower's deposit accounts, savings accounts or other accounts.The mortgage payments are calculated based on the borrower's combined balance. Read more

Online Transaction

Though it might seem straightforward, there are a few steps for you to understand about online transactions Read more

Ordinary Income

Ordinary income is not a capital gain, dividend or other income subject to special taxation.  In the United States, ordinary income is taxed progressively, meaning that there are a series of brackets in which income is taxed. Read more

Package Deal

A package deal combines several products, discounts, features or services as one transaction. Let's say John Doe is considering taking a cruise. Read more

Paper Millionaire

A paper millionaire is a person who has at least $1 million of unrealized gains. Let's say John Doe starts a business. Read more

Parsonage Allowance

In the tax world, a parsonage allowance is income earned by members of the clergy but excluded from gross income. Let's say John Doe is a pastor at the XYZ Church. Read more

Pass-Through Entity

A pass-through entity (also known as flow-through entity) is a business structure in which business income is treated as personal income of the owners.It is used to avoid double taxation, when business income is subject to corporate tax and then to the owner’s personal income. Read more

Passive Income

Passive income is income generated from any business activity in which the earner does not participate.When people describe the dream of "getting rich quick" and "striking it big," they are usually describing  a scheme that involves a component of passive income in one form or another. Read more

Past Due

Past due means overdue.Typically, a bill is past due if the borrower is 30 days past the payment deadline. Read more

Past-Due Balance Method

The past-due balance method is a system for calculating interest charges based on loan or credit balances not paid prior to a specified due date. The past-due balance method for computing interest on credit card charges and certain types of loans comprises a grace period during which no interest is charged if repaid in full. Read more

Pay Yourself First

Pay yourself first is a phrase referring to the idea that investors should routinely and automatically put money into savings before spending on anything else. For example, let's assume you bring home $60,000 a year after taxes. Read more


A paycation is when an employee takes paid vacation from his or her employer and works at another job. Let's say John Doe has earned two weeks of paid vacation at Company XYZ. Read more


Paycheck-to-paycheck means a lifestyle in which a person does not save money and would incur significant financial stress if he or she does not receive his or her next paycheck. For example, let's say John Doe's paycheck is $1,450 every two weeks, or $2,900 a month. Read more

Pension Plan

A pension plan is an arrangement to provide employees with an income when they are no longer earning a regular income from employment. A pension plan is usually a type of retirement plan that gives employers the opportunity to make a contribution to a fund set aside for an employee's future benefit.  The pool of funds is invested on behalf of the employee, on a tax exempt basis, and is intended to yield a stream of payments to the employee upon retirement. Read more

Personal Income

Personal income, aka "before-tax income," is the total annual gross earnings of an individual from all income sources, such as: salaries and wages, investment interest and dividends, employer contributions to pension plans, and rental properties. Personal income is used in calculating adjusted gross income (AGI) -- which is important to individuals for income-tax purposes.  It is also an essential measure to investors because it serves as an indicator of future demand for both goods and services in the market. Read more

Personal Property

Personal property is a class of property that can be moved from one location to another. Generally, real property is a class of property that cannot be moved.  It includes land and buildings, for example.  Personal property typically includes furniture, fixtures, tools, vehicles, and machinery and equipment.  All of these items can be moved. Read more

PIN-Debit Transaction

A PIN-debit transaction, also known as an online transaction, is a password-protected payment method that authorizes a transfer of funds over an electronic funds transfer (EFT) When you pay for goods or services with your debit card, you have an option for the payment to be processed in two different ways: as an offline transaction via a credit card processing network, or as an online transaction via an EFT system, requiring a personal identification number (PIN) to complete the process.When processed as an online transaction, the exchange of funds is completed using an EFT network, such as Star, Pulse or Interlink, depending on which EFT system your bank is associated with as a member bank. Read more

Pre-Tax Contribution

A pre-tax contribution is a payment made with money that has not been taxed.  Anybody can take a portion of their monthly pay and put it in a savings account. Read more

Price Protection

Price protection is an agreement between a buyer and a seller whereby the parties agree to fix the price of a good or service for a specific period of time. In practice, price protection (sometimes called purchase protection) is a feature of many credit cards, whereby customers can get a refund on purchases made with the credit card if the price of those purchases goes down within a certain time frame after the purchase. Read more

Prime Rate

The prime rate is the interest rate commercial banks charge their most creditworthy customers, which are usually corporations. Anyone who has borrowed money knows that different banks charge different interest rates. Read more


