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Payroll tax expense

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Definition of Payroll tax expense

Payroll Tax Expense Image 1

Payroll tax expense

The amount of tax associated with salaries that an employer pays to governments (federal, state, and local).



Related Terms:

Accrued expenses payable

expenses that have to be recorded in order for the financial statements to be accurate. Accrued expenses usually do not involve the receipt of an invoice from the company providing the goods or services.


accrued expenses payable

The account that records the short-term, noninterest-
bearing liabilities of a business that accumulate over time, such
as vacation pay owed to employees. This liability is different than
accounts payable, which is the liability account for bills that have been
received by a business from purchases on credit.


After-tax profit margin

The ratio of net income to net sales.


After-tax real rate of return

Money after-tax rate of return minus the inflation rate.


Annual fund operating expenses

For investment companies, the management fee and "other expenses,"
including the expenses for maintaining shareholder records, providing shareholders with financial statements,
and providing custodial and accounting services. For 12b-1 funds, selling and marketing costs are included.



Asymmetric taxes

A situation wherein participants in a transaction have different net tax rates.


Average tax rate

taxes as a fraction of income; total taxes divided by total taxable income.


Payroll Tax Expense Image 2

average tax rate

Total taxes owed divided by total income.


Before-tax profit margin

The ratio of net income before taxes to net sales.


Break-even tax rate

The tax rate at which a party to a prospective transaction is indifferent between entering
into and not entering into the transaction.


Cash flow after interest and taxes

Net income plus depreciation.


Corporate tax view

The argument that double (corporate and individual) taxation of equity returns makes
debt a cheaper financing method.


Corporate taxable equivalent

Rate of return required on a par bond to produce the same after-tax yield to
maturity that the premium or discount bond quoted would.


Current Income Tax Expense

That portion of the total income tax provision that is based on
taxable income.


Current Tax Payment Act of 1943

A federal Act requiring employers to withhold income taxes from employee pay.


Deferred Income Tax Expense

That portion of the total income tax provision that is the result
of current-period originations and reversals of temporary differences.


Payroll Tax Expense Image 3

Deferred Tax Asset

Future tax benefit that results from (1) the origination of a temporary difference
that causes pretax book income to be less than taxable income or (2) a loss, credit, or other
carryforward. Future tax benefits are realized on the reversal of deductible temporary differences
or the offsetting of a loss carryforward against taxable income or a tax-credit carryforward against
the current tax provision.


Deferred Tax Liability

Future tax obligation that results from the origination of a temporary
difference that causes pretax book income to exceed taxable income.



Deferred taxes

A non-cash expense that provides a source of free cash flow. Amount allocated during the
period to cover tax liabilities that have not yet been paid.


Depreciation expense

An expense account that represents the portion of the cost of an asset that is being charged to expense during the current period.


Depreciation tax shield

The value of the tax write-off on depreciation of plant and equipment.


depreciation tax shield

Reduction in taxes attributable to the depreciation allowance.


Double-tax agreement

Agreement between two countries that taxes paid abroad can be offset against
domestic taxes levied on foreign dividends.


earnings before interest and income tax (EBIT)

A measure of profit that
equals sales revenue for the period minus cost-of-goods-sold expense
and all operating expenses—but before deducting interest and income
tax expenses. It is a measure of the operating profit of a business before
considering the cost of its debt capital and income tax.


Earnings before interest and taxes (EBIT)

A financial measure defined as revenues less cost of goods sold
and selling, general, and administrative expenses. In other words, operating and non-operating profit before
the deduction of interest and income taxes.


Earnings before interest and taxes (EBIT)

The operating profit before deducting interest and tax.


Earnings before interest, taxes, depreciation and amortization (EBITDA)

The operating profit before deducting interest, tax, depreciation and amortization.


Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA)

An earningsbased measure that, for many, serves as a surrogate for cash flow. Actually consists of working
capital provided by operations before interest and taxes.



EBDDT - Earnings before depreciation and deferred taxes

This measure is used principally by
firms in the real estate industry, with the exception of real estate investment trusts, which typically
do not pay taxes.


Effective Tax Rate

The total tax provision divided by pretax book income from continuing
operations.


Electronic Federal Tax Payment Systems (EFTPS)

An electronic funds transfer system used by businesses to remit taxes to the government.


