The tax and accounting terms that actually matter to business owners, in plain English. Every entry includes a worked example and the statute, regulation, or IRS guidance behind it.
An accountable plan is a formal reimbursement arrangement that lets a business repay owners and employees for business expenses they paid personally,...
Treas. Reg. §1.62-2
Accrual basis accounting recognizes income when the right to it is fixed and the amount determinable the all-events test, and deducts expenses when...
IRC §446(c)(2); §451
The accumulated adjustments account is a corporate-level ledger an S corporation maintains to track the cumulative income that has already been taxed...
IRC §1368(e); Treas. Reg. §1.1368-2
An amended return corrects a filed tax return: individuals file Form 1040-X, corporations file 1120-X, and partnerships generally file an...
IRC §6511; Form 1040-X
The annual gift tax exclusion is the amount one person can give to any other person each year with no gift tax, no gift tax return, and no use of the...
IRC §2503(b)
The at-risk rules of Section 465 are a second gate a loss must pass through after basis: a taxpayer can deduct losses from an activity only up to the...
IRC §465; Form 6198
The Augusta rule lets a homeowner rent out their personal residence for 14 or fewer days per year and exclude the rental income from tax entirely:...
IRC §280A(g)
The backdoor Roth IRA is a two-step maneuver that gets money into a Roth IRA for taxpayers whose income exceeds the direct contribution limits:...
IRC §408A(d)(3); Form 8606
Bonus depreciation under Section 168k allows a business to deduct the full cost of qualifying property in the year it is placed in service instead of...
IRC §168(k)
The built-in gains tax is a corporate-level tax that applies when a C corporation converts to an S corporation and then sells appreciated assets it...
IRC §1374
Business meals with a client, prospect, vendor, or team member are 50% deductible when the meal is ordinary and necessary to the business, the...
IRC §274(n)
A C corporation is the default tax classification for a corporation: a fully separate taxpayer that files Form 1120 and pays federal income tax at a...
IRC §11
Cash basis accounting recognizes income when payment is actually or constructively received and deducts expenses when they are paid. It is the method...
IRC §446(c)(1); §448
Cost segregation is an engineering-based study that breaks a purchased or constructed building into components that depreciate at different speeds....
IRC §168; Hospital Corp. of America v. Commissioner, 109 T.C. 21 (1997)
The de minimis safe harbor is an annual election under the tangible property regulations that lets a business deduct, rather than capitalize and...
Treas. Reg. §1.263(a)-1(f)
Debt basis is a second, separate basis account an S corporation shareholder gets for money the shareholder personally lends to the corporation. When...
IRC §1366(d); Treas. Reg. §1.1366-2
A defined benefit plan is a pension the business promises to fund, and it supports by far the largest deductible retirement contributions in the...
IRC §§412, 415(b)
Depreciation recapture is the rule that claws back prior depreciation deductions when an asset is sold at a gain. For personal property like...
IRC §§1245, 1250
A disregarded entity is a business entity with one owner that the IRS ignores for income tax purposes: its activity is reported directly on the...
Treas. Reg. §301.7701-3(b)(1)(ii)
The estimated tax penalty is interest the IRS charges when tax is paid too late within the year, even if the return is filed and fully paid by April....
IRC §6654; Form 2210
The excess business loss limitation under Section 461l caps how much net business loss a noncorporate taxpayer can deduct against non-business income...
IRC §461(l); Form 461
A filing extension gives more time to file a tax return, not more time to pay. Individuals file Form 4868 for an automatic six-month extension to...
IRC §6081; Forms 4868 / 7004
First-time penalty abatement is an administrative waiver the IRS grants almost automatically to taxpayers with a clean compliance history, removing...
IRM 20.1.1.3.3.2.1
Form 1099-NEC reports nonemployee compensation: what a business paid an independent contractor, freelancer, or unincorporated service provider during...
IRC §6041A; Form 1099-NEC
An HRA is an employer-funded arrangement that reimburses employees tax-free for medical expenses and, in some versions, insurance premiums:...
IRC §§105, 106; §9831(d) (QSEHRA)
An HSA is the only account in the code with a triple tax benefit: contributions are deductible or pre-tax through payroll, growth is tax-free, and...