In finance,  principal refers to the face amount of a debt instrument or an amount of money borrowed. For example, if you borrow $25,000 from XYZ Bank to purchase a car, the principal balance is $25,000. Read more

Probate Court

Probate court is a section of the court system that transfers money and property from the deceased to heirs, beneficiaries or other entities. John Doe writes a will. Read more

Progressive Tax

A progressive tax is one in which the tax rate increases as the amount being taxed increases.Most western countries use a progressive tax in one way or another. Read more

Promissory Note

A promissory note is a written document that binds one party to pay another through credit.The agreement is considered a debt instrument as it typically contains loan-type features such as the repayment terms, principal amount owed, interest rate, maturity date, date of issuance and both parties' signatures. Read more

Purchase Protection

Purchase protection is an agreement between a customer and a seller whereby the two sides agree to set the price of a good or service in place for a particular time period. In reality, purchase protection (also called price protection) is an aspect of many credit cards, whereby customers are able to receive refunds on items purchased with the credit card if the price of those items decreases within a specific time frame after the purchase. Read more

Qualified Adoption Expenses (QAE)

Qualified adoption expenses (QAEs) are costs associated with adopting a child.They are generally tax-deductible and may even qualify for a tax credit. Read more

Qualified Appraisal

A qualified appraisal is a document that formally describes and estimates the value of a piece of property. Assume that John wants to donate a painting to his favorite charity. Read more

Qualified Charitable Organization

A qualified charitable organization is a charity to which donations are tax-deductible. According to the IRS, only certain types of organizations can be qualified charitable organizations:  Community chests, corporations, trusts, funds, or foundations devoted to religious, charitable, educational, scientific, or literary causes or to the prevention of cruelty to children or animals. Read more

Qualified Electric Vehicle

A qualified electric vehicle is powered by an electric motor that relies on rechargeable batteries or fuel cells. Specifically, and according to the IRS, a qualified electric vehicle must have a battery capacity of at least 2.5 kilowatt hours if the vehicle has 2-3 wheels, and it must have a battery capacity of at least 4 kilowatt hours if the vehicle has 4 wheels. Read more

Qualified Higher Education Expense

Generally, a qualified higher education expense is tuition or a tuition-related expense paid to a post-secondary institution. For example, let's assume that John pays $48,000 in tuition and fees for a year at State University. Read more

Qualified Widow

Qualified widow (or widower) is a tax-filing status similar to filing single, married filing jointly, married filing separately, or head of household. For example, let's assume the John and Jane Doe have been married for 15 years and they have 2 minor children. Read more

Qualifying Domestic Trust (QDOT)

A qualifying domestic trust (QDOT) is a trust that allows non-citizens to obtain a marital deduction. For example, let's assume that John Doe is a U.S. Read more

Qualifying Relative

A qualifying relative is a person a taxpayer can claim as a dependent. For example, let's assume that John and Jane Doe took in Jane's mother because she ran out of retirement money and can no longer support herself. Read more

Qualifying Widow or Widower

A qualifying widow or widower is a person who can still file as married filing jointly for tax purposes. Let's say John and Jane Doe have been married for 40 years. Read more

Quick-Rinse Bankruptcy

A quick-rinse bankruptcy moves through the courts especially quickly. Let's say Company XYZ is struggling to pay its vendors and is quickly running out of cash to pay its employees. Read more


In personal finance, the term rating commonly refers to a credit rating score issued by the Fair Isaac Corporation (a "FICO score").A person's credit rating indicates how creditworthy he or she is. Read more

Ratings Service

Ratings Service is provided by companies that evaluate the risks associated with debt securities.  Companies, such as Moody's, Standard & Poor's (S&P), and Fitch, provide ratings for securities based on underwriting criteria. The criteria include a number of factors, such as the underlying security, method of repayment, revenue history, qualifications of the team, market factors, etc. Read more


Reaffirmation occurs when a lender agrees to forgive a borrower's debt and then the borrower agrees to repay the debt anyway. For example, let's assume that John Doe borrowed $100,000 from Bank XYZ for a luxury car. Read more

Realized Gain

Realized gains are increases in the value of an asset that has been sold.This concept is the opposite of paper profit -- a paper profit only turns into a realized gain when you actually sell the security. Read more

Realized Loss

A realized loss is a decrease in the value of an asset that has been sold.This concept is the opposite of paper loss or unrealized loss -- a paper loss only turns into a realized loss when you actually sell the security. Read more


Refinance refers to the replacement of a debt with new debt bearing different terms. Financing involves borrowing a specific amount of money over a length of time at an agreed-upon interest rate. Read more


