IRS Glossary: Plain-English Tax Terms A to Z

IRS letters are written in a mix of legal and agency language. This glossary translates the most common terms into plain English. If a word on your notice isn't here, check the page for your notice in our notice library or the IRS forms guide.

A

Abatement

A reduction or removal of tax, penalty or interest the IRS has already charged. You can ask for one by phone, by letter, or on Form 843.

Accepted return

An e-filed return that passed the IRS's first automated checks. "Accepted" means received, not approved. The IRS can still review it later.

Accuracy-related penalty

A penalty, generally 20% of the underpaid tax, for underpaying because of negligence or a substantial understatement of income tax. It often shows up on a CP2000 or after an audit.

Additional Medicare Tax

An extra 0.9% Medicare tax on wages and self-employment income above $200,000 (single), $250,000 (married filing jointly) or $125,000 (married filing separately). These thresholds are not adjusted for inflation.

Adjusted gross income (AGI)

Your total income minus certain "above-the-line" deductions, such as half of self-employment tax. Many credits, limits and IRS programs, including low-income fee waivers, are based on AGI.

Amended return

A corrected return filed after the original, using Form 1040-X for individuals. See our guide to amended returns.

Appeals (IRS Independent Office of Appeals)

A part of the IRS that operates separately from the auditors and collectors. It reviews disputes over audits, penalties and collection actions.

Assessment

The formal recording of a tax debt on your IRS account. Once tax is assessed, the IRS can bill you and, if you don't pay, start collection.

Assessment statute expiration date (ASED)

The last day the IRS can assess more tax for a year. It is generally three years after the return was filed. It can be longer in some cases, such as a large omission of income, and there is no limit if no return was filed or for fraud.

Audit

An IRS review of a return to check whether income, deductions and credits are correct. The IRS calls it an examination. See IRS audits.

Audit reconsideration

A way to ask the IRS to reopen a finished audit, or a tax assessed because you didn't file, when you have new information. See audit reconsideration.

Automated Collection System (ACS)

The IRS's phone-based collection operation. It sends many of the "LT" letters, such as the LT11.

Automated Substitute for Return (ASFR)

An IRS program that prepares a return for people who didn't file, using income reported by employers and others. It usually leads to a CP2566.

Automated Underreporter (AUR)

The IRS program that compares your return with W-2s, 1099s and other information returns. When they don't match, it sends a CP2501 or CP2000.

Automatic Exemption from Penalty (AEP)

A new IRS relief program that started in summer 2026. For 2025 tax year returns and later, if you have filed and paid on time for the three prior years, the IRS won't charge late-filing or late-payment penalties and will send you a letter saying so.

B

Back taxes

Taxes from earlier years that are still unpaid. They keep growing with penalties and interest until paid.

Backup withholding

Tax a payer must withhold, currently at 24%, from certain payments such as interest or 1099 income. It applies when you don't give the payer a correct taxpayer identification number or the IRS tells the payer to start.

Balance due

The amount you owe on your IRS account, including tax, penalties and interest. A first balance-due notice is usually a CP14.

Bank levy

An IRS seizure of money in a bank account. The bank must hold the funds for 21 days before sending them to the IRS, which gives you time to resolve the issue. See levies and garnishment.

C

CAF number

A number the IRS's Centralized Authorization File assigns to a representative or designee when a Form 2848 or Form 8821 is recorded. It lets IRS employees confirm who may discuss your account.

Collection Appeals Program (CAP)

A faster Appeals review for collection actions such as liens, levies, and rejected or ended payment plans. It covers more actions than a CDP hearing, but you can't go to court if you disagree with the decision.

Collection Due Process (CDP) hearing

A chance to have the IRS Independent Office of Appeals review a planned levy or a filed lien. You request it on Form 12153, generally within 30 days of the date on the notice. You can go to Tax Court if you disagree with the result. See CDP hearings.

Collection information statement

A financial form listing your income, expenses, assets and debts. The IRS uses it to decide what you can pay. The main versions are Forms 433-A, 433-F, 433-H and 433-B.

Collection statute expiration date (CSED)

The end of the IRS's time to collect a tax debt. It is generally 10 years from the date of assessment. Some events, such as an offer in compromise being considered or a bankruptcy, pause the clock. See IRS statute of limitations.

