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US Individual income tax return form


Individual tax form that is slightly more difficult to complete than the 1040EZ. This is available for those who don’t itemize; whose taxable income is less than $50,000; and whose income is only from wages, salaries, tips, interest, and ordinary dividends, capital gains, taxable scholarship and fellowship grants, pensions, annuities and IRAs, unemployment income, and social security.


Simplest form of the 1040, for those under age 65 with no dependents, no itemized deductions, and taxable income less than $50,000.


Tax return form for trust and estates


Reports earnings from independent contracting work. A company must send a contractor a 1099 if they paid $10+ in broker payments or royalties; paid $600+ to an attorney; or paid $600+ in rent, prizes, awards, or services.


Type of employee-sponsored individual retirement account that is funded with pre-tax dollars and often has a matching feature by the employer. 401(k)s have a higher max contribution limit than IRAs.


Similar to a 401k but for a non-profit company. Also funded with pre-tax (tax-deductible) dollars.

457 plan

A deferred compensation plan whose contributions are tax-deductible, and contribution limits are the same as those for 401ks and 403bs. This can be beneficial to an employee who wants to save more than just maximum ($19,500 in 2020) in their 401(k)/403(b) or those whose contributions are limited because they earn too much, as they provide another avenue to save an additional dollars tax deferred.

529 Plan

A popular savings vehicle for college expenses, both deposits to and withdrawals from this account are tax-free if used for qualified higher education expenses. The beneficiary does not necessarily have to be a minor. Contributions are made after tax, but withdrawals used for qualified education expenses are tax free at the Federal level (may be subject to state taxes). If withdrawals are not used for education, they will be taxed at ordinary income rates AND with a 10% penalty (like early IRA withdrawals). There are no age limits for the contributions/distributions, and these often have no limits for contribution amounts (vary by state). Beneficiaries can be reassigned if the primary does not want/use the funds, and no penalty results if the contingent beneficiary is related to the first. Money in the account remains under the parent’s/owner’s control, and there is no requirement to release the funds to the beneficiaries like in a Coverdell or UGMA/UTMA. The owner of the plan has full withdrawal access.

Affordable Care Act (ACA)

Act that made insurance coverage mandatory and standardized healthcare plan offerings.


The individual who facilitates the buying and selling of securities on behalf of the customer.


A contract sold by insurance companies that may provide income for the rest of the individual’s life in return for a lump-sum or periodic payment to the insurance company. Annuities, like IRAs, are tax-deferred vehicles. The taxation on annuities when they are distributed are different from IRAs for “non-qualified” annuities.


Anything of value that you own and that increases your net worth. Assets include but are not limited to cash, property, and securities.

Asset allocation

The placement of a certain amount of one's investment capital within different types of asset classes (e.g., 50% stock, 30% bonds, and 20% cash).


Also known as “cost basis,” this is the value assigned to an asset, generally its purchase price plus the amount of subsequent deposits, that is used to determine a capital gain or capital loss for tax purposes.

Bear market

The term used to describe a prolonged period of declining stock prices.

Before-tax dollars

Pre-tax dollars that are contributed to a tax-deferred savings plan (e.g. 401(k) and some IRAs) that you do not have to pay income tax on until withdrawal at a future date.


The entity (person, trust, estate) designated to receive the proceeds from an asset, account, and/or an insurance policy at the holder’s death.


Also referred to as a fixed income security. A bond is a debt certificate or IOU issued by a corporation or unit of government. In exchange for lending their funds to the bond issuer, lenders are promised interest payments and the return of their initial investment at a specified future date.


A “loanership” investment that pays a specific rate of interest that remains the same until maturity.


Completes both client transactions and often acts as the other side of the trade by selling from their own inventory of shares/funds.

Bull market

The term used to describe a prolonged period of rising stock prices.

Capital appreciation/capital gains

An increase in the market value of an investment.

Capital loss

A decrease in the market value of an investment.

Certificates of deposit (CDs)

Long-term deposits with banks that pay higher rates of interest than savings or checking accounts IF the depositor agrees to leave the funds untouched for a while.


Fee paid to a broker to trade securities, generally based on the number of shares trade or the dollar amount of the trade.


The court-appointed entity that makes financial or personal decisions for a property or person

Contributory IRA (Traditional)

An individual retirement account where only the owner of the account may contribute. The contributions to the account are with pre-tax dollars and earnings accumulate tax free, but any withdrawals from the account are then taxed. Max annual contribution per year is $6,000, but individuals over 50 can make a “catch-up” contribution of an extra $1000. Once the owner reaches 72 years of age, they must make a Required Minimum Distribution (RMD) each year after this. This is a withdrawal that allows the government to collect taxes on a certain amount of the account value. The total withdrawal amount is a formula based on the estimated number of years left in one’s lifetime and the total value of the IRA account. The RMD can either be taken out in cash or transferred to a different non-retirement account.