Refund can refer to the amount that the Internal Revenue Service will pay to a taxpayer based an overpayment of estimated tax or employer withholding taxes during the year.  A refund also refers to the procedure where an issuer refinances outstanding bonds by issuing new bonds. During the year, a taxpayer is obligated to make estimated tax payments to the Internal Revenue Service. Read more

Regressive Tax

A regressive tax is a tax that increases as a percentage of income as the amount of income declines. The United States has the opposite of a regressive tax system. Read more

Remote Deposit Capture (RDC)

The term remote deposit capture (RDC) refers to a technology that uses a smartphone to make online deposits to a user's bank account without having to physically visit a branch location. RDC is a service that allows users to scan checks and transmit the scanned images to a bank for posting and clearing. Read more


Repayment usually refers to the payments on a debt.  Under the terms of a loan, repayment can have different schedules and requirements.For example, a loan may be amortized over a specific period of time, requiring regular repayments. Read more

Revocable Trust

A revocable trust is a trust with provisions that can be altered by the grantor.Sometimes a revocable trust is referred to as a "living revocable trust." A trust is a legal instrument that allows property to be passed to heirs and beneficiaries without going through probate (i.e., state directed distributions of assets upon death). Read more

Revolving Credit

Revolving credit is a line of credit individuals and corporations can borrow from and pay back as needed. Revolving credit is also referred to as a line of credit (LOC) Before granting a revolving line of credit to an applicant, a financial institution considers several factors that determine a borrower's ability to repay. Read more

Sales Tax

Sales tax is a consumption tax levied on goods and services purchased at the retail level, paid by the consumer and submitted by the retailer to the governing tax authority. In the United States, the sales tax is imposed on retail items. Read more

Same Property Rule

The same property rule is an IRS rule stating that money taken from an Individual Retirement Account must be placed into a similar type of account if the account holder is less than 59.5 years old. Let's say John Doe has an IRA that he opened when he was 15. Read more

Same-Day Funds

Same-day funds can be deposited and then withdrawn on the same day. Let's say John Doe gets paid every other Friday. Read more

Saver's Tax Credit

The saver's tax credit, also called the savers credit, is a tax credit for making contributions to certain retirement accounts.  The savers credit gives taxpayers a tax credit of up to $1,000 ($2,000 if filing jointly) for contributions to IRAs, 401(k)s and certain other retirement plans. Read more


In economics, savings is the amount that is left after spending.In banking, savings refers to savings accounts, which are short-term, interest-bearing deposits with a bank or other financial institution. Read more

Savings Club

Savings clubs most commonly refer to a special type of account that provides a way to regularly save for a specific goal or event.These accounts historically came with a savings passbook with coupons which helped make the act of saving more convenient and automatic.  Christmas club accounts are an example of this type of account, which provide a way to save in advance for larger expenditures during the holidays. Read more

Schedule K-1

An Internal Revenue Service (IRS) Schedule K-1 is used to report a beneficiary's share of income, deductions, credits, and other items from pass-through entities.These generally include limited partnerships, S Corporations, income trusts, and limited liability companies. Read more

Secured Creditor

Secured creditor is a lender that provides collateralized debt. Mortgage lenders are the most common example of secured creditors: They lend you money and keep the house as collateral. Read more

Secured Debt

Secured debt is debt that is collateralized. Mortgages are the most common example of secured debt: the bank lends you the money and the bank has the house as collateral. Read more


Self-dealing is an illegal activity that occurs when a person or entity with fiduciary duty puts his or her own  interests ahead of a client's interests in a transaction. Let's say John Doe owns 500,000 shares of Company XYZ. Read more

Self-Employment Tax

The self-employment tax refers to the Social Security and Medicare taxes paid on income earned by people who work for themselves. People who are self-employed must pay both the employee and employer portion of the Federal Insurance Contributions Act (FICA) tax (a total of 12.4% rather than the 6.2% normally paid by employees) and both halves of the Medicare tax (2.9% rather than 1.45% normally paid by employees). Read more

Senior Debt

Senior debt is debt that is first to be repaid, ahead of all other lenders or creditors, in the event of a borrower’s bankruptcy. For example, if Company XYZ issues bonds, the bondholders are creditors who are senior to Company XYZ's shareholders, for example. Read more

Short-Term Gain

Short-term gain usually refers to the profit on the sale of an investment that has been held less than a certain IRS-defined period of time. Let’s assume you purchase 100 shares of Company XYZ for $1 per share. Read more