Equivalent taxable yield

The yield that must be offered on a taxable bond issue to give the same after-tax
yield as a tax-exempt issue.


Expense

The reduction in value of an asset as it is used for current company operations.


Expense ratio

The percentage of the assets that were spent to run a mutual fund (as of the last annual
statement). This includes expenses such as management and advisory fees, overhead costs and 12b-1
(distribution and advertising ) fees. The expense ratio does not include brokerage costs for trading the
portfolio, although these are reported as a percentage of assets to the SEC by the funds in a Statement of
Additional Information (SAI). the SAI is available to shareholders on request. Neither the expense ratio or the
SAI includes the transaction costs of spreads, normally incurred in unlisted securities and foreign stocks.
These two costs can add significantly to the reported expenses of a fund. The expense ratio is often termed an
Operating expense Ratio (OER).


Expensed

Charged to an expense account, fully reducing reported profit of that year, as is appropriate for
expenditures for items with useful lives under one year.


Expenses

The costs incurred in buying, making or producing goods and services.


Expenses

Costs involved in running the company.


Federal Unemployment Tax Act (FUTA)

A federal Act requiring employers to pay a tax on the wages paid to their employees, which is then used to create a
pool of funds to be used for unemployment benefits.


Fixed Expenses

Cost of doing business which does not change with the volume of business. Examples might be rent for business premises, insurance payments, heat and light.


fixed expenses (costs)

expenses or costs that remain the same in amount,
or fixed, over the short run and do not vary with changes in sales volume
or sales revenue or other measures of business activity. Over the
longer run, however, these costs increase or decrease as the business
grows or declines. Fixed operating costs provide capacity to carry on
operations and make sales. Fixed manufacturing overhead costs provide
production capacity. Fixed expenses are a key pivot point for the analysis
of profit behavior, especially for determining the breakeven point and for
analyzing strategies to improve profit performance.


Foreign tax credit

Home country credit against domestic income tax for foreign taxes paid on foreign
derived earnings.


GENERAL-AND-ADMINISTRATIVE EXPENSES

What was spent to run the non-sales and non-manufacturing part of a company, such as office salaries and interest paid on loans.


Imputation tax system

Arrangement by which investors who receive a dividend also receive a tax credit for
corporate taxes that the firm has paid.


INCOME TAX

What the business paid to the IRS.


Income tax

A government tax on the income earned by an individual or corporation.


Income Tax Expense

See income tax provision.


Income Tax Provision

The expense deduction from pretax book income reported on the
income statement. It consists of both current income tax expense and deferred income tax
expense. The terms income tax expense and income tax provision are used interchangeably.


Indirect Taxes

taxes paid by consumers when they buy goods and services. A sales tax is an example.


Inflation Tax

The loss in purchasing power due to inflation eroding the real value of financial assets such as cash.


Interest equalization tax

tax on foreign investment by residents of the U.S. which was abolished in 1974.


Interest tax shield

The reduction in income taxes that results from the tax-deductibility of interest payments.


interest tax shield

tax savings resulting from deductibility of interest payments.


Investment tax credit

Proportion of new capital investment that can be used to reduce a company's tax bill
(abolished in 1986).


Investment Tax Credit

A reduction in taxes offered to firms to induce them to increase investment spending.


Limited-tax general obligation bond

A general obligation bond that is limited as to revenue sources.


management expense ratio (MER)

The total expenses expressed as an annualized percentage of daily average net assets. MER does not include brokerage fees and commissions, which are also payable by the Fund.


Margin Tax Rate

The tax rate applicable to the last unit of income.


Marginal tax rate

The tax rate that would have to be paid on any additional dollars of taxable income earned.


marginal tax rate

Additional taxes owed per dollar of additional income.


Marginal Tax Rate

Percent of an increase in income paid in tax.


Office expense

The amount of expense incurred for the general operation of an office.


Operating expense

Any expense associated with the general, sales, and administrative
functions of a business.


OPERATING EXPENSES

The total amount that was spent to run a company this year.


Operating Expenses

The amount of money the company must spend on overhead, distribution, taxes, underwriting the risk and servicing the policy. It is a factor in calculating premium rates.


Payroll Cycle

The period of service for which a company compensates its employees.


Payroll expense

The amount paid to employees for services rendered; synonymous with salary expense and wage expense.