Cost basis

The value assigned to an asset, generally its purchase price plus the amount of subsequent deposits, that is used to determine a capital gain or capital loss for tax purposes.

Coverdell Education Savings Account (CESA)

Can be used for any qualified education purposes – including elementary, secondary, and higher education purposes. Contributions to a Coverdell must stop on the beneficiary’s 18th birthday, and assets must be used or distributed to him/her by age 30. These accounts are funded with after-tax dollars, like in a 529 plan.

Custodial account

Custodial accounts are created for the benefit of minors, or as a product of a gift given to a minor by an adult. Any transfer of property to a custodial account is irrevocable. The minor will come into full ownership of any assets in the accounts whenever they turn 18. Earnings accumulate tax-free and withdrawals remain tax-free if they are used for higher education expenses for the beneficiary (minor). These types of accounts are often used for a child’s education.

Defined benefit pension plan

For these plans, the employer’s investments must have sufficient returns to pay a set benefit to the employees for retirement.


A severe or long recession – 6 consecutive quarters

Disability income insurance

Type of insurance that replaces lost earnings when someone is unable to work due to accident or illness. This insurance typically only covers people until full retirement age.


The process of selecting different investments to reduce investment risk.


A distribution of income from investments to shareholders.

Earned income

Includes salary, bonus, tips, etc. Earned income does not include rental income. All earned income is taxed as ordinary income at income tax rates.

Emergency fund

A sum of money set aside in a readily accessible savings account for unanticipated events such as unemployment, medical bills, and car repairs. Emergency fund amount guidelines vary, but a general rule of thumb is to have enough to cover at least three months of basic living expenses.


All of a person’s assets, including real estate, personal property, and securities.

Estate planning

The process of organizing your assets for use during your lifetime and distribution after death in accordance with your values, goals, and beliefs.

Face Value

The value of a bond at maturity. This value may vary significantly from what the bond was originally purchased for.

FICA taxes

Taxes for Social Security and Medicare that are paid for by both the employee and the employer. If you are self-employed, you are responsible for the full employer and employee shares of FICA taxes.

Fiduciary standard

Investment advisors and Financial Planners are held to the fiduciary standard are obligated to put their client’s interests above their own.

Filing status

Can be Single, MFJ, MFS, Head of Household, or Qualifying Widow(er).

Financial planner

An individual who helps people look at their financial picture and help them make a plan as to the best way to proceed with their resources. This person is usually paid an hourly fee/flat fee for financial advice, may not necessarily trade in the investor’s portfolio


The Financial Industry Regulatory Authority. FINRA is a nonprofit government agency that oversees brokers to help ensure that they are operating fairly.

Future value

The amount that a sum of money today will be worth in the future with growth due to compound interest.


The person who set up and funded a trust with property and creates terms around its use that the trustee must follow in the best interest of the beneficiaries.

Group coverage

Type of insurance provided by employers. It is generally cheaper than if employees were to buy insurance individually.

Head of household filing status

Individuals qualify for this status if they have a dependent, are unmarried, and pay for more than half of all household expenses.

Health savings account (HSA)

Allows individuals to pay for current health expenses and save for future qualified medical and retiree health expenses tax-free.

Homeowners insurance

A form of insurance that protects your home, its contents, people who are injured at your home, and provides liability protection. The main Homeowners Policy provides fire protection. You can get separate or combined policies to also protect against Wind & Hail and Flood Policies are sold separately.


These are non-negotiable securities, which means that they cannot be bought and sold on the secondary market but only through the US government for payment. They share similar features to TIPS because they adjust for inflation and are default-free.

Incapacity planning

Planning for what happens to your assets and to you if/when you are no longer able to express your wishes. Incapacity planning tools may include a living will, DNR, and health care power of attorney.


An unmanaged collection of securities whose overall performance is used as an indication of stock or bond market trends. An example of an index is the widely quoted Dow Jones Industrial Average (often referred to as the “DOW”). Another frequently reported index is the Standard & Poor's 500 (often referred to as “the S&P”). The S&P, for instance, is merely a list of the largest 500 companies in the USA.

Individual account

An individual securities account that is a taxable account, meaning that any capital gains are taxed at capital gains rates. Account holders can own any form of security in these accounts, and they are the simplest form of investment account.

Individual coverage

Insurance coverage that is acquired on a personal basis and is not provided by an employer. It tends to be more expensive than group coverage.