Social Security Tax

Social Security tax is an employment tax that funds the Social Security program, a mandatory U.S.government program of retirement, disability, and life insurance. Read more

Spousal Support

Spousal support is a series of payments to a separated or ex-spouse according to a divorce decree or separation agreement. Also known as "alimony," the idea behind spousal support is to provide a spouse with lower income or lower income potential with financial support. Read more

Standard Deduction

A standard deduction is a reduction in taxable income.Federal, state and local tax codes determine what is deductible and which taxpayers are eligible for deductions. Read more

Step-Up in Basis

A step-up in basis refers to an increase in the price at which an investment is considered to have been purchased. Let's assume that your uncle purchased 100 shares of Disney in 1970 for $1 per share. Read more

Stock Savings Plan

A stock savings plan is a Canadian taxation system that offers tax benefits to Canadian residents who purchase the initial public offerings (IPOs) of local companies. Each Canadian province has its own stock savings plan. Read more


Subordinate means "ranks beneath." In finance, the term usually refers to the claims a creditor has on a company's assets relative to other creditors. When something is subordinate, it ranks below the claims of other investors. Read more

Take Home Pay

Take home pay is the portion of one's salary left after all payroll taxes have been deducted. John Doe has a salary of $100,000. Read more

Take-Out Lender

A take-out lender is a lender whose loan replaces another loan. Let's say Company XYZ is a real estate development company. Read more

Tax Accounting

Tax accounting focuses on the preparation, analysis and presentation of tax returns and tax payments. For example, Company XYZ might use one accounting method for calculating depreciation when it reports financial results to investors, but tax laws may require it to use a different method for tax accounting purposes. Read more

Tax Advisor

A tax advisor is a person who advises clients about tax laws and strategies. For example, a tax advisor might help a client structure his assets such that his estate taxes are lower. Read more

Tax and Price Index (TPI)

Used primarily in the United Kingdom, a tax and price index measures the amount that a consumer’s income would have to increase to compensate for increases in inflation and taxes. Assume John Doe has $50,000 in disposable income this year. Read more

Tax Anticipation Note (TAN)

A tax anticipation note (TAN) is a short-term note that a state or local government issues and expects to repay with imminent tax receipts. Let's assume Town XYZ wants to purchase a new building to replace the old City Hall. Read more

Tax Arbitrage

Tax arbitrage refers to a strategy or practice where individuals or corporations profit from the ways different kinds of capital gains, income, and financial transactions are treated for tax purposes.  Read more

Tax Attribute

A tax attribute is a reduction that the IRS requires a taxpayer to make in a tax credit or tax loss when a lender cancels debt that the taxpayer owes.There are typically seven types of tax attributes: net operating losses, business credit carryovers, minimum tax credits, capital losses, property bases, passive activity loss and credit carryover, and foreign tax credit. Read more

Tax Avoidance

Tax avoidance is the legal act of minimizing one's taxes.It is not the same as tax evasion, which is illegal. Read more

Tax Base

A tax base is the total amount of assets or revenue that a government can tax. Taxes can be based on any kind of asset or revenue stream. Read more

Tax Benefit

A tax benefit is any tax advantage given by the IRS to a taxpayer that reduces his or her tax burden.It's also the name of an IRS rule requiring companies to pay taxes on income that was previously written off but is subsequently recovered. Read more

Tax Bracket

A tax bracket is range of incomes for which a certain tax rate applies. The United States has a progressive tax system, which means that different portions of a person's income is taxed at increasing rates (often referred to as "marginal rates"). Read more

Tax Break

A tax break is a tax deduction, tax credit or reduction in tax rate. For example, let's say John and his wife had a baby in 2011. Read more

Tax Court

Tax court is a court of law in which administrative law judges manage disputes between taxpayers and the IRS. The tax court handles a wide variety of tax matters but does not have a jury system. Read more

Tax Credit

A tax credit is permission to reduce the amount of income that is subject to tax.A tax credit is not the same as a tax deduction. Read more

Tax Deduction

A tax deduction reduces the amount of income that is subject to tax.A tax deduction is not the same as a tax credit. Read more

Tax Deferred

In the investment world, "tax deferred" refers to investments on which applicable taxes (typically income taxes and capital gains taxes) are paid at a future date instead of in the period in which they are incurred. For example, consider the traditional Individual Retirement Account (IRA). Read more

Tax Drag

Tax drag is the reduction in returns attributable to taxes. For example, let's assume that John owns 100 shares of Company XYZ stock. Read more

