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Simple English definitions for legal terms
deficiency in tax
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A quick definition of deficiency in tax:
Term: Deficiency in Tax
Definition: Deficiency in tax refers to a situation where a person or business owes more taxes than they have paid. This means they have not paid the full amount of taxes they were supposed to pay. It is important to pay the correct amount of taxes to avoid penalties and legal consequences.
A more thorough explanation:
Definition: Deficiency in tax refers to the amount of tax owed by a taxpayer that is not paid or underpaid. It is the difference between the amount of tax that should have been paid and the amount that was actually paid.
For example, if a taxpayer owes $10,000 in taxes but only pays $8,000, then there is a deficiency in tax of $2,000.
Another example is if a taxpayer fails to report all of their income on their tax return, resulting in a lower tax liability than what they actually owe. This would also be considered a deficiency in tax.
The examples illustrate how a deficiency in tax can occur when a taxpayer does not pay the full amount of taxes owed or fails to report all of their income. This can result in penalties and interest charges from the IRS.