Glossary: Business Tax Terms That May Stump You

Shiloh Johnson
By Shiloh Johnson

Running a small business is rewarding, but it definitely isn’t easy. Add business tax to the mix, and it can quickly become chaotic. With so many tax terms, fluid updates and changes to tax codes, filing deadline extensions, and sales tax variants by state business owners can feel like they need a PhD in tax language to ensure they don’t miss the mark. To get you off to a good start, I’ve listed 14 business tax-related terms that are helpful, particularly during tax season.

Accrual method

The accrual method, also called accrual basis, is a form of accounting that tracks income and expenses as they occur. This means that it is recorded before any actual money changes hands. For example, if something is ordered, the transaction is accounted for in a bill before the bill is actually paid.

Adjusted basis

This refers to the change in the value of a particular asset, to help determine if there’s been a gain or loss when you sell. 

Amount realized 

Amount realized refers to what you bring in from a sale minus any expenses, fees, etc., and is used to assess any capital gains or losses for taxes. 


Through a carryback, a business can use a net operating loss and put it toward a prior year’s tax return and obtain a tax refund.


A carryforward allows business owners to use net operating loss deductions in future tax years. 

Cash method

The cash method is a form of accounting that tracks revenue and expenses only when cash is actually received or spent. 

Estimated tax

Estimated tax refers to the estimated amount of tax you are required to pay quarterly, in lieu of regular payroll tax withholding. Think of it as a tax prepayment plan.

Excise tax

Excise tax is a type of tax that is imposed on certain products such as alcohol, soda, and cigarettes. 

Gross Receipts Tax 

Gross receipts tax is a type of tax that is based on all revenue sources that is charged by some states, in place of sales tax.

Net operating loss 

When there are more expenses than there is income, businesses have a ‘net operating loss’. This net operating loss can be used as a carryback to get a refund on previous tax years or a carryforward and used as a deduction in the future. 

Payroll tax 

This refers to the tax put on employees’ wages. A portion of this tax is deducted from an employee’s check and the other portion paid directly by employers.

Self-Employment Tax 

Self-Employment Tax refers to the 15.3% that small business owners pay to cover Social Security and Medicare benefits. 

Standard Mileage Method 

Under the Standard Mileage Method, business owners deduct a specific amount per mile as part of their car-related business deductions. The rate for standard mileage in 2021 is set by the IRS at 56 cents. 


A SEP IRA is a Simplified Employee Pension Individual Retirement Account that is for self-employed people. Self-employed taxpayers can contribute to a SEP-IRA and deduct contributions

What other business tax terms are you curious about? Drop me a line at

Need help managing your tax deadlines, notices & more? We’ve got you covered. Try us, absolutely free.

Shiloh Johnson
By Shiloh Johnson
Shiloh Johnson is a long-time CPA and founder of ComplYant, a technology platform offering business owners and entrepreneurs a simple way to manage tax rules and requirements.

Related posts

Tax Form Series: What is a K-1?

Tax Form Series: What is a K-1?

Running a business is hard enough without trying to decipher the various tax forms you receive. We're here to help with our Tax Form Series, where we’ll answer questions like who receives them and what they are used for.
8 Tax Penalties Your Business Should Know About

8 Tax Penalties Your Business Should Know About

Most business owners are well acquainted with tax penalties - they’re harder to avoid than anyone wants to admit. But what are tax related penalties? In this article I’ll break down the most common penalties for you.
Keep These 2 Things In Mind As October 15th Approaches

Keep These 2 Things In Mind As October 15th Approaches

Fall is upon us, the air is crisp, pumpkins are filling our porches (and lattes), and once again we are talking about taxes. Yep, it’s October. I know what you’re thinking, you just said it’s October, tax day is in April - what taxes are due in October?