An arrangement in Australia that eliminates the double taxation of dividends. Dividends are dispersed with tax imputations attached to them. The shareholder is able to reduce the tax paid on the dividend by an amount equal to the tax imputation credits. Basically, taxation of dividends has been partially paid by the company issuing the dividend. This concept is best illustrated by an example. Suppose you receive a franked dividend of $100. Assume the before-tax value of this dividend is $125 (this will depend on the company's rate of taxation). In other words, the company has to generate $125 of pre-tax profit to be able to disperse the dividend. If your marginal tax rate is 30%, you will owe $12.50 in taxes on the franked dividend (($100) -($125 * (1-.3))= $12.5). If the dividend is unfranked, you will owe $30 on the $100 dividend ($100 * (1-.7)= $30. Essentially, the company pays a portion of the tax that you would owe if the dividend was unfranked. In Australia, these taxes are paid to the Australian Tax Office (ATO).
A tax levied at the state level against businesses and partnerships chartered within that state. In some states, companies with operations in that state may also be liable for the tax even if they are chartered in another state. This is a privilege tax that gives the business the right to be chartered and/or operate within that state. The amount of franchise tax in any given state can differ greatly depending on the tax rules within each state. Some states will calculate the amount of franchise tax owed based on assets or net worth of the business, while other states look at the capital stock of the company.
The steps required to propose a new tax law or a change to an existing one. The process involves the President and Congress. Here is how formal tax legislation works: 1. A tax bill starts in the House of Representatives and is sent to the Ways and Means Committee.2. The committee members reach agreement about the legislation and draft a proposed tax law. 3. The bill is forwarded to the full House for debate, amendment (if necessary), and approval. 4. The bill is sent to the Senate for more review and a rewrite by the Finance Committee. 5. This version is now presented to the Senate for approval. 6. After Senate approval, the bill is sent to a joint committee of House and Senate members who try to compromise and cooperate with each other on a new version. 7. The compromise version of the bill is sent to the House and the Senate for further approval. 8. After all this, it goes to the President, who may sign it, making it law, or veto it by not signing. 9. If the president vetoes the bill, Congress can attempt to override the veto with a 2/3 vote of each house. If Congress is successful, the bill becomes law regardless of the presidential signing.
Income tax that is deferred because of discrepancies between a company's tax return and the tax calculated on the company's financial statements. Future income tax occurs when there is a greater amount of deductions on taxable income than on the net income that is calculated on a company's income statement. In simple terms future income tax is an adjustment accounting for the difference between what the company has already paid in taxes on the current income and what they will have to pay in the future for this income. This difference occurs because companies are taxed by government in a different way than from the way they calculate tax on their accounting records.
A status that is important for determining dependency exemptions. Full-time status is based on what the individual's school considers full time. An individual enrolled in a post-secondary institution may be eligible for certain tax breaks.
A managerial accounting method that describes when all fixed and variable costs, including manufacturing costs, are used to compute the total cost per unit. Full costing includes these costs when computing the amount of money it takes to produce and distribute one unit of output. Full costing is also known as "full costs" or "absorption costing". How a firm expenses its production and distribution costs will impact the structure of internal income statements. Because all costs incurred to sell a product are included with cost of goods sold, the firm's gross margin will be lower under the full costing method than the absorption costing method.
Money withheld from an individual's paycheck and remitted to another party, usually a creditor. When reporting taxable income, you must include the amounts garnisheed from your wages.
A federal subsidy that allows businesses to reduce their taxable income dollar for dollar based on specific types of fuel costs. There are several types of fuel credits. For example, a 2005 fuel credit to companies that produce biofuels provided a tax credit to companies that combined diesel derived from biomass with diesel derived from petroleum to create an alternative fuel mixture. Watch: Tax Deduction Vs. Tax Credit The black liquor tax credit, once part of the alternative fuel credit, was a tax loophole allowed to companies for using black liquor - a paper production byproduct that the paper and pulp companies were already using - mixed with diesel as a fuel source. The paper and pulp companies began adding diesel to their black liquor so they could claim a tax credit. This achieved the reverse of what the bill intended, increasing the use of fossil fuels and reducing the use of biofuels.
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