| As a courtesy to our clients, we have compiled a comprehensive list of common tax terms and definitions for quick reference. | Tax Lingo Troubles? |
Accrual method of accounting |
A business method of accounting requiring income to be reported when earned and expenses to be deducted when incurred. However, deductions generally may not be claimed until economic performance has occurred. |
| Term | Definition |
|---|---|
| 401(k) Plan |
A qualified plan established by employers to which eligible employees may make salary deferral (salary reduction) contributions on a post-tax and/or pretax basis. Employers offering a 401(k) plan may make matching or non-elective contributions to the plan on behalf of eligible employees and may also add a profit-sharing feature to the plan. Earnings accrue on a tax-deferred basis. |
| 403(b) Plan |
A 403(b) plan, also known as a tax-sheltered annuity (TSA) plan, is a retirement plan for certain employees of public schools, employees of certain tax-exempt organizations and certain ministers. Individual accounts in a 403(b) plan can be any of the following types:
Generally, retirement income accounts can invest in either annuities or mutual funds. |
| 408(k) Plan |
A plan set up by an employer to help employees fund their retirement. The 408(k) plan is a simplified version of the popular 401(k) plan but is intended for smaller companies (those with fewer than 25 employees). It is also available to self-employed individuals. Under the plan, employees can contribute pretax dollars to the account and thus reduce their net incomes for the year. This results in a tax savings for the contributor. |
| 457 Plan |
A non-qualified, deferred compensation plan established by state and local governments and tax-exempt governments and tax-exempt employers. Eligible employees are allowed to make salary deferral contributions to the 457 plan. Earnings grow on a tax-deferred basis and contributions are not taxed until the assets are distributed from the plan. |
| 501(c) |
A subsection under the United States Internal Revenue Code. The subsection relates to non-profit organizations and tax law and identifies which nonprofit organizations are exempt from paying federal income tax |
| 529 Plan |
A plan that allows for the prepayment of qualified higher education expenses at eligible educational institutions. Also known as a "qualified tuition program", or more fully as a "section 529 plan". |
| 90-Day Letter |
An IRS notice sent after an audit stating that there was a discrepancy or error within an individuals taxes and they will be assessed unless petitioned. |