Tax Efficiency

Tax efficiency involves making investing choices that reduce one's tax bill. For example, let's assume that John owns 100 shares of Company XYZ stock, which he bought six months ago for $5 a share. Read more

Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA)

The Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA) became law on September 3, 1982.The TEFRA made it more difficult for individuals and corporations to reduce their tax liability. Read more

Tax Evasion

Tax evasion is the act of illegally avoiding tax liability. Tax evasion is a felony. Read more

Tax Expense

Tax expense is the amount of tax owed in a given period.It appears on the income statement. Read more

Tax Fairness

Tax fairness is the concept of having an equitable tax system. Tax fairness is a subjective term with no single hard-and-fast definition. Read more

Tax Fraud

Tax fraud is the willful and intentional act of lying on a tax return for the purpose of lowering one's tax liability. For example, let's say John owns a painting business. Read more

Tax Free

Tax free means not taxable. For example, many states and municipalities do not charge sales tax on food items. Read more

Tax Freedom Day

Tax Freedom Day is the day of the year by which the average American has earned enough money to pay his or her tax bill for the year. The average American spends about one-third of his or her income on federal, state, and local taxes. Read more

Tax Gain/Loss Harvesting

Tax gain/loss harvesting is a strategy for reducing taxes. John Doe made two major investment transactions this year: 1. Read more

Tax Haven

A tax haven is a country or jurisdiction known for generating little or no tax liability. Tax havens exist because countries are usually not obligated to provide customer information to foreign taxing authorities (though investigations of criminal activity, terrorism, or other behavior may require disclosure). Read more

Tax Holiday

A tax holiday is a day or period of time during which a government does not tax certain transactions. Sales tax holidays are especially common. Read more

Tax Home

A tax home is a taypayer's primary residence or place of business (if the taxpayer is an organization). Let's assume John lives in Montana during the summer and Arizona during the winter. Read more

Tax Increase Prevention and Reconciliation Act of 2005 (TIPRA)

The Tax Increase Prevention and Reconciliation Act of 2005 (TIPRA) was signed into law on May 17, 2006. TIPRA was passed to achieve five primary goals: Prevent a scheduled increase in the number of people subject to the alternative minimum tax (AMT) Preserve lower capital gains and dividends tax rates in effect through 2010 Preserve higher limits for expensing the purchase of certain assets Remove an income ceiling on certain IRA conversions Apply the so-called "kiddie tax" to more taxpayers under age 18 In general, TIPRA was a mishmash of tax changes, most of which benefited most taxpayers. Read more

Tax Indexing

Tax indexing is method for adjusting tax rates to account for inflation-related increases in income. For example, let's say that John makes $100,000 a year and is in the 28% federal income tax bracket. Read more

Tax Liability

Tax liability refers to the amount legally owed to a taxing authority as the result of a taxable event. A tax liability might also be called a "tax obligation." A tax authority -- such as a local, state or national government -- imposes taxes upon individuals, organizations and corporations to fund social programs and administrative roles. Read more

Tax Lien

A tax lien is a claim placed on a piece of real estate by a tax authority due to a taxpayer's failure to pay taxes.   When a taxpayer fails to pay either income taxes or property taxes, the taxing authority to whom the debt is owed may place a lien against the taxpayers property to ensure that the tax liability will eventually get paid. Read more

Tax Lot Accounting

Tax lot accounting is a method of record keeping that tracks the cost, purchase date, and sale date for every unit of every security in a portfolio. For example, let's assume that you purchase 50 shares of Company XYZ at $5 a share on January 1. Read more

Tax Planning

Tax planning is the process of forecasting one's tax liability and formulating ways to reduce it. Tax planning entails creating portfolios or circumstances that are as tax efficient as possible. Read more

Tax Preference Item

A tax preference item is income that subjects a taxpayer to alternative minimum tax (AMT).These items are treated differently for regular tax and AMT purposes. Read more

Tax Rate

A tax rate is the percentage of income a person or company pays in taxes. The United States has a progressive tax system, which means that different portions of a person's income are taxed at different rates (the rates are often referred to as "marginal tax rates"). Read more

Tax Reform Act of 1986

The Tax Reform Act of 1986, signed by President Ronald Reagan, was one of the most significant changes to the American federal income tax system. The Tax Reform Act of 1986 had several noteworthy components, not the least of which was the reduction in the number of tax brackets (from a little over a dozen down to four) and the reduction in the top tax rate (from 50% to 28%). Read more

