What Is “ Partnership ”?
05/28/2026
A partnership is a legal and tax classification for a business owned and operated by two or more people or entities. For federal tax purposes, a partnership is a “pass-through” entity, meaning the business itself does not pay income tax. Instead, the profits and losses pass through the business directly to the individual partners, who
What Is “Partner”?
05/28/2026
What Is a Partner? A partner is an individual, corporation, or other entity that owns a portion of a business organized as a partnership. In the eyes of the IRS, a partner is a co-owner who shares in the profits, losses, deductions, and credits of the business based on a legal agreement. Because a partnership
What Is “Organizational cost”?
05/28/2026
What Is “Organizational cost”? Organizational costs are the specific expenses incurred to legally create a business entity, such as a corporation or a partnership. These costs focus on the “legal birth” of the business rather than its day-to-day operations or initial marketing. 1. Meaning of “Organizational cost” In plain English, organizational costs are the “setup
What Is “Ordinary and necessary expense”?
05/28/2026
What Is an Ordinary and Necessary Expense? An ordinary and necessary expense is the standard used by the IRS to decide if a business cost can be deducted from your taxes. For an expense to be deductible, it must be both common in your line of work and helpful or appropriate for your business operations.
What Is “Operating expense”?
05/28/2026
What Is an Operating Expense? An operating expense (often called OPEX) is a cost a business incurs through its normal day-to-day operations. These are the “keep-the-lights-on” expenses, such as rent, insurance, and marketing, that are necessary to run the business but are not directly tied to the production of a specific product. 1. Meaning of
What Is “ Office audit ”?
05/28/2026
What Is an Office Audit? An office audit is a type of tax examination where the IRS requests that you bring your financial records to a local IRS office for an in-person interview with a tax examiner. It is more comprehensive than a correspondence audit but generally less complex than a field audit conducted at
What Is “Offer in compromise”?
05/28/2026
What Is “Offer in compromise”? An Offer in Compromise (OIC) is an agreement between a taxpayer and the IRS that settles a tax debt for less than the full amount owed. It is a specialized program designed for individuals and businesses who are experiencing legitimate financial hardship and truly cannot afford to pay their total
What Is “ Notice of Federal Tax Lien ”?
05/28/2026
What Is a Notice of Federal Tax Lien? A Notice of Federal Tax Lien (NFTL) is a public document filed by the IRS to alert creditors that the government has a legal claim against your property. It serves as an official notice that you owe a tax debt and ensures the IRS is “first in
What Is “ Notice of deficiency ”?
05/28/2026
What Is a Notice of Deficiency? A Notice of Deficiency is an official legal notice from the IRS informing a taxpayer that the agency has determined they owe additional taxes, penalties, or interest. Often referred to as a “90-day letter,” it serves as a formal proposal of tax changes and provides a specific window of
What Is “Nondeductible expense”?
05/28/2026
What Is a Nondeductible Expense? A nondeductible expense is a cost that cannot be subtracted from your total income to lower your tax bill. Even if these costs are necessary for your personal life or business, the IRS specifically prohibits using them to reduce your taxable income. 1. Meaning of “Nondeductible expense” In plain English,