What Is “FICA tax”?
05/29/2026
FICA tax is a mandatory U.S. federal payroll tax deducted from the paychecks of most workers. It is established by the Federal Insurance Contributions Act and is used specifically to fund two major national programs: Social Security and Medicare. 1. Meaning of “FICA tax” In plain English, FICA is the money you and your employer
What Is “FIFO method”?
05/29/2026
The FIFO method, which stands for “First-In, First-Out,” is an accounting rule used to determine the cost basis of assets or inventory. It assumes that the items you purchased or produced first are the ones you sold first for tax and reporting purposes. 1. Meaning of “FIFO method” In plain English, the FIFO method follows
What Is “Federal income tax withholding”?
05/29/2026
Federal income tax withholding is the amount of money an employer takes out of an employee’s paycheck and sends directly to the IRS on their behalf. It acts as a “pay-as-you-go” system, serving as a prepayment of the annual income tax that the worker expects to owe for the year. 1. Meaning of “Federal income
What Is “Fair market value”?
05/29/2026
Fair market value (FMV) is the price an asset would sell for on the open market between a willing buyer and a willing seller. It assumes that both parties are well-informed about the item and that neither is being forced to buy or sell. 1. Meaning of “Fair market value” In plain English, Fair Market
What Is “Estimated tax for self-employed”?
05/29/2026
Estimated tax for the self-employed is a “pay-as-you-go” method used to pay both income tax and self-employment tax on earnings that do not have taxes withheld. Since self-employed individuals do not have an employer to deduct taxes from their paychecks, the IRS requires them to make four manual payments throughout the year. 1. Meaning of
What Is “Equity”?
05/29/2026
In the simplest terms, equity is the value of an asset you truly “own” after subtracting any debts or liabilities tied to it. It represents your financial stake in a property, a business, or an investment. Meaning of “Equity” Think of equity as the part of an asset that belongs to you, not the bank
What Is “Employment tax”?
05/29/2026
Employment tax is a broad term used by the IRS to describe the various taxes that must be paid when a business has employees. It includes the taxes employers withhold from worker’s paychecks as well as the taxes the business must pay directly out of its own funds based on those wages. 1. Meaning of
What Is “Employer tax deposit”?
05/29/2026
An employer tax deposit is the actual payment of payroll taxes that a business owner sends to the IRS. This includes the federal income tax withheld from employees’ paychecks, as well as both the employee and employer portions of Social Security and Medicare taxes. 1. Meaning of “Employer tax deposit” In plain English, an employer
What Is “Depreciation recapture”?
05/29/2026
Depreciation recapture is a tax process that allows the IRS to collect taxes on the financial gain a taxpayer realizes from the sale of a depreciable asset. It essentially reclassifies a portion of your profit as ordinary income to “pay back” the tax deductions you claimed while you owned the property. 1. Meaning of “Depreciation
What Is “Distribution”?
05/29/2026
A distribution is a payment of cash, stock, or physical assets from an entity—such as a business or a retirement account—to an individual owner, shareholder, or beneficiary. In the tax world, it represents the moment wealth moves from the “entity’s pocket” into “your pocket.” 1. Meaning of “Distribution” In plain English, a distribution is a