Payroll journal

A journal used to record the payroll of a company.


Payroll Register

A report on which is summarized the wage and deduction information
for employees for a specific payroll.


Payroll Stabilization

This calculation is used by states to determine the unemployment
contribution rate to charge employers and links the contribution rate
to fluctuations in a company’s total payroll over time.


Payroll taxes payable

The amount of payroll taxes owed to the various governments at the end of a period.


Personal tax view (of capital structure)

The argument that the difference in personal tax rates between
income from debt and income from equity eliminates the disadvantage from the double taxation (corporate
and personal) of income from equity.


Prepaid expense

An expenditure that is paid for in one accounting period, but which
will not be entirely consumed until a future period. Consequently, it is carried on the
balance sheet as an asset until it is consumed.


Prepaid expenses

expenses that have been paid for but have not yet been used up; examples are prepaid insurance and prepaid rent.


Profit before interest and taxes (PBIT)

See EBIT.


Progressive Tax

A tax in which the rich pay a larger percentage of income than the poor. Contrast with regressive tax.


Progressive tax system

A tax system wherein the average tax rate increases for some increases in income but
never decreases with an increase in income.


Proportional Tax

A tax taking the same percentage of income regardless of the level of income.


Regressive Tax

A tax in which the poor pay a larger percentage of income than the rich. Contrast with progressive tax.


Rent expense

The amount of expense paid for the use of property.


revenue-driven expenses

Operating expenses that vary in proportion to
changes in total sales revenue (total dollars of sales). Examples are sales
commissions based on sales revenue, credit card discount expenses, and
rents and franchise fees based on sales revenue. These expenses are one
of the key variables in a profit model. Segregating these expenses from
other types of expenses that behave differently is essential for management
decision-making analysis. (These expenses are not disclosed separately
in externally reported income statements.)


Roth IRA. An IRA account whose earnings are not taxable at all under certain

circumstances.


Salary expense

The amount paid to employees for services rendered; synonymous with payroll expense and wage expense.


Sales Tax

A tax levied as a percentage of retail sales.


SELLING EXPENSES

What was spent to run the sales part of a company, such as sales salaries, travel, meals, and lodging for salespeople, and advertising.


Short-term tax exempts

Short-term securities issued by states, municipalities, local housing agencies, and
urban renewal agencies.


Split-rate tax system

A tax system that taxes retained earnings at a higher rate than earnings that are
distributed as dividends.


State Disability Tax

A tax charged by selected states to maintain a disability insurance
fund, from which payments are made to employees who are unable to
work due to illness or injury.


Statutory Tax Rate

The income tax rate that is stated in income tax law. It is applied to taxable
income reported in income tax returns. The U.S. Federal statutory corporate income tax rate
starts out at 15% for taxable income up to $50,000 and rises quickly to 35%.


TANs (tax anticipation notes)

tax anticipation notes issued by states or municipalities to finance current
operations in anticipation of future tax receipts.


Tax anticipation bills (TABs)

Special bills that the Treasury occasionally issues that mature on corporate
quarterly income tax dates and can be used at face value by corporations to pay their tax liabilities.


tax benefit (of depreciation)

the amount of depreciation deductible for tax purposes multiplied by the tax rate;
the reduction in taxes caused by the deductibility of depreciation


Tax books

Set of books kept by a firm's management for the IRS that follows IRS rules. The stockholder's
books follow Financial Accounting Standards Board rules.


Tax clawback agreement

An agreement to contribute as equity to a project the value of all previously
realized project-related tax benefits not already clawed back to the extent required to cover any cash
deficiency of the project.


tax deferral

postponing taxation of an amount until a future date


Tax deferral option

The feature of the U.S. Internal Revenue Code that the capital gains tax on an asset is
payable only when the gain is realized by selling the asset.


tax-deferred income

current compensation that is taxed at a future date


Tax-deferred retirement plans

Employer-sponsored and other plans that allow contributions and earnings to
be made and accumulate tax-free until they are paid out as benefits.


Tax differential view ( of dividend policy)

The view that shareholders prefer capital gains over dividends,
and hence low payout ratios, because capital gains are effectively taxed at lower rates than dividends.


tax-exempt income

current compensation that is never taxed



 

 

 

 

 

 

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