- The concept that a taxpayer does not actually have to take possession of money for it to be taxable. The most common occurrence of this is when savings account interest is reinvested rather than sent to the account holder as a separate payment. In this case, the account holder constructively received the interest because the earnings were credited to his account and could have been taken out at the owner's discretion. As such, the earnings are taxable.
receive taxable benefit, indirect income
Related Terms and Acronyms
- Audit — Definition,
- An examination of a taxpayer's income tax return or other transactions bearing tax consequences. Audits range from a simple letter from the agency to a detailed review of individual or business tax filings and records.
- Garnishment — Definition,
- An amount withheld from your pay and remitted to another party, such as a creditor. You must include in your taxable income any amount that was garnished from your pay, because the full amount of your pay is considered to have been received by you even though some was withheld to pay your debts.
- Gross Income — Definition,
- Normal annual income including overtime that is regular or guaranteed. The income may be from more than one source. Salary is generally the principal source, but other income may qualify if it is significant and stable.
- Household Income (HHI) — Acronym, Important,
- The total income of all members of a household.
- Income Tax — Definition,
- The main source of revenue for the federal government and many Provinces. The tax is based on your earned and unearned income. The amount or percentage taxed is based on the amount of income, using the governments graduated tax scale.
- Net Income (NI) — Acronym, Very Important,
- The difference between effective gross income and expenses. The term is qualified as net income before depreciation and debt.
- Payroll Taxes — Definition,
- A tax based on wages and salaries that is deducted from employees pay cheques.
- Tax Deduction — Definition,
- An expense that governments allow you to subtract from your income before computing your income tax.
- Tax Exempt (TE) — Acronym, Very Important,
- Income that is not subject to tax. Income exempt from federal tax may, however, be subject to provincial taxation.
- Taxable Income — Definition,
- Income that is subject to taxation after accounting for adjustments, exemptions, and deductions.