Taxation Legal Terms and Definitions

Partnership return If you need more time to file a partnership return, file Form 8736, Application for Automatic Extension of Time To File U.S. Return for a Partnership, REMIC, or for Certain Trusts, for an automatic 3-month extension. File Form 8736 by the regular due date of the partnership return. Acquisition The purchase of one corporation by another, through either the purchase of its shares, or the purchase of its assets. Meal Expense Deduction Generally, you can deduct only 50% of your business-re-lated meal expenses while traveling away from your tax home for business purposes. Also, you can generally de­duct only 50% of certain reimbursements you make to your employees for meal expenses they incur while traveling away from home on business. Work Opportunity Credit and Welfare-to-Work Credit The work opportunity credit and the welfare-to-work credit are scheduled to expire for wages paid to individuals who began working for you after 2003. Dependency exemption Amount that taxpayers can claim for their eligible dependents. Each exemption reduces the income subject to tax. The exemption amount is a set amount that changes from year to year. Earned Income Credit A tax credit for certain people who work, meet certain requirements, and have earned income under a specified limit. Federal Insurance Contributions Act (FICA) Tax Provides benefits for retired workers and their dependents as well as for disabled workers and their dependents. Also known as the Social Security tax. Excise tax A tax on the sale or use of specific products or transactions. Self-Employment Tax The self-employment tax rate on net earnings remains the same for 2003. This rate, 15.3%, is a total of 12.4% for social security (old-age, survivors, and disability insur­ance) and 2.9% for Medicare (hospital insurance). Employee Works for an employer. Employers can control when, where, and how the employee performs the work.

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	Did You Know?
	There are tax rules if change in accounting method is made Generally, the partnership must get IRS consent to change its method of accounting used to report income (for income as a whole or for any material item). To do so, it must file Form 3115, Application for Change in Accounting Method. See Form 3115 and Pub. 538, Accounting Periods and Methods.