Accounting & Tax Definitions -- E

Earned Income: In simple English: All the money you earn. This includes any wages, salaries, tips, net earnings (if you're self-employed), and any other income received for personal services. Add it all up, it's all earned income.

Earned Income Credit: Low-income workers can file a tax return to get an earned income credit, even if no income tax was withheld from the worker's pay.

Electronic Filing (IRS e-file): IRS e-file options allow you to file Federal income tax returns (and some state returns) through a tax professional, through your home computer or even through your telephone. It may also be available in many other places in your local community.

Engagement Letter: Written communication between an accountant and a client with respect to a professional engagement, outlining the scope of the accountant's responsibilities and arrangements agreed upon.

Equity: The ownership of a shareholder in a corporation. See Capital.

Estate: Real and personal property owned by a person at the time of death (real property is land and anything permanently attached to it).

Excise Tax: Excise taxes are taxes on the sale or use of certain products or transactions. So every time you make a telephone call, buy a plane ticket, or ride in a car (to name but a few) you'll be paying excise taxes.

Exempt: Exempt from tax liability - Before a taxpayer pays taxes, he/she can claim a set amount of tax deductions for him/herself, a spouse and eligible dependents. The total amount is subtracted from the adjusted gross income. Then the tax on the remaining income is figured out.

Exempt from withholding - Taxpayers can be exempt from paying a certain amount of federal income tax if they meet certain income, tax liability, and dependency requirements. In fact, you could be exempt from having certain taxes taken out of your paycheck. If you have a job, be smart and check into this.

Expenditure: Consumption of an asset or payment for an expense. Incurrence of a liability.

External Auditor: An independent accountant engaged to determine if the financial statements of an entity represent the economic events that occurred during the period audited. The external audit is for the shareholders/owners (rather than for management).