Accounting & Tax Definitions -- S

S Corporation: A small corporation which elects subchapter S tax treatment. This tax treatment allows the corporation to avoid federal level taxation. Corporate Profits and Losses are passed through to the shareholders.

Sales Taxes: Depending on the state you live in, you pay an extra percentage of sales tax for items purchased.

Security: Collateral for a debt (for example, accounts receivable may be pledged as security for a loan). Security is a generic term used to refer to a bond, share certificate or other medium or long-term investment evidencing debt or ownership.

Share: An interest in a corporation. The total ownership of a corporation is divided into shares of stock. See Stock

Shareholder: Any holder of one or more shares in a corporation. A shareholder usually has evidence that they are a shareholder. This evidence is represented by a stock certificate.

Social Security: Social Security is America's government-run retirement plan. One day, when you're your grandparents' age, you'll get the money back.

Sole Proprietorship: A business carried on by the owner as an individual. The owner of a sole proprietorship is personally liable for all business debts; thus, personal property could be taken to pay business debts. A Sole Proprietorship is an unincorporated business wholly owned by one individual.

Standard Deductions: Some taxpayers choose to take a standard amount instead of itemizing all of their deductions. This is a fixed amount that is generally based on a person's filing status.

State Taxes: There are all kinds of taxes which are used to pay for all sorts of things. Some of our money goes to the Federal government, which pays for services like Interstate highways, the armed forces, the FBI, and a lot more. Your state also needs money for schools, roads, state troopers-to name just a few. At the end of the tax year, you will need to send one form to the Federal government, and another to your state government.

Stated Capital: The par value of shares multiplied by the number of shares outstanding. The amount of stated capital may effect the ability to pay dividends.

Statement: Summary of an account for a period of time (usually one month) showing invoices, credits and balance due. A statement is provided to a customer by a supplier.

Statement of Changes in Financial Position: A financial statement showing the effect of operating, financing and investing activities effecting the cash position of the company. Also known as Cash Flow Statement, Statement of Cash Flow, Statement of Operating, Financing and Investing Activities, or Statement of Changes in Cash Resources.

Statement of Earnings: See Income Statement

Statement of Financial Position: See Balance Sheet.

Statement of Retained Earnings: A financial statement summarizing the changes in retained earnings for a stated period. Also known as Statement of Changes in Capital Accounts or Statement of Changes in Retained Earnings and Reserves.

Stock: Capital of a corporation that is divided into portions or shares. Stock refers to an equity or ownership interest in a corporation. There may be several classes of stock in a corporation, each class divided into equal portions or shares. Ownership of shares is demonstrated by stock certificates. See Share.

Stock Certificate: A written instrument that shows ownership of shares in a corporation.

Stock Dividend: A dividend paid by the issuance of shares of capital stock.

Stock Option: The right to buy shares of capital stock at a stated price on or by a given date. A privilege often extended to executives or employees of a company.

Stock Transfer Book: A record book which lists the owners of shares of stock in a corporation.

Stockholder: See shareholder.

Subsidiary: A corporation controlled by another corporation that owns directly or indirectly an interest sufficient to elect a majority of the board of directors. See Parent Company.

SEP: See Simplified Employee Pension

SIMPLE Retirement Plan: Small employers may establish a savings incentive match plan for employees retirement plan. A SIMPLE plan can be either an IRA for each employee or a cash or deferred arrangement, such as a 401(k) plan.

SUB Pay: Supplemental unemployment benefits. These benefits are generally received from a company-financed fund and are fully taxable as wages.

Safe Harbor: Tax regulations that allow a (usually) simpler method of determining a tax consequence than is available following the precise language of the Code or regulations. An example is the simplified method for determining the taxable portion of pension distributions.

Salvage Value: The estimated value that will be realized upon the sale or other disposition of an asset at the end of its useful life.

Schedules: Official IRS forms used to report various types of income, deductions, and/or credits.

Scholarships and Fellowships: Scholarships and fellowships received by degree candidates for the payment of tuition, fees, books, supplies, and equipment are generally excluded from gross income. Amounts received for room and board as well as scholarship and fellowship money received by non-degree candidates must be included in income.

Section 1231: Section 1231 assets are depreciable assets and real estate used in a trade or business and held for more than one year. Under certain circumstances, the classification also includes timber, coal, domestic iron ore, livestock (held for draft, breeding, dairy, or sporting purposes), and unharvested crops.

Section 1231 Gains and Losses: If the combined gains and losses from the taxable dispositions of section 1231 assets is a gain, such gains are treated as long-term capital gains. In arriving at section 1231 gains, however, the depreciation recapture provisions (for example, sections 1245 and 1250) are first applied to produce ordinary income. If the net result of the combination is a loss, such gains and losses for section 1231 assets are treated as ordinary.

Section 1245: Section 1245 assets are depreciable business use personal property and certain nonresidential real property. If the sale of these assets results in a gain, section 1245 of the Code requires the gain to be treated as ordinary income to the extent of depreciation allowed or allowable. That is, the depreciation must be recaptured. Any gain in excess of the amount required to be recaptured is section 1231 gain, potentially taxable as long-term capital gain.

Section 125 Plan: See Cafeteria Plan.

Section 1250: The section that requires that gain on disposition of real property be treated as ordinary income to the extent of the depreciation claimed in excess of straight line. Any gain in excess of this ordinary income is section 1231 gain.

Section 179 Expense Deduction: An election to treat the cost of certain qualified property as a currently deductible expense rather than as a capital expenditure. A maximum deduction of $102,000 may be claimed for qualified assets placed in service in 2004. This is also referred to as expensing.