The erosion of purchasing power over time through an increase in the cost of goods and services.

Inherited IRA

Any IRA that has been passed to a beneficiary upon the death of the original owner of the account. unless the beneficiary is a spouse or charitable remainder trust, the account must be distributed within 10 years.

Inherited IRA

Any IRA that has been passed to a beneficiary upon the death of the original owner of the account. For non-spouse beneficiaries, the entire IRA must be distributed to the beneficiary after 10 years per the new SECURE Act.


The process of purchasing assets such as stocks, bonds, real estate, and mutual funds with the expectation of future income and/or capital gains (growth in value).

Investment advisors

Manage client investments in exchange for a fee, generally in the form of a small annual percentage of the client’s account. Investment advisors are not allowed to share in profits as compensation.

Itemized deduction

The taxpayer will get the higher of their standard deduction or their itemized deduction. This is calculated on Schedule A of the tax return and includes real estate taxes, charitable gifts, investment interest expenses, unreimbursed business expenses, and more.

Joint account

These accounts are owned by two or more individuals; there are several varieties of joint accounts that differ in ownership characteristics. Joint accounts are treated similarly in taxation as individual/brokerage accounts.

Joint Tenants by Entirety (JT TBE)

These kinds of accounts are similar to a JT WROS, but are reserved exclusively to married couples. JT TBEs also have a survivorship feature, which means that if one of the spouses dies, the other spouse will receive 100% of the other spouse’s ownership percentage.

Joint Tenants-in-Common (JT TIC/Ten Com)

In this type of joint account, the owners of the account each hold/own a different percentage share of the asset value. If one of the owners dies, however, they do not have the power to personally choose a beneficiary or give their assets to a surviving co-owner of the account; rather, the probate court determines who receives his/her interest in the account (NO survivorship feature).

Joint with Right of Survivorship (JT WROS)

A person owns the account assets with one or more persons, and each person owns an equal and undivided interest in the account unless otherwise determined. Once one of the owners dies, his/her interest or percentage of the account is immediately divided and given to the other owner(s) of the accounts. This feature is called “survivorship”

Keogh plan

For individuals with self-employment income (only for sole proprietorships, not LLCS or S/C Corps), the business owner can contribute up to 20% of self-employment income and up to 25% of employees’ compensation.


Also known as debts. Money owed by an individual or a business that decreases net worth.

Life insurance

A contract with a life insurance company where a policyholder pays a premium in exchange for an amount paid to his or her beneficiaries in the event of death. Life insurance is not needed by everyone but often should be purchased by those who have financial dependents (e.g., children).


The ability to convert an asset to cash quickly without loss of value.

Liquidity risk

Risk that you are unable to quickly turn an investment into cash and at fair price (thinly traded securities would have a high liquidity risk.

Living Trust (inter vivos)

A trust that is operative during the grantor’s lifetime

Living will

A legal document to direct life-sustaining procedures.

Long-term care insurance

Type of insurance that covers the cost of support services (e.g., home health care and nursing home care) when someone is unable to perform basic activities of daily living such as bathing, eating, and dressing for extended periods of time. Typically for those in retirement age. Sources of coverage include Medicare, Medicaid, and individual policies.

Market risk

The risk that an investment will lose its value due to market decline

MFJ filing status

Married filing jointly. This filing status means both individuals in the couple elect to use the same status and file their returns together. These taxpayers combine gross income and deductions.

MFS filing status

Married filing separately. Both individuals in the couple elect to file separate tax returns.

Money market mutual fund

A type of mutual fund that invests in short-term, liquid cash assets

Municipal bonds

A “loanership” agreement that an investor makes with a local government. Interest paid is tax-free.

Mutual funds

A pool of stocks that are owned in pieces by investors; good for diversification to minimize unsystematic risk.

Net income

Also known as take-home income. The amount of money that a worker receives in a paycheck after items such as income taxes, Social Security (FICA) tax, retirement plan savings, union dues, and other items have been deducted.

Net worth

A snapshot of your financial situation calculated by subtracting your liabilities (debts) from your assets. Both assets and liabilities are assessed at the current fair market value.

Par value

See face value

Passive income

Income from rental properties, direct participation programs (partnerships), and other means in which the recipient is not actively involved.


The combined holding of stocks, bonds, cash and cash equivalents, and any other assets owned by an individual or household.


The combined holding of stocks, bonds, cash equivalents, or other assets (e.g., real estate) by an individual or household.

Portfolio income

Includes income from capital gains, dividends, and interest, and investments. This type of income is taxable at federal, state, and local levels for all bonds and securities.

