Legal Definitions - adjustment

In legal and financial contexts, an adjustment refers to a modification, alteration, or settlement made to a financial claim, debt, or legal obligation. Its primary purpose is to establish a fair or agreed-upon resolution between parties, often by changing an original amount, liability, or right based on new information, negotiations, or specific circumstances. Adjustments aim to reconcile differing positions and achieve an equitable outcome.

• Debt Settlement: A small business owner ordered a large quantity of raw materials from a supplier. Upon delivery, a portion of the materials was found to be damaged and unusable. The business owner disputed the full invoice amount. After discussions, the supplier agreed to reduce the total bill by the value of the damaged goods.

  This illustrates an adjustment as a deduction made on a debt (the invoice) to establish an equitable arrangement between the business owner and the supplier, acknowledging the legitimate objection regarding the damaged materials.

• Insurance Claim Payout: After a severe hailstorm, a homeowner filed a claim with their property insurance company for damage to their roof and siding. An insurance adjuster inspected the property, assessed the extent of the damage, and reviewed the policy terms. Following negotiations with the homeowner, the insurance company offered a specific sum of money to cover the repair costs.

  Here, the final agreed-upon sum offered by the insurance company to settle the claim is an adjustment, reflecting the company's determination of the amount payable after considering the damage, policy, and negotiations.

• Amended Tax Return: An individual filed their annual income tax return, but a few months later realized they had overlooked a significant tax credit they were eligible for, such as for energy-efficient home improvements. They then filed an amended tax return with the tax authority, providing the new information. The tax authority reviewed and approved the amendment, resulting in a reduction of their overall tax liability for that year.

  This scenario demonstrates an adjustment as an IRS-approved change to a taxpayer's liability, correcting an initial filing to reflect the accurate amount owed or refunded.