Resources
Tax and crypto glossary
Plain-English definitions of the terms that show up in IRS letters, crypto tax reports, offshore disclosures, and opinion letters, written by the attorneys and accountants who deal with them every day. Each term links to the guide or service page where we go deeper.
Browse by topic: All terms Business and Corporate (18) Crypto Tax (71) International Tax (24) IRS Forms (47) IRS Notices and Letters (10) Opinion Letters (4) Tax Controversy (68) Web3 Regulation (7)
Showing 18 terms in Business and Corporate.
#
- 83(b) election
- An 83(b) election is a filing made within 30 days of receiving restricted stock or a profits interest that elects to be taxed on its value at grant rather than at vesting, which for early-stage equity usually means paying tax on a small amount now instead of a large amount later.
C
- C corporation
- A C corporation pays tax on its own income at the corporate rate, and shareholders pay again on dividends. It is the structure for venture-backed startups, companies with foreign owners, and businesses that qualify for the Section 1202 exclusion.
E
- Economic nexus
- Economic nexus is a sales tax obligation created by sales into a state above a threshold, typically 100,000 dollars or 200 transactions, without any physical presence, under the Supreme Court's 2018 Wayfair decision.
- Employee Retention Credit (ERC)
- The Employee Retention Credit was a refundable payroll tax credit for employers that kept workers on payroll during the pandemic, worth up to 7,000 dollars per employee per quarter at its peak, and it is now a top IRS enforcement priority because of widespread improper claims.
- Employer identification number (EIN)
- An EIN is the IRS's nine-digit identifier for a business, required for entities with employees, corporations, partnerships, most LLCs, and trusts, and obtained free from the IRS.
- Equity compensation (RSUs, ISOs, NSOs)
- Equity compensation is pay in the form of company stock or options; restricted stock units are taxed as wages at vesting, non-qualified options at exercise, and incentive stock options at sale, with alternative minimum tax exposure at exercise.
L
- LLC (limited liability company)
- A limited liability company is a state-law entity that shields owners from business liabilities and is taxed by default as a sole proprietorship (one owner) or a partnership (multiple owners), with an option to elect corporate or S corporation treatment.
O
- Operating agreement
- An operating agreement is the contract among an LLC's members that sets ownership percentages, management, profit allocations, distributions, and what happens when a member leaves, dies, or is sued.
P
- Partnership taxation
- A partnership, including a multi-member LLC by default, pays no income tax itself; it files Form 1065 and passes income, losses, and credits to partners on Schedule K-1, taxed whether or not cash is distributed.
- Payroll taxes
- Payroll taxes are the federal income tax withholding, Social Security, and Medicare taxes an employer must withhold from wages and deposit with the IRS on a set schedule, along with the employer's matching share and federal unemployment tax.
Q
- Qualified business income deduction (Section 199A)
- The qualified business income deduction lets owners of pass-through businesses deduct up to 20 percent of qualified business income, subject to income thresholds and limits based on wages paid and property for higher earners.
R
- Reasonable compensation
- Reasonable compensation is the salary an S corporation must pay an owner who works in the business before taking distributions, measured by what the business would pay someone else for the same services.
S
- S corporation
- An S corporation is a corporation or LLC that elects pass-through taxation under Subchapter S, so income is taxed once on the owners' returns, and owners who work in the business must be paid a reasonable salary subject to payroll tax.
- Sales tax nexus
- Sales tax nexus is the connection between a seller and a state that lets the state require the seller to register, collect, and remit sales tax, created by physical presence or, since the 2018 Wayfair decision, by economic activity above a threshold.
- Section 179 and bonus depreciation
- Section 179 lets a business deduct the full cost of qualifying equipment in the year of purchase up to an annual limit, and bonus depreciation allows immediate expensing of a percentage of qualifying property, with the percentage set by current law.
- Sole proprietorship
- A sole proprietorship is a business owned by one person with no separate entity; income and expenses go on Schedule C, profit is subject to self-employment tax, and the owner is personally liable for the business.
U
- Use tax
- Use tax is the counterpart to sales tax, owed by a buyer on taxable purchases where sales tax was not collected, such as goods bought from an out-of-state seller, and it is a frequent finding in state audits of businesses.
W
- Worker classification (W-2 versus 1099)
- Worker classification is whether a worker is an employee, paid on a W-2 with payroll taxes withheld, or an independent contractor, paid on a 1099-NEC and responsible for their own taxes; the IRS decides based on control over the work, not the label the parties use.