IRC §223
Paying your children reasonable wages for real work in your business converts high-bracket parent income into low-or-zero-bracket child income while...
IRC §3121(b)(3)(A)
The home office deduction allows self-employed taxpayers to deduct the costs of the portion of their home used regularly and exclusively for...
IRC §280A(c)
An installment sale spreads gain recognition over the years payments are actually received when at least one payment arrives after the year of sale,...
IRC §453; Form 6252
Itemized deductions are the specific personal expenses Congress allows on Schedule A in place of the standard deduction: state and local taxes...
IRC §63(d); Schedule A (Form 1040)
Late S election relief is the IRS's standing administrative program that lets a business rescue a missed Form 2553 deadline without a private letter...
Rev. Proc. 2013-30
An LLC is a state-law entity that gives its owners a liability shield while leaving federal tax treatment up to an election. Under the check-the-box...
Treas. Reg. §301.7701-3
Long-term capital gains are profits from selling capital assets, such as stock, crypto, real estate, or a business, held for more than one year. They...
IRC §1(h); §1222
MACRS is the default depreciation system for tangible property placed in service after 1986. It assigns every asset a recovery period 5 years for...
IRC §168; Form 4562
Material participation is the standard that decides whether a business activity is passive or non-passive for a given taxpayer. The regulations...
Treas. Reg. §1.469-5T
The net investment income tax is a 3.8% surtax on investment income for taxpayers with modified adjusted gross income above $200,000 single or...
IRC §1411; Form 8960
A net operating loss arises when a taxpayer's allowable deductions exceed gross income for the year, most often from a business losing money or from...
IRC §172
A partnership is a business with two or more owners that is taxed under Subchapter K of the Internal Revenue Code. The partnership files an...
IRC §701; Subchapter K
A pass-through entity tax is a state-level workaround to the federal cap on state and local tax deductions. Instead of the owners paying state income...
IRS Notice 2020-75
The passive activity loss rules of Section 469 are the third and usually toughest gate for deducting business and rental losses. Activities in which...
IRC §469; Form 8582
The QBI deduction under Section 199A allows owners of pass-through businesses sole proprietorships, partnerships, S corporations, and many rentals to...
IRC §199A
Qualified dividends are dividends from U.S. corporations and eligible foreign corporations that are taxed at the favorable long-term capital gains...
IRC §1(h)(11)
QSBS under Section 1202 is the largest exclusion in the code for startup founders and early investors: gain on the sale of qualifying C corporation...
IRC §1202
Quarterly estimated taxes are the prepayments the IRS requires from anyone whose income is not covered by withholding: business owners, freelancers,...
IRC §6654; Form 1040-ES
Real estate professional status removes the automatic "passive" label that Section 469 puts on all rental activities, allowing a qualifying...
IRC §469(c)(7)
Reasonable compensation is the W-2 salary an S corporation must pay a shareholder who works in the business before taking profit distributions....
Rev. Rul. 74-44; IRC §3121(d)(1)
The R&D credit rewards businesses for developing or improving products, processes, software, formulas, or techniques through work that is...
IRC §41; Form 6765
An S corporation is a corporation or an LLC that elects corporate treatment that has filed a valid election under Subchapter S of the Internal...
IRC §§1361-1379 (Subchapter S)
The S election is the filing that turns an eligible corporation or LLC into an S corporation for tax purposes. It is made on Form 2553, signed by all...
IRC §1362(a); Form 2553
The estimated tax safe harbor is the rule that guarantees no underpayment penalty regardless of what the current year's tax turns out to be. A...
IRC §6654(d)(1)
The SALT cap limits the itemized deduction for state and local taxes income, sales, and property taxes combined. Introduced at $10,000 in 2018, it...
IRC §164(b)(6)
Schedule K-1 is the form a pass-through entity issues to each owner reporting that owner's share of the entity's income, deductions, credits, and...
IRC §§6031, 6037; Forms 1065 / 1120-S
Filing dates, extensions, and quarterly estimated payment dates for all 50 states and DC, updated for 2026 and 2027. Weekend and holiday shifts already applied.
A 1031 exchange lets a real estate investor sell investment or business real property and defer all capital gains tax and depreciation recapture by...
IRC §1031
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