Tax Refund

A taxpayer gets a tax refund when he or she has overpaid taxes to the government. A tax refund is the difference between taxes paid and taxes owed. Read more

Tax Refund Anticipation Loan (TRAL)

A tax refund anticipation loan (TRAL) is a short-term loan from a third party.The loan is collateralized by the borrower's pending tax refund. Read more

Tax Relief

Tax relief is a tax deduction, tax credit, reduction in tax rate or forgiveness of a tax lien. For example, let's say John and his wife had a baby in 2011. Read more

Tax Return

A tax return is a set of forms that a taxpayer uses to calculate and report taxes owed to the Internal Revenue Service (IRS). April 15 is the annual deadline for filing a tax return, though some types of taxpayers must file tax returns quarterly. Read more

Tax Sale

A tax sale is a sale of property by a taxing authority. For example, let's say that John owns a home and he owes $4,000 in property taxes. Read more

Tax Season

Tax season is from January 1 to April 15 of each year. Tax season is the busiest part of the year for tax accountants, because the filing deadline for individual taxpayers is April 15. Read more

Tax Selling

Tax selling is a strategy used to reduce tax liability. Let's assume that John sold two different stocks that he originally bought five years ago: 1) He sold 1,000 shares of Company XYZ at $25 a share. Read more

Tax Shelter

A tax shelter is a means of minimizing one's tax liability.Tax shelters can be both legal and illegal. Read more

Tax Shield

A tax shield is a deduction, credit or other method used to reduce the amount of taxes owed. For example, let's say John and his wife have a baby in 2011. Read more

Tax Swap

A tax swap is a strategy that involves selling one investment with capital losses and replacing it with a similar, but not identical, investment. Let's assume that John owns 1,000 shares of Mutual Fund XYZ. Read more

Tax Table

A tax table shows the tax due for different income ranges. For example, according to the IRS 2011 tax table, if John makes a salary between $76,150 and $76,200 and is single, he owes $15,169 in taxes.  [Click here to see the 2011 IRS tax table.] There are also tax tables for state taxes. Read more

Tax Wedge

A tax wedge is the difference between gross income and after-tax income.In economics, it refers to the broader financial effects of a tax on a sector of the market. Read more

Tax Year

A tax year is the year for which a tax is calculated and paid. The United States has a January to December tax year for individual taxpayers. Read more


Tax-advantaged means that some or all of an investor's income is sheltered from taxation, allowing a taxpayer to minimize his or her tax burden. One of the best examples of tax-advantaged investing is the 401(k) plan. Read more

Tax-Efficient Fund

A tax-efficient fund is a mutual fund or ETF that minimizes the fundholder's tax bill in some way. For example, let's say John is in a high tax bracket. Read more

Tax-Exempt Interest

Tax-exempt interest is interest income that is exempt from federal and/or state taxes. For example, let's assume that John Doe purchases a municipal bond. Read more

Tax-Exempt Sector

In investing, a tax-exempt sector is a group of financial instruments that pay tax-exempt interest.However, it also refers to nonprofit organizations, which are tax-exempt. Read more

Tax-Exempt Security

Generally, tax-exempt securities are those whose interest, dividends or gains are free from federal income taxation. For example, let's assume that John purchases $1,000 of municipal bonds. Read more

Tax-Free Savings Account (TFSA)

In Canada, a tax-free savings account (TFSA) is a federal program that allows Canadians to avoid paying taxes on interest earned in specific savings accounts. Canadians with valid Canadian Social Insurance Numbers can open a tax-free savings account (TFSA). Read more

Taxable Estate

A taxable estate is the portion of a person's net assets that are taxable upon his or her death. An estate tax is often levied on the assets that the deceased leaves to his or her heirs.  Living spouses who inherit their husband/wife's assets can avoid estate taxes altogether. Read more

Taxable Event

A taxable event is any occurrence that creates a tax liability. Many day-to-day financial activities are taxable events, but in the investing world the most common are the receipt of income, interest or dividends, and the creation of capital gains (usually through selling assets for a profit). Read more

Taxable Gain

A taxable gain is an increase in the value of an investment.It is the difference between the purchase price (known as the "cost basis") and the sale price of an asset.  The formula for taxable gain is: Sale Price - Purchase Price = Taxable Gain Note that this formula assumes the sale price is higher than the purchase price. Read more

Taxable Income

At the beginning of every year, most individuals and families start collecting their annual pay statements and receipts in order to determine their taxable income.If you’ve ever done taxes on your own, you know how hard finding this number can be. Read more