Securities: In general, any evidence of 1) an interest in corporate stock or stock rights or 2) an interest in any note, bond, debenture or other evidence of indebtedness issued by a government or corporation.

For certain tax purposes, however, the definition is more limited.

Self-Employed Individuals: Taxpayers who work for themselves. They decide when, how, and where to work, obtain their own jobs or sales, pay their own expenses, and receive social security and Medicare coverage through payment of self-employment tax.

Self-Employment Income: Self-employed individuals are taxed on their net income from self-employment and are entitled to social security and Medicare benefits through the payment of self-employment tax.

Self-Employment Tax: For 2004, self-employed persons are subject to social security tax of 12.4 percent on net earnings of up to $87,900 and medicare tax of 2.9 percent on all net earnings. If a self-employed individual receives wages from an employer that are subject to social security tax, the amount of self-employment income subject to social security tax may be reduced. Self-employment tax is computed on Schedule SE.

Separate Maintenance Payments: Amounts paid to one spouse by the other spouse under a court order or agreement while they live apart.

Severance Damages: Payment received because part of a property is condemned and the value of the retained part is thereby decreased.

Short Sale: A sale in which the seller borrows the stock certificates or other property delivered to the buyer. At a later date, the seller either purchases similar stock or property necessary to "cover" the sale, and delivers it to the lender or delivers to the lender stock or property that he or she already held but did not wish to transfer at an earlier date. For income tax purposes, there is no gain or loss on the transaction until the short sale is covered by purchase and transfer. Special rules apply in determining whether the gain or loss on a short sale is a long-term or short-term capital gain or loss.

Short-Term Gain or Loss: Gain or loss on the sale or exchange of a capital asset held one year or less.

Simplified Employee Pension (SEP): An arrangement under which an employer makes contributions to an employee's individual retirement account (IRA), or a self-employed person contributes to his own plan.

Simplified Method: The method of computing the taxable and non taxable portions of a qualified employer plan by which the cost is recovered over a specified number of periodic payments. The number of payments is determined by finding a factor on a simple table. The method replaced the general rule for eligible pensions, which was considerably more complex.

Single: The filing status used by an unmarried taxpayer who does not qualify for any other filing status.

Single-Purpose Agricultural Building: An agricultural structure used for only one purpose. Examples are milking sheds and greenhouses. Such buildings may be contrasted with, for example, barns. Barns are generally used for a variety of farming purposes.

Social Security Tips: The amount of tips reported to an employer by an employee that is subject to this tax. Tips are also subject to Medicare tax.

Social Security Wages: Total wages paid to an employee that are subject to this tax. This amount does not include tips. Wages are also subject to Medicare tax.

Social Security and Medicare Taxes Withheld: The employee's share of these taxes that was withheld and submitted along with the employer's share to the IRS by the employer.

Special 10-Year Averaging: This is a special method available to determine the tax on a qualified lump-sum distribution for any taxpayer who was born before 1936 and meets the other requirements. The tax computed using special 10-year averaging is based on 1986 rates for a single individual. The computation is done on Form 4972.

Special Needs Child: For the adoption credit, a child determined by the state to be difficult to adopt due to factors such as racial or ethnic background, age, a condition that requires special care, or whether the child has siblings. A special needs child must be a U.S. citizen.

Spousal IRA: An IRA set up by a taxpayer whose spouse has little or no compensation for the benefit of that spouse. The designation "spousal" is significant for tax purposes only. There is no connection between a Spousal IRA and the other spouse's IRA, and no IRA may be jointly owned.

Standard Deduction: A base amount of income not subject to tax. The regular standard deductions for 2004 is $4,850 for single taxpayers, $7,150 for heads of household, $9,700 for married couples filing joint returns and qualifying widow(er)s, and $4,850 for married persons filing separately. Taxpayers who are blind and/or age 65 or older have higher standard deductions. Taxpayers who may be claimed as dependents on other taxpayers' returns may have reduced standard deductions.

Standard Mileage Rate: An annual deduction based on a set number of cents per mile for qualified business use of the taxpayer's vehicle. The standard mileage rate for 2004 is 37.5 cents per mile.

State and Local Income Tax Withheld: The amounts withheld from income and submitted to the state or local tax division as an advance payment of the taxpayer's state or local income tax.

Statements: Explanations of various types of income, deductions, and/or credits reported on a schedule or directly on Form 1040. Statements may or may not be official IRS forms.

Statutory Employee: A worker who is treated as an employee for social security and Medicare tax purposes and as self-employed for income tax purposes. The "Statutory employee" box on such a worker's Form W-2 should be marked.

Stock Dividend: Additional shares of stock distributed to shareholders at no cost. The number of shares received are a percentage of the shares owned. The basis of the original shares is generally apportioned equally to the total shares owned after the distribution.

Stock Split: Additional shares of stock distributed to shareholders at no cost. The number of shares received are a ratio of the shares owned. The basis of the original shares is generally apportioned equally to the total shares owned after the split.

Straddle: A combination of a call and a put (both of which are defined elsewhere in this glossary) written at the same time on the same number of shares of a security at the same price during the same period of time. The call and put parts of a straddle are generally bought by different holders.

Straight-Line Depreciation Method: The most commonly used method of depreciation prior to 1981. Basis less salvage value or land value divided by useful life equals depreciation deduction.

Student Loan Interest Deduction: An adjustment to income (limited to $2,500 for 2004) for interest paid during the year on qualified higher-education loans.

Support: The total amount provided on behalf of an individual. Support includes food, lodging, and other necessities as well as recreation and other nonessential expenditures. Support is not limited to necessities and can be as lavish as the taxpayer can afford.