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Tax-deferred retirement plans |
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Definition of Tax-deferred retirement plansTax-deferred retirement plansEmployer-sponsored and other plans that allow contributions and earnings to
Related Terms:After-tax profit marginThe ratio of net income to net sales. After-tax real rate of returnMoney after-tax rate of return minus the inflation rate. Asymmetric taxesA situation wherein participants in a transaction have different net tax rates. Average tax ratetaxes as a fraction of income; total taxes divided by total taxable income. average tax rateTotal taxes owed divided by total income. Before-tax profit marginThe ratio of net income before taxes to net sales. Break-even tax rateThe tax rate at which a party to a prospective transaction is indifferent between entering ![]() Cash flow after interest and taxesNet income plus depreciation. Contingent deferred sales charge (CDSC)The formal name for the load of a back-end load fund. Corporate tax viewThe argument that double (corporate and individual) taxation of equity returns makes Corporate taxable equivalentRate of return required on a par bond to produce the same after-tax yield to Current Income Tax ExpenseThat portion of the total income tax provision that is based on Current Tax Payment Act of 1943A federal Act requiring employers to withhold income taxes from employee pay. Deferred-annuitiestax-advantaged life insurance product. deferred annuities offer deferral of taxes with the Deferred AnnuityAn annuity providing for income payments to commence at a specified future time. Deferred callA provision that prohibits the company from calling the bond before a certain date. During this ![]() deferred compensationpay related to current performance Deferred equityA common term for convertible bonds because of their equity component and the Deferred futuresThe most distant months of a futures contract. A bond that sells at a discount and does not Deferred Income Tax ExpenseThat portion of the total income tax provision that is the result Deferred nominal life annuityA monthly fixed-dollar payment beginning at retirement age. It is nominal Deferred Tax AssetFuture tax benefit that results from (1) the origination of a temporary difference Deferred Tax LiabilityFuture tax obligation that results from the origination of a temporary Deferred taxesA non-cash expense that provides a source of free cash flow. Amount allocated during the Depreciation tax shieldThe value of the tax write-off on depreciation of plant and equipment. depreciation tax shieldReduction in taxes attributable to the depreciation allowance. Double-tax agreementAgreement between two countries that taxes paid abroad can be offset against earnings before interest and income tax (EBIT)A measure of profit that Earnings before interest and taxes (EBIT)A financial measure defined as revenues less cost of goods sold 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 EBDDT - Earnings before depreciation and deferred taxesThis measure is used principally by Effective Tax RateThe total tax provision divided by pretax book income from continuing Electronic Federal Tax Payment Systems (EFTPS)An electronic funds transfer system used by businesses to remit taxes to the government. Employee Retirement Income Security Act of 1974 (ERISA)A federal Act that sets minimum operational and funding standards for employee benefit Equivalent taxable yieldThe yield that must be offered on a taxable bond issue to give the same after-tax 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 Foreign tax creditHome country credit against domestic income tax for foreign taxes paid on foreign Imputation tax systemArrangement by which investors who receive a dividend also receive a tax credit for INCOME TAXWhat the business paid to the IRS. Income taxA government tax on the income earned by an individual or corporation. Income Tax ExpenseSee income tax provision. Income Tax ProvisionThe expense deduction from pretax book income reported on the Indirect Taxestaxes paid by consumers when they buy goods and services. A sales tax is an example. Individual Retirement AccountA personal savings account into which a defined Individual Retirement AnnuityAn IRA comprised of an annuity that is managed Inflation TaxThe loss in purchasing power due to inflation eroding the real value of financial assets such as cash. Insured plansDefined benefit pension plans that are guaranteed by life insurance products. Related: noninsured plans Insured Retirement PlanThis is a recently coined phrase describing the concept of using Universal Life Insurance to tax shelter earnings which can be used to generate tax-free income in retirement. The concept has been described by some as "the most effective tax-neutralization strategy that exists in Canada today." Interest equalization taxtax on foreign investment by residents of the U.S. which was abolished in 1974. Interest tax shieldThe reduction in income taxes that results from the tax-deductibility of interest payments. interest tax shieldtax savings resulting from deductibility of interest payments. Investment tax creditProportion of new capital investment that can be used to reduce a company's tax bill Investment Tax CreditA reduction in taxes offered to firms to induce them to increase investment spending. Limited-tax general obligation bondA general obligation bond that is limited as to revenue sources. Margin Tax RateThe tax rate applicable to the