Correspondence audit

An audit done entirely by mail. The IRS asks for documents on a few items. It often starts with a Letter 566.

CP notice

"CP" stands for computer paragraph. These are IRS notices generated automatically, such as the CP14 or CP2000. The code is usually printed in the top or bottom right corner.

Currently not collectible (CNC)

An account status the IRS uses when you can't pay anything without being unable to cover basic living expenses. Collection pauses, but penalties and interest continue and the IRS may keep future refunds. See currently not collectible.

D

Deficiency

The difference between the tax the IRS says you owe and the tax you reported. A proposed deficiency becomes final if you don't challenge it in time.

Dependent

A qualifying child or qualifying relative you can claim on your return. Dependents affect credits such as the Child Tax Credit and the Earned Income Tax Credit.

Direct debit installment agreement (DDIA)

A payment plan paid by automatic monthly withdrawals from your bank account. In 2026 it has the lowest long-term setup fee: $29 online.

Direct Pay

The IRS's free service for paying from a checking or savings account online, without registering.

Doubtful collectibility

The most common reason the IRS accepts an offer in compromise. It means the IRS doubts it could ever collect the full amount you owe.

E

Earned Income Tax Credit (EITC)

A refundable credit for workers with low to moderate income. Claims are often reviewed. A denied claim may require Form 8862 before you claim it again. See CP75 and CP79.

EFTPS

The Electronic Federal Tax Payment System, a free Treasury service for paying federal taxes. Businesses use it for payroll deposits, and individuals can use it for estimated tax. Enrollment is required.

Employer Identification Number (EIN)

A nine-digit number the IRS assigns to businesses, trusts and other entities. A CP575 confirms a new EIN.

Enrolled agent (EA)

A tax professional licensed by the IRS who can represent taxpayers before the IRS on any tax matter, including audits, collections and appeals.

Equivalent hearing

A hearing with IRS Appeals you can request if you missed the 30-day window for a CDP hearing. You must ask within one year after the date of the levy notice, or one year plus 5 business days after a lien was filed. You can't take an equivalent hearing decision to Tax Court.

Estimated tax

Tax you pay during the year on income without withholding, such as self-employment or investment income. Individuals usually pay it in four installments using Form 1040-ES. Try our self-employment tax calculator.

Examination

The IRS's formal word for an audit.

Extension of time to file

Extra time to file a return, usually six months, requested on Form 4868 for individuals or Form 7004 for businesses. It does not extend the time to pay.

F

Failure-to-deposit penalty

A penalty on employers and others who don't deposit payroll or other taxes on time, in the right amount or the right way. It ranges from 2% to 15% depending on how late the deposit is.

Failure-to-file penalty

A penalty of 5% of unpaid tax for each month or part of a month a return is late, up to 25%. Returns more than 60 days late have a minimum: $510 for returns due in 2025 and $525 for returns due in 2026, or 100% of the tax if less.

Failure-to-pay penalty

A penalty of 0.5% of unpaid tax for each month or part of a month it stays unpaid, up to 25%. It drops to 0.25% during an approved payment plan if you filed on time. It rises to 1% if you don't pay within 10 days of a notice of intent to levy.

Federal tax lien

The government's legal claim against your property when you don't pay a tax debt after a bill. It attaches to everything you own, including property you acquire later. See federal tax liens.

Field audit

An audit done in person at your home, business or accountant's office, usually by a revenue agent. It ends with a report and, if you don't agree, a 30-day letter such as a Letter 950.

Filing status

The category that sets your tax rates and standard deduction: single, married filing jointly, married filing separately, head of household, or qualifying surviving spouse.

First Time Abate (FTA)

An IRS policy that removes late-filing, late-payment and late-deposit penalties for one period if you have a clean three-year history. It is being replaced by Automatic Exemption from Penalty for 2025 tax year returns and later. See penalty relief.

Fiscal year

A 12-month tax year that ends on the last day of any month other than December. Most individuals use the calendar year.

Form 1099

A family of information returns that report non-wage payments, such as freelance pay (1099-NEC), interest (1099-INT) or payment-app sales (1099-K). The IRS gets a copy and matches it to your return.

Form W-2

The form your employer uses to report your wages and the taxes withheld. Employers must send it by January 31, or the next business day.

Fraud penalty

A civil penalty of 75% of the part of an underpayment caused by fraud. It is separate from criminal charges.