Portfolio rebalancing

Periodically adjusting the holdings in an investment portfolio to maintain a certain asset allocation.

Pourover Trust

A trust that is established before death and allows estate assets to be added to it after death (good for wealthy individuals that want to add assets to the trust to avoid the probate/court process).

Powers of attorney

A document that appoints an entity to manage your estate when you are unable to do so.

Present value

Today's value of a sum of money that will be received at a future date.

Primary insurance amount (PIA)

The amount that the person will receive at full retirement age, (which is 66 for current retirees.) Calculated based on the monthly earnings amount that social security tax has been paid on each working year.


The court-supervised process of validating a will, paying debts of the deceased, and distributing the proceeds to named beneficiaries (heirs).

Profit sharing plan

Flexible contributions that vary based on the company’s profits, and if no profits are made, then no contributions are made either. These plans have much higher max annual contribution limits than 401ks and other employer retirement plans.


An official booklet that describes a mutual fund, including its objectives, expenses, historical performance, purchase and redemption policies, and fees.

Qualifying widow(er) filing status

A filing status that allows you to keep the benefits of an MFJ status for two years after the death of your spouse. Qualifying widow(er)s must have a dependent to use this status.

Real estate investment trust (REIT)

A company that owns a portfolio of properties and sells shares to investors. This is a real estate investment with liquidity.


A widespread decline in economic activity that lasts more than a few months.

Required minimum distributions (RMDs)

This is a distribution that must be taken from qualified retirement plans (IRA, 401(k), 403(b), 457s) when the individual is 72 years of age or older. This minimum amount comes out of the tax-qualified retirement plan each year and gets taxed as ordinary income.


An investment gain or loss.


Exposure to investment loss.

Risk tolerance

A person's capacity to emotionally and financially handle the risks associated with investing.

RMD calculation

Account balance December 31st of the prior year divided by the life expectancy factor (from uniform table)

Rollover IRA

Designed to receive retirement funds from a qualified plan (ex. 401(k)s) or another IRA account or used to transfer funds from one IRA custodian to another (ex. from Schwab to Fidelity). Once the taxpayer/account owner has the funds from the account they are transferring, they generally have 60 days to place these funds into a rollover account. If it is rolled over after the 60-day mark, it is subject to income tax.

Rollovers and transfers

Direct rollovers can be done to move an IRA from one custodian to another with no penalties and no taxes. Indirect rollovers involve withdrawing all funds in an account to move to a new custodian. In the interval, the money is in the hands of the client. Rollovers from one IRA to another can only be done once per year and must be completed within 60 days.

Roth IRA

A Roth IRA is a type of individual retirement account that is funded with after-tax dollars, and any withdrawals are tax-free (so long as the individual is 59.5 and has had the account for five years). There are income restrictions and contribution limits to Roth IRAs.

Roth IRA

These IRAs differ from traditional IRAs because instead of contributions being made with pre-tax dollars, they are put in after they have been taxed normally as income. They still grow tax free, and any withdrawal after 59.5 years of age is NOT taxed.

Schwab One

An individual brokerage account on Schwab.


The US Securities and Exchange Commission is an independent federal agency that protects investors


A term used to refer to stocks and bonds


Good for business owners, as they can contribute pre-tax dollars for themselves (20% of their income) and for any eligible employees (25% of their wages).


Essentially, a less expensive form of a 401k that allows employers to make contributions to employee’s retirement funds. Because they are less expensive to manage, these forms of qualified plans are great for small business employers to use. Only employers can contribute to the plans, NOT the employee. Contributions to the plan are deductible for the employer and excluded from income for the employee. Earnings on contributions grow tax-deferred. There is no set contribution that must be made by employers each year, so it allows flexibility for them on this end. NOTE: many self-employed business owners open a SEP for themselves because it allows greater contribution limits to their own retirement from their own business.


A unit of ownership in a company (common stock) or mutual fund. The value of a share will vary according to market conditions and other factors.


Only available for companies with less than 100 employees and have no other retirement plans in place; often cheaper and easier to set up than 401ks, so these plans are good for small businesses. Employee cannot withdraw or roll funds into another IRA from a SIMPLE in the first two years without incurring a 25% penalty plus ordinary income tax.


Only employers with fewer than 100 employees can open these plans and annual contributions are limited to $13,500. There is a $3,000 catch-up contribution allowed for workers over age 50. Unlike SEP IRAs, both employers AND employees can contribute to this plan. Employers will either contribute a flat 2% (regardless of an employee’s contribution) of the employee’s wages OR 3% matching contribution. The SIMPLE IRA works most like a 401k, but is less costly and easier to administer than a 401k.