last unit of income. Marginal tax rateThe tax rate that would have to be paid on any additional dollars of taxable income earned. marginal tax rateAdditional taxes owed per dollar of additional income. Marginal Tax RatePercent of an increase in income paid in tax. Non-insured plansDefined benefit pension plans that are not guaranteed by life insurance products. Related: Nonqualified Retirement PlanA pension plan that does not follow ERISA and Payroll tax expenseThe amount of tax associated with salaries that an employer pays to governments (federal, state, and local). Payroll taxes payableThe 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 Profit before interest and taxes (PBIT)See EBIT. Progressive TaxA tax in which the rich pay a larger percentage of income than the poor. Contrast with regressive tax. Progressive tax systemA tax system wherein the average tax rate increases for some increases in income but Proportional TaxA tax taking the same percentage of income regardless of the level of income. Qualified Retirement PlanA retirement plan designed to observe all of the requirements Registered Retirement Income Fund (Canada)Commonly referred to as a RRIF, this is one of the options available to RRSP holders to convert their tax sheltered savings into taxable income. Registered Retirement Savings Plan (Canada)Commonly referred to as an RRSP, this is a tax sheltered and tax deferred savings plan recognized by the Federal and Provincial tax authorities, whereby deposits are fully tax deductable in the year of deposit and fully taxable in the year of receipt. The ability to defer taxes on RRSP earnings allows one to save much faster than is ordinarily possible. The new rules which apply to RRSP's are that the holder of such a plan must convert it into income by the end of the year in which the holder turns age 69. The choices for conversion are to simply cash it in an pay full tax in the year of receipt, convert it to a RRIF and take a varying stream of income, paying tax on the amount received annually until the income is exhausted, or converting it into an annuity with guaranteed payments for a chosen number of years, again paying tax each year on moneys received. Regressive TaxA tax in which the poor pay a larger percentage of income than the rich. Contrast with progressive tax. Roth IRA. An IRA account whose earnings are not taxable at all under certaincircumstances. RRSP (Registered Retirement Savings Plan) (Canada)A savings plan registered with Revenue Canada, which allows you to set aside a portion of your earned income now for use in the future. When you contribute to your RRSP, you are eligible to claim a tax deduction. However, cashing RRSPs at a later date will result in the payment of tax. Sales TaxA tax levied as a percentage of retail sales. Short-term tax exemptsShort-term securities issued by states, municipalities, local housing agencies, and Single-premium deferred annuityAn insurance policy bought by the sponsor of a pension plan for a single Split-rate tax systemA tax system that taxes retained earnings at a higher rate than earnings that are Spousal Registered Retirement Savings PlanThis is an RRSP owned by the spouse of the person contributing to it. The contributor can direct up to 100% of eligible RRSP deposits into a spousal RRSP each and every year. Contributing to a spouses RRSP reduces the amount one can contribute to one's own RRSP, however, if the spouse is a lower income earner, it is an excellent way in which to split income for lower taxation in retirement years. State Disability TaxA tax charged by selected states to maintain a disability insurance Statutory Tax RateThe income tax rate that is stated in income tax law. It is applied to taxable TANs (tax anticipation notes)tax anticipation notes issued by states or municipalities to finance current Tax anticipation bills (TABs)Special bills that the Treasury occasionally issues that mature on corporate tax benefit (of depreciation)the amount of depreciation deductible for tax purposes multiplied by the tax rate; Tax booksSet of books kept by a firm's management for the IRS that follows IRS rules. The stockholder's Tax clawback agreementAn agreement to contribute as equity to a project the value of all previously tax deferralpostponing taxation of an amount until a future date Tax deferral optionThe feature of the U.S. Internal Revenue Code that the capital gains tax on an asset is tax-deferred incomecurrent compensation that is taxed at a future date Tax differential view ( of dividend policy)The view that shareholders prefer capital gains over dividends, tax-exempt incomecurrent compensation that is never taxed Tax-exempt sectorThe municipal bond market where state and local governments raise funds. Bonds issued tax exemptiona tax treatment where income is never subject to income taxation Tax free acquisitionA merger or consolidation in which 1) the acquirer's tax basis in each asset whose Tax havenA nation with a moderate level of taxation and/or liberal tax incentives for undertaking specific Tax Reform Act of 1986A 1986 law involving a major overhaul of the U.S. tax code. Tax-Related Incomes Policy (TIP)tax incentives for labor and business to induce them to conform to wage/price guidelines. Tax shieldThe reduction in income taxes that results from taking an allowable deduction from taxable income. Related to : financial, finance, business, accounting, payroll, inventory, investment, money, inventory control, stock trading, financial advisor, tax advisor, credit. |