Taxable Preferred Securities

Taxable preferred securities are typically preferred stocks whose dividends are not tax-exempt. Preferred securities (usually called "preferred stocks") have characteristics of both stocks and bonds.  Like shares of common stock, shares of preferred stock represent an ownership stake in a company. Read more

Taxable Wage Base

A taxable wage base is the maximum annual wage on which a taxpayer must pay taxes. For example, let's assume that John earns $150,000 a year as CFO of Company XYZ. Read more


Taxes are required payments from citizens to governments.The payments fund projects and expenditures that serve the public interest.  Most taxes are legislated, meaning that representatives elected by the citizens of a country or region determine what activities to tax, how much to tax, when to collect those taxes, and how to administer the proceeds. Read more


A taxpayer is a person or organization that must pay taxes to a federal, state, or local agency.  For example, let's assume that Jane is an employee of Company XYZ.She earns $150,000 per year.  In addition to paying federal income taxes, unemployment taxes, Social Security taxes, and Medicare taxes, Jane will likely owe state and local income taxes, all of which will be withheld from her paycheck. Read more

Taxpayer Advocate Service (TAS)

The Taxpayer Advocate Service (TAS) is an organization within the Internal Revenue Service that is designed to help taxpayers resolve problems with the IRS.  The TAS was first formed in 1978.Over time, it gained more responsibilities and authority, primarily as the result of the IRS Restructuring and Reform Act of 1998 and the passage of the Taxpayer Bill of Rights. Read more

Taxpayer Bill of Rights

The Taxpayer Bill of Rights is a list of the protections available to all taxpayers when dealing with the Internal Revenue Service. In 1988, Congress passed the first Taxpayer Bill of Rights. Read more

Teaser Rate

A teaser rate is usually an artificially low initial interest rate on an adjustable-rate mortgage (ARM). The interest rate on the ARM corresponds to a specific benchmark (often the prime rate, but sometimes LIBOR, the one-year constant-maturity Treasury, or other benchmarks) plus an additional spread (which is also called the margin, and its size is often based on the borrower's credit score). Read more

Tele Tax

Tele Tax is an automated phone service offered by the IRS. Tele Tax allows callers to select from a phone menu of 151 tax topics. Read more


In the finance world, a term is the length of time until a debt matures.A term can also be a condition of a deal, as evidenced by the phrase term sheet, which describes the terms of a deal. Read more

The Wealth Effect

The wealth effect is an increase in consumer spending directly proportional to strong stock portfolio performance. The wealth effect is a behavioral economic theory which posits that consumer spending increases significantly when overall portfolio performance is high. Read more


A tradeline is a record of activity for a credit account.A tradeline is created on your credit report when you borrow money from a bank or lender who then reports the activity of that account to one of the three credit bureaus, Equifax, TransUnion, or Experian.  The tradeline provides a record for each loan reported, for example, there would be a tradeline for your car loan, another for your mortgage, etc. Read more

Transfer Tax

A transfer tax is a tax on the value of goods that one party gives to another. Individuals and organizations frequently give and accept property with no exchange of monetary payment. Read more

Truth in Lending Act (TILA)

The Truth in Lending Act (TILA) was implemented to protect consumers when they borrow money.TILA requires the disclosure of certain credit terms so that consumers are not deceived. Read more

U.S. League of Savings Institutions

The U.S.League of Savings Institutions was a national organization of savings banks. Read more


A person is unbanked when he or she does not participate in the banking system and relies on the use of cash rather than checks or credit cards. Let's assume John Doe is poor and does not trust banks. Read more

Uncollected Funds

Uncollected funds refer to the balance of uncleared checks in a bank account. When an account holder deposits a check into a savings or checking account, the bank must collect the specified amount of cash from the check writer's bank account. Read more

Underwater Mortgage

An underwater mortgage is a mortgage on a property that is worth less than what is owed on it. For example, let's say John Doe buys a house for $500,000. Read more

Unearned Income

Unearned income is an IRS term for income that is not obtained by participating in a business or trade (e.g., salaries and bonuses, wages, commissions and tips).It typically includes interest, dividends, pensions, social security, unemployment benefits, alimony and child support. Read more


In the finance world, a lender or piece of debt is unsecured if it does not have collateral. Let's assume you would like to borrow $100,000 to start a business. Read more

Unsecured Debt

Unsecured debt is debt that does not have any collateral attached. If you borrow money from XYZ Bank, XYZ Bank becomes your creditor. Read more