Frivolous return

A return or submission based on arguments the courts have rejected, such as claims that wages aren't income. The IRS can charge a $5,000 penalty for each one.

G

Garnishment

The everyday word for a wage levy, where the IRS takes part of each paycheck directly from your employer.

Gross income

All income you receive that isn't specifically exempt from tax, before any deductions.

H

Hardship

In IRS collection, economic hardship means paying would leave you unable to meet basic, reasonable living expenses. It can support currently-not-collectible status, a levy release, or help from the Taxpayer Advocate Service.

Head of household

A filing status for unmarried people who pay more than half the cost of keeping up a home for a qualifying person. It has lower rates than single.

I

Identity Protection PIN (IP PIN)

A six-digit number known only to you and the IRS that must be on your return to file it electronically. It changes every year. A CP01A mails it to some taxpayers. Others get theirs through their IRS Online Account.

Identity theft (tax-related)

When someone uses your Social Security number or ITIN to file a return or claim a refund. Victims usually file Form 14039. See tax identity theft.

Identity verification letter

A letter asking you to prove you filed a return before the IRS processes it, such as Letter 5071C, Letter 4883C or Letter 5747C.

Individual Taxpayer Identification Number (ITIN)

A nine-digit tax number for people who need to file but can't get a Social Security number. You apply on Form W-7. See CP565.

Information return

A form a third party files with the IRS reporting payments to you, such as a W-2, 1099 or 1098. The IRS matches these against your return.

Injured spouse

A spouse whose share of a joint refund was taken to pay the other spouse's past-due debt. They can ask for their share back on Form 8379. This is different from innocent spouse relief.

Innocent spouse relief

Relief from tax, interest and penalties on a joint return when your spouse or former spouse caused the error and you didn't know. You request it on Form 8857. For most types, you must ask within two years after the IRS first tries to collect from you. See innocent spouse relief.

Installment agreement

The formal name for an IRS payment plan, where you pay a balance in monthly payments. See IRS payment plans and our payment plan calculator.

Interest (underpayment interest)

A charge on unpaid tax, penalties and interest. It runs from the due date until you pay and compounds daily. The rate is the federal short-term rate plus 3 points, reset quarterly. It was 7% for October through December 2026. See IRS interest.

Internal Revenue Code (IRC)

The federal tax law, found in Title 26 of the U.S. Code. Notices often cite a section, such as IRC § 6651 for late-filing and late-payment penalties.

Internal Revenue Manual (IRM)

The IRS's public handbook for its employees. It explains how the IRS handles audits, collections, penalties and more, and it is available on irs.gov.

IRS Online Account

A secure account on irs.gov where you can see your balance, payments, notices, transcripts and payment plan options. See IRS transcripts and online account.

J

Jeopardy levy

A levy the IRS can make without the usual advance notice when it believes collection is at risk, for example if assets may be moved or hidden. You can request a CDP hearing afterward.

Joint and several liability

On a joint return, each spouse is responsible for the entire tax, not just half. The IRS can collect the full amount from either spouse.

L

Legal holiday

For IRS deadlines, a legal holiday in the District of Columbia, which includes federal holidays and D.C. Emancipation Day on April 16. A deadline that falls on one moves to the next business day.

Levy

A legal seizure of your property or rights to property to pay a tax debt. Examples include wages, bank accounts, Social Security benefits and refunds. Before most levies, the IRS must send a final notice at least 30 days ahead.

Lien discharge

Removing the federal tax lien from a specific piece of property, often so it can be sold. You apply on Form 14135.

Lien release

Removal of a federal tax lien after the debt is paid or can no longer be collected. The IRS releases a lien within 30 days after the debt is paid.

Lien subordination

An IRS agreement to let another lender move ahead of the tax lien, for example to refinance a mortgage. You apply on Form 14134.

Lien withdrawal

Removing the public Notice of Federal Tax Lien as if it had never been filed. In some cases this is available after you pay or enter a direct debit payment plan. You apply on Form 12277.

Low Income Taxpayer Clinic (LITC)

An independent clinic that represents low-income taxpayers in disputes with the IRS for free or a small fee. Most serve people whose income is at or below 250% of the federal poverty guidelines. See Taxpayer Advocate Service.

M

Married filing separately

A filing status for married people who file their own returns. It can limit credits and deductions, but each spouse is responsible only for their own return.

