Tax words, in plain English.

A retirement plan for employees of public schools and certain tax-exempt organizations, such as many hospitals. Its deferral limit is shared with any 401(k) you also contribute to.

A deferred-compensation plan of a state or local government or a tax-exempt employer, with its own deferral limit separate from a 403(b). In a non-governmental 457(b), the money stays the employer's asset until paid out, so its creditors can reach it.

Total income minus a short list of adjustments, such as deductible retirement contributions. Many limits and phase-outs are measured against it, so a deduction that lowers AGI can matter more than one that does not.

A second way of computing tax, with its own exemption and rates. You pay whichever result is higher. Exercising and holding incentive stock options is a common way to reach it.

When AMT comes from a timing difference, such as an ISO exercise, part of it can become a credit used in later years when regular tax is higher than the minimum tax. It carries forward until used.

A nondeductible contribution to a traditional IRA followed by a conversion to a Roth IRA. People use it when their income is too high to contribute to a Roth IRA directly. The pro-rata rule decides how much of the conversion is taxed.

Your investment in an asset for tax purposes: usually what you paid, plus or minus certain adjustments. Gain or loss on a sale is measured against it. For stock received as pay, the value already taxed as wages becomes part of the basis.

A running total of what an S corporation owner has in the company, in stock and in loans to it. It goes up with income and contributions and down with losses and distributions. It limits the losses you can deduct and decides how distributions are taxed. The K-1 does not report it; the owner tracks it.

An amount, such as a loss or a credit, that could not be used this year and moves to a later year. Also the name of this show: one sentence from each lesson to carry forward.

A box 12 code on Form W-2 for qualified overtime compensation. It is the figure that supports the overtime deduction on Schedule 1-A.

An IRS notice that proposes a change to a return because the forms filed under your number (W-2s, 1099s) do not match what the return reported. It is a proposal with a response form, and the response form is the answer.

A sale of ISO or qualified ESPP stock before the holding periods are met. Part of the gain is then taxed as ordinary income instead of capital gain.

A plan that lets employees buy company stock through payroll, often at a discount. For a qualified plan, how long you hold the shares decides how the discount is taxed when you sell.

Payments made during the year on income that has no withholding, or not enough: self-employment income, investment income, a large stock sale. They are due in installments through the year.

An IRS administrative policy that can remove certain penalties, such as failure to file or failure to pay, for a taxpayer with a clean recent history. It removes the penalty, not the tax.

The form a broker files for sales of stock and other securities. It may or may not report your cost basis to the IRS; when it does not, the sale can look like pure income to the matching program.

An information return for payments received through card processors and third-party payment networks. It reports gross payments, not profit, and it can overlap with income already reported on another form.

The IRS power of attorney form. It authorizes a named representative to deal with the IRS, and only for the tax forms and years listed on it.

The wage and tax statement an employer gives each employee for the calendar year: wages, withholding and coded amounts in box 12, such as retirement deferrals.

An agreement with the IRS to pay a balance over time. It stops the balance from going to collection, but interest and some penalties keep running until the balance is paid.

An employee stock option that can qualify for special treatment: no regular tax at exercise, but the spread can count for the AMT, and the holding periods decide how the eventual sale is taxed.

The rate on the next dollar of taxable income. Income is taxed in steps, so a raise or a bonus is taxed at the rate of the step it lands in, not at one rate for everything.

The IRS process that lines up the information returns filed under your Social Security number against your return. When they disagree, it prints a proposed change. Nobody read your return and decided it looked suspicious.

Involvement in a business or activity that is regular, continuous and substantial, measured by tests in the regulations. Whether you meet one decides whether losses from the activity are passive.

A formal IRS notice of proposed additional tax that starts a deadline, set by statute, to petition the Tax Court. The IRS cannot extend that deadline, and a phone call does not preserve it.

A stock option without the special ISO treatment. For an employee, the spread at exercise is taxed as wages.

A business you do not materially participate in, and most rental activities. Losses from passive activities generally offset only passive income; the rest is suspended and carried forward.

When you convert IRA money to a Roth IRA, the taxable share is figured across all your traditional, SEP and SIMPLE IRA balances at year end, not just the account you converted from.

A federal program that forgives the remaining balance of eligible Direct Loans after qualifying payments made while working for a qualifying employer. Its tax treatment differs from forgiveness under an income-driven plan.

The wage an S corporation must pay an owner who works in the business before taking distributions. What is reasonable depends on the work and the facts.

A promise to deliver company shares when they vest. The value on the vest date is taxed as wages, whether or not you sell.

A corporation that elects to pass its income, losses, deductions and credits through to its owners for federal income tax.

A payment level that avoids the underpayment penalty even if you still owe tax when you file. The levels are set in the law and the IRS instructions, and they depend on your prior-year tax and income.

The new schedule for several recent deductions, including the one for qualified overtime. They are taken after adjusted gross income is figured, so they lower taxable income but not AGI.

The form that reports an owner's share of an S corporation's or partnership's income, deductions and credits. It does not show the owner's basis.

A fixed amount, set each year by filing status, that reduces taxable income if you do not itemize. You take whichever is larger: the standard deduction or your itemized deductions.

Pay other than regular salary: bonuses, commissions and vested stock. An employer may withhold federal income tax on them at a flat rate, which is a deposit toward your tax, not the tax itself.

The tax year is the year the income was earned. The return for it is filed the following year. Reading the label before the number avoids using last year's figure for this year's question.

Tax an employer or payer takes out of a payment and sends to the IRS for you. It is a prepayment, credited against the tax on your return when you file.