Unsubordinated Debt

Unsubordinated debt refers to loans and debt securities (e.g., bonds, CDs, collateralized securities, etc.) for which the repayment priority outranks other debts owed by the same individual entity (called subordinated debt). Debt in the form of loans or debt securities (e.g. Read more

Utilization Ratio

The utilization ratio compares an individual's total debt balances to total available credit.It helps determine part of a person's credit score. Read more

Vertical Equity

Vertical equity is the concept of increasing tax rates on higher incomes.Vertical equity is similar to the concept of progressive taxes. Read more

W-2 Form

A W-2 form is a tax form required from employers that reports wages paid and taxes withheld to the Internal Revenue Service (IRS), local state tax authorities and the Social Security Administration. Every calendar year, employers must fill out and deliver a W-2 form to every employee who worked for the company during the year. Read more

W-4 Form

A W-4 form is a standard IRS form an employee uses to report federal taxability status to an employer. An employer is required by law to withhold taxes from an employee's pay based on information reflected in the employee's W-4 form. Read more

W-8 Form

The W-8 form is a standard IRS form that exempts non-U.S.citizens from specific federal income taxes. Read more

W-9 Form

The W-9 form is a standard IRS form that certifies an individual's Social Security number and taxpayer identification number. Employers and all types of brokers (for example, securities dealers and real estate agents) are required to report details of transactions to the Internal Revenue Service (IRS). Read more

Wage Assignment

A wage assignment refers to a forced payment of a financial obligation via automatic withholding from an employee's pay. Courts can subject individuals who become delinquent in their obligations to wage assignments. Read more

Wage Earner Plan

A wage earner plan, subsequently known as Chapter 13, is a bankruptcy protection scheme that allows income earners to satisfy outstanding debts -- in whole or in part -- within a specific time frame. In a Chapter 13 bankruptcy -- formerly called a wage earner plan -- a person petitions the court to reduce the total amount owed and provide a reasonable repayment schedule based on his or her income. Read more

Wage Garnishment

A wage garnishment is an obligatory payment of a debt where a portion of an employee's paycheck is automatically withheld to pay the debt. Courts can set wage garnishments on individuals who become delinquent on their debt payments. Read more

Waterfall Payment

A waterfall payment is a repayment system by which senior lenders receive principal and interest payments from a borrower first, and subordinate lenders receive principal and interest payments after. Imagine the cash generated by a company as a waterfall that flows from senior lenders down to subordinate lenders. Read more


In the business world, wealth is a measure of financial resources. Wealth is usually a measure of net worth; that is, it is a measure of how much a person has in savings, investments, real estate and cash, less any debts. Read more

Wealth Management

Wealth management services are offered because individuals with a high net worth often have complicated financial situations. Read more

Wealth Psychologist

A wealth psychologist is a person who helps people cope with the emotional aspects of money. Let's say that John and Jane get married. Read more

Wealth Tax

A wealth tax is based on a person's net worth or the value of his or her assets. Let's say John Doe makes $100,000 a year. Read more

Wire Transfer

A wire transfer is a method of transferring money electronically between two people or institutions. A wire transfer is made between two financial institutions by a person issuing instructions to one institution. Read more

Withholding Allowance

A withholding allowance reduces the amount of income tax an employer withholds from an employee's paycheck.  Withholding allowances are indicated by employees on the IRS Form W-4 and appropriate state income tax form.IRS Form W-4 allows all employees to claim at least one allowance for his or her self. Read more

Withholding Tax

Discover how withholding taxes work – and what they mean for your upcoming tax refund.  Read more

Year-End Bonus

A year-end bonus is extra money given to an employee, typically as a reward for helping the company achieve financial goals. Let's say Company XYZ's goal this year was to earn 5 cents per share. Read more


Yupcap stands for Young Urban Professionals Who Can't Afford Property. Let's say Jane Doe has a master's degree and is an editorial assistant in San Francisco. Read more

Zero Capital Gains Rate

A zero capital gains rate is a 0% tax on gains from the sale of assets and property sold in an enterprise zone. For example, downtown ABCTown has decayed over the last 10 years. Read more

Zero-Rated Goods

Zero-rated goods are goods that aren't subject to value-added (VAT) tax. A value added tax (VAT) is a consumption tax added to a product's sales price. Read more

Zombie Bank

A zombie bank is a bank with liabilities that exceed its assets (in other words, it has a net worth of zero).They do not die (hence the nickname) because they receive government support or bailouts. Read more

Zombie Debt

Zombie debt is debt that won't die.  Let's say John Doe ran up a $10,000 credit card bill in his 20s. Read more