Math error

A mistake the IRS can fix without an audit, such as an arithmetic error or a missing form. You generally have 60 days from the notice to ask the IRS to reverse it. See CP11 and CP12.

Minimum late-filing penalty

The lowest failure-to-file penalty for a return more than 60 days late: $485 for returns due in 2024, $510 for 2025 and $525 for 2026, or 100% of the unpaid tax if that is less.

N

Nonfiler

Someone who didn't file a required return. The IRS may send a CP59 or CP518, and may eventually prepare a substitute for return. See unfiled tax returns.

Notice and demand

The IRS's first bill for an assessed tax, which asks for payment. A CP14 is the most common example.

Notice date

The date printed on an IRS notice. Response deadlines are counted from this date, not from when you received it. Try our notice deadline calculator.

Notice of Deficiency

A legal notice proposing more tax that gives you 90 days (150 days if addressed outside the U.S.) to petition the U.S. Tax Court. It is also called a statutory notice or 90-day letter. See CP3219A.

Notice of Federal Tax Lien (NFTL)

A public notice the IRS files to alert creditors that it has a lien on your property. The IRS then sends a Letter 3172 explaining your right to a hearing.

O

Offer in compromise (OIC)

An agreement to settle a tax debt for less than the full amount, based on what the IRS believes you can pay. As of 2026 it requires a $205 application fee and a first payment unless you qualify as low income. See offer in compromise.

Office audit

An audit held at an IRS office, where you bring records to an examiner.

Offset (refund offset)

When the IRS or the Treasury Offset Program applies your refund to a debt, such as back taxes, child support or a federal student loan. See CP49 and refund delays and offsets.

Overpayment

Tax paid beyond what you owe. The IRS refunds it, applies it to other debts, or applies it to next year's estimated tax if you ask.

P

Partial payment installment agreement (PPIA)

A payment plan with payments that won't pay the full balance before the collection statute expires. The IRS requires a full financial review and may check your finances again during the plan.

Penalty

An extra charge for not following a tax rule, such as filing late, paying late or underreporting income. Many penalties can be reduced or removed. Try our penalty and interest calculator.

Penalty abatement

Removal of a penalty, usually for reasonable cause, an administrative waiver such as First Time Abate, or a statutory exception. See penalty relief.

Petition (Tax Court)

The document you file with the U.S. Tax Court to dispute a Notice of Deficiency or a CDP determination before paying. The deadline is strict.

Power of attorney

Written permission for a representative, such as a CPA, enrolled agent or attorney, to act for you with the IRS. You give it on Form 2848. See tax professional power of attorney.

Premium tax credit

A credit that helps pay for health insurance bought through the Health Insurance Marketplace. It is reconciled on Form 8962. A missing Form 8962 can trigger a Letter 12C.

Private debt collection

An IRS program that assigns certain older, inactive tax debts to private collection agencies under contract. The IRS tells you first with a CP40. The agencies can't take payment themselves. Payments go to the IRS.

Protest

A written request to appeal proposed audit changes to the IRS Independent Office of Appeals, usually sent within the time given in a 30-day letter.

Q

Qualifying child

A child who meets IRS tests for relationship, age, residency and support. Qualifying children are central to the Child Tax Credit, the EITC and head-of-household status.

Quarterly interest rate

The IRS interest rate for a calendar quarter. For individual underpayments it was 7% for most of 2025 and 2026, and 6% from April through June 2026.

R

Reasonable cause

A good reason, such as serious illness, a disaster or records you couldn't get, that shows you used ordinary care but still couldn't meet a tax duty. It can be grounds for removing many penalties.

Reasonable collection potential (RCP)

The IRS's estimate of what it could collect from you, based on your equity in assets plus future disposable income. It drives offer in compromise decisions.

Refund statute expiration date (RSED)

The deadline to claim a refund. It is generally three years from when you filed the return or two years from when you paid the tax, whichever is later.

Refundable credit

A credit that can produce a refund even if you owe no tax, such as the EITC or the refundable part of the Child Tax Credit.

Return transcript

An IRS record showing most lines from your original return as filed. Lenders often ask for one. You can get it from your IRS Online Account or with Form 4506-T.

Revenue agent

An IRS employee who conducts field audits, usually of businesses and complex returns.

Revenue officer

An IRS employee who handles collection cases in person, usually larger or more complex debts. Revenue officers can issue levies and file liens.