Single filing status

Filing status for unmarried individuals who cannot be considered Head of Household.

Standard deduction

Taxpayers get one standard deduction per person. Taxpayer’s deduction increases for being over the age of 65 and if they or their spouse is blind.


Also known as equity. A type of investment (security) that represents a unit of ownership in a corporation. This ownership is represented by shares of stock, which are a claim on the corporation’s assets and earnings.


Represents the owner’s claims on the profits of the company and can be easily transferred, gifted, sold, donated, etc.


An individual who buys and sells securities on behalf of a client. Generally stock brokers get paid through a commission or mark-up on trades they execute.

Suitability standard

Investment advisors that are held to the suitability standard are only required to make suggestions that align with the client’s best interests. Rules concerning conflict of interest disclosure are not as stringent as they are with the fiduciary standard.


Type of US government bond that is short-term (one year or less), fully secured, and insured by the government. This is the safest kind of bond.

T-notes / T-bonds

T-notes mature in 2-10 years and T-bonds mature in 30 years. Both make semi-annual coupon/interest payments.

Taxable income

The amount of income that a taxpayer looks up in a tax table to determine the tax due after subtracting adjustments, deductions, and exemptions from gross income.

Term life

Temporary insurance that builds no cash value and must be renewed for a higher premium at the end of the term.

Testamentary Trust

A trust that is created and funded only upon the grantor’s death.

Time value of money

The fact that a dollar received today is not worth the same as a dollar received at a previous or future time period, due to the interest that can be earned on the money.

Total return

The combination of income and capital gains or losses on an investment.

Traditional IRA

A Traditional IRA account is created for the benefit of an individual saving for retirement, and only the account owner can contribute to it. Contributions to a Traditional account are made with pre-tax dollars and earnings accumulate tax-free, but any withdrawals will be taxed. There are age requirements and contribution limits for these accounts.

Treasury Inflation-Protected Securities (TIPS)

One of the safest forms of government securities.


A legal instrument that grants control of specified assets to a person or financial institution (the trustee). Trusts contain guidance and instructions as to how the trustee must treat the property inside the trust. Trusts can be revocable or irrevocable and can manage property while the grantor is alive or following the grantor’s death (a testamentary trust).

Trust accounts

Trust accounts involve three parties: the grantor, the trustee, and the beneficiary. The grantor gifts something of value to the beneficiary, but the trustee holds that gift until certain conditions are met.


A person or financial institution that manages the property of others. In the context of a trust, a trustee is the legal representative of the trust. A trustee must act as a fiduciary in regards to the trust’s beneficiaries


A type of custodial account that allows gifts of only cash, securities, or life insurance, which can only be gifted to these accounts during the individual’s lifetime.

Umbrella liability insurance

Excess liability insurance that supplements the liability limits of a homeowner's or renter's policy and automobile insurance policy.

Universal life

Form of permanent insurance that offers flexibility in death benefit and premium payments.

Unrealized gain

A profitable investment position that has yet to be cashed in, such as a winning stock position that remains open. A gain becomes realized once the position is sold for a profit.

Unrealized loss

An unprofitable investment position that has yet to be cashed in, such as a losing stock position that remains open. A loss becomes realized once the position is sold.

US government bonds

Type of bond that is safer than others because it carries very little default risk. Interest made on these bonds on non-taxable.


Type of custodial account that has no restrictions on the type of property that can be gifted. In contrast to UGMAs, gifts may be made inter vivos (during the lifetime) as well as testamentary (after death)


Life insurance that is tied to investments. The death benefit and cash value fluctuate according to fluctuations of the separate account

Variable universal life insurance (VUL)

Flexible premium insurance with cash value and death benefit tied to the performance of the separate account.


The degree of price fluctuation associated with a specific investment or market index. The more price fluctuation that is experienced, the greater the volatility.


Document given to an employee by an employer that reports earnings from wages and includes all income tax, social security tax, and Medicare tax withheld


The form an employee uses to tell their employer how much to withhold


Independent contractors may (or may not) be asked to fill out a W-9 by the company that hires them. This forms signifies that the company that hires the independent contractor is not responsible for withholding taxes from your payments.

Whole life

Most common form of permanent insurance with a guaranteed death benefit and minimum guaranteed cash value.


A legal document that states what people want done with their property after they die (e.g., charitable donations, distributions to their heirs) and who they want to manage their financial affairs, settle their estate, and serve as guardian for minor children.


Deduction of federal and state income taxes, Social Security taxes, and other items, such as union dues and health insurance premiums, from a worker's paycheck.