IRS Enrolled Agent SEE Part 1 (Individuals) Glossary
27 essential terms and definitions for IRS Enrolled Agent SEE Part 1 (Individuals). Each definition is written for exam preparation, covering the concepts as they are tested on the 2026 syllabus.
A
- Adjusted Gross Income (AGI)
- AGI is gross income minus above-the-line adjustments such as the deductible portion of self-employment tax, IRA contributions, student loan interest, and HSA contributions. AGI is the starting point for many phase-outs and the denominator in several itemized-deduction limitations.
- Alternative Minimum Tax (AMT)
- AMT is a parallel tax system that requires certain taxpayers to compute liability under an alternative set of rules without favorable preferences. The taxpayer pays the higher of regular tax and AMT. The AMT exemption phases out at higher AMT income levels.
C
- Capital Gain
- A capital gain arises when a capital asset is sold for more than its adjusted basis. Long-term capital gains (assets held more than one year) are taxed at preferential rates of 0%, 15%, or 20% depending on the taxpayer's taxable income; short-term gains are taxed at ordinary rates.
- Child Tax Credit (CTC)
- The Child Tax Credit reduces tax liability for each qualifying child under age 17. Under OBBBA, the maximum CTC for tax year 2026 is $2,200 per child, of which up to $1,700 is refundable as the Additional Child Tax Credit. The credit phases out above income thresholds.
- Constructive Receipt
- Constructive receipt is the tax doctrine that income is taxable when it is made available to the taxpayer without substantial restriction, even if not actually received. A check available to be picked up on December 30 is constructively received in that year, even if not cashed until January.
D
- Dependent
- A dependent is either a qualifying child or a qualifying relative who meets the relationship, age, residency, support, and joint-return tests under IRC §152. Dependents enable filing-status benefits, the Child Tax Credit, the Credit for Other Dependents, and certain itemized deductions.
E
- Earned Income Tax Credit (EITC)
- The EITC is a refundable credit for low- and moderate-income taxpayers with earned income. The credit phases in over earned income up to a maximum, plateaus, and phases out over a higher income range. Amounts vary by number of qualifying children and filing status.
F
- Filing Status
- Filing status determines the tax rate schedule, standard deduction, and eligibility for various credits. The five statuses are single, married filing jointly, married filing separately, head of household, and qualifying surviving spouse.
- Form 1040
- Form 1040 is the standard US individual income tax return. The base form covers most taxpayers; numerous schedules (1, 2, 3, A, B, C, D, E, F, SE) handle specific income types, adjustments, and credits.
- Form W-2
- Form W-2 (Wage and Tax Statement) is the annual statement an employer provides to each employee and to the IRS showing wages, tips, federal and state income tax withheld, and Social Security and Medicare wages and withholding.
- Form 2848
- Form 2848 is the Power of Attorney and Declaration of Representative, granting an Enrolled Agent, CPA, attorney, or other qualifying person authority to represent a taxpayer before the IRS. The CAF (Centralized Authorization File) processes the form and tracks active authorizations.
- Form 1099-NEC
- Form 1099-NEC reports nonemployee compensation of $600 or more paid to an independent contractor. Payers must issue 1099-NEC to recipients and file with the IRS by January 31 of the year following payment.
G
- Gift Tax
- Gift tax is imposed on the donor for transfers of property by gift during life. The annual exclusion ($18,000 per donee in 2025) and the lifetime unified credit (basic exclusion amount, raised to $15 million per individual under OBBBA) limit reported gifts. Gifts above the annual exclusion reduce the unified credit.
- Gross Income
- Gross income under IRC §61 includes all income from whatever source derived, except as otherwise excluded by statute. It encompasses compensation, business income, gains from property, interest, dividends, rents, royalties, alimony (pre-2019 decrees), and many other categories.
H
- Head of Household
- Head of Household is a filing status available to unmarried taxpayers who pay more than half the cost of keeping up a home that is the principal residence for more than half the year of a qualifying person (usually a child or qualifying relative). It carries a larger standard deduction and lower rates than single.
I
- Itemized Deduction
- Itemized deductions are specific deductible expenses reported on Schedule A, including medical expenses above the AGI floor, SALT (capped at $40,000 under OBBBA), mortgage interest, charitable contributions, and casualty losses in federally-declared disaster areas.
K
- Kiddie Tax
- Kiddie tax under IRC §1(g) applies the parent's marginal rate to a child's unearned income above a threshold. For 2025, the threshold is $2,700; unearned income above this is taxed at the parent's rate rather than the child's.
M
- Marginal Tax Rate
- Marginal tax rate is the rate applied to the next dollar of taxable income. The US uses a progressive bracket system, so a taxpayer's marginal rate may differ from the average effective rate. Marginal rates drive most tax-planning decisions.
- Modified AGI (MAGI)
- MAGI is AGI adjusted for specific add-backs that vary by the provision being applied. Common MAGI definitions add back the foreign earned income exclusion, student loan interest deduction, IRA deduction, and savings bond interest exclusion. MAGI is used in IRA contribution phase-outs, premium tax credit, and NIIT.
N
- Net Investment Income Tax (NIIT)
- NIIT under IRC §1411 imposes a 3.8% tax on the lesser of net investment income or modified AGI above $200,000 (single) or $250,000 (MFJ). Investment income includes interest, dividends, capital gains, rental income (when passive), and royalties.
Q
- Qualified Business Income (QBI)
- QBI is the net income from a qualified trade or business that is eligible for the §199A deduction. The deduction is up to 20% of QBI, subject to wage and unadjusted basis limits and a phase-out for specified service trades or businesses above income thresholds.
R
- Refundable Credit
- A refundable credit can reduce tax liability below zero, generating a tax refund for the excess. EITC, the refundable portion of CTC, the American Opportunity Credit (40% refundable), and the Premium Tax Credit are common refundable credits.
S
- Section 121 Exclusion
- Section 121 allows a taxpayer to exclude up to $250,000 of gain ($500,000 for MFJ) on the sale of a principal residence, provided ownership and use tests are met for two of the prior five years. Special rules apply for partial use, recapture of depreciation, and military and Foreign Service exceptions.
- Standard Deduction
- Standard deduction is a fixed amount that reduces AGI for taxpayers who do not itemize. Under OBBBA, the 2026 standard deduction is $16,100 for single, $32,200 for MFJ, and $24,150 for head of household. Additional standard deduction is allowed for age 65+ and blindness.
T
- Tax Liability
- Tax liability is the total tax owed before credits and payments, equal to the tax computed on taxable income (including AMT if higher than regular tax) plus additional taxes such as self-employment tax, NIIT, and the additional Medicare tax.
- Taxable Income
- Taxable income is AGI minus the standard deduction or itemized deductions, minus the QBI deduction. It is the figure to which the regular-tax rate schedule applies to compute the tentative tax.
W
- Withholding
- Withholding is the system by which employers, payers, and certain third parties remit estimated tax to the IRS on behalf of recipients throughout the year. W-4 governs wage withholding; W-4P governs pension withholding; W-9 documents non-employee TINs for backup withholding.