S

Schedule C

The form sole proprietors and single-member LLC owners use to report business income and expenses. Its net profit feeds into self-employment tax.

Schedule SE

The form used to figure self-employment tax.

Seizure

The IRS taking physical property, such as a vehicle or real estate, to sell for a tax debt. It is rare and comes after several notices and a chance for a hearing.

Self-employment tax

Social Security and Medicare tax for people who work for themselves: 15.3% on 92.35% of net profit. The Social Security part stops at the yearly cap, which is $184,500 for 2026. See our self-employment tax calculator.

Seriously delinquent tax debt

An individual's federal tax debt over an inflation-adjusted amount ($66,000 for 2026) for which a lien has been filed and hearing rights used up, or a levy issued. The IRS can certify it to the State Department, which can deny or revoke a passport. See CP508C.

Small tax case

A simpler U.S. Tax Court procedure for disputes of $50,000 or less per year. Decisions can't be appealed.

Statute of limitations

Legal time limits on the IRS and on you: the time to assess tax, to collect it, and to claim a refund. See IRS statute of limitations.

Statutory notice of deficiency

Another name for the Notice of Deficiency (90-day letter).

Substitute for return (SFR)

A return the IRS prepares for you when you don't file, based on information returns. It usually leaves out your deductions and credits, so filing your own return often lowers the bill.

T

Tax account transcript

An IRS record of activity on your account for one year, such as payments, penalties, interest and notices. It is useful for checking a balance.

Tax Court (U.S. Tax Court)

An independent federal court where you can dispute a Notice of Deficiency, and certain other IRS decisions, without paying first.

Taxpayer Advocate Service (TAS)

An independent organization within the IRS that helps taxpayers, for free, whose problems aren't being solved through normal channels or who face hardship. You can ask for help with Form 911. See Taxpayer Advocate Service.

Taxpayer Assistance Center (TAC)

An IRS walk-in office where you can get help in person, usually by appointment.

Taxpayer Bill of Rights

Ten basic rights every taxpayer has when dealing with the IRS, such as the right to be informed and the right to appeal. They are summarized in Publication 1.

Taxpayer identification number (TIN)

Any number the IRS uses to identify you: a Social Security number, ITIN or EIN.

Third-party authorization

Permission for someone to see your IRS information or talk to the IRS for you. Form 8821 lets them see information only. Form 2848 lets them represent you.

Tolling

Pausing a statute-of-limitations clock. For example, the collection clock stops while an offer in compromise is pending.

Treasury Offset Program (TOP)

A program run by Treasury's Bureau of the Fiscal Service that takes federal payments, including tax refunds, to pay certain past-due debts such as child support or student loans.

Trust fund recovery penalty (TFRP)

A penalty equal to the unpaid income tax and employee Social Security and Medicare tax a business withheld but didn't pay over. It can be charged personally to anyone responsible who willfully failed to pay.

Trust fund taxes

Taxes a business holds for the government, such as income tax and the employee share of Social Security and Medicare withheld from paychecks.

U

Underpayment

Tax you owe but didn't pay by the due date. Interest and often penalties apply.

Underpayment of estimated tax penalty

A charge for not paying enough tax during the year through withholding or estimated payments. It's figured on Form 2210 for individuals and depends on how much was paid late and for how long.

Underreported income

Income that should have been on your return but wasn't. It is often found when the IRS matches 1099s and W-2s. See CP2000.

Unfiled return

A required return that hasn't been filed. Filing as soon as possible stops the late-filing penalty from growing. See unfiled tax returns.

W

Wage and income transcript

An IRS record of the W-2s, 1099s and other information returns filed under your Social Security number. It is useful for filing old returns or answering a CP2000.

Wage levy

An ongoing IRS levy on your paychecks. Your employer sends part of each check to the IRS until the debt is paid, the levy is released, or other arrangements are made. An exempt amount based on your filing status and dependents is left to you.

Where's My Refund

The IRS's online tool for checking the status of a current-year refund.

Withholding

Income tax your employer, or another payer, takes out of your pay and sends to the IRS for you. You control it with Form W-4.

IRSV.com is an independent guide and is not affiliated with the IRS. This page is general information, not tax or legal advice. Rules change; confirm details on IRS.gov or with a tax professional. Found an error? Tell us.