For employer-sponsored, tax-advantaged retirement plan purposes, anyone who is a 5% owner of a company or who received more than $110,000 in compensation in 2010 (the compensation limit is adjusted annually). If the employer chooses, a highly compensated employee may also be defined as any employee whose pay is in the top 20% of compensation for that company. When a company contributes to a defined-benefit or defined-contribution plan for its employees and those contributions are based on the employee's compensation, the Internal Revenue Service wants the company to minimize the discrepancy between the retirement benefits received by highly compensated and lower compensated employees. If the difference is too great, the company can lose the tax deduction it gets for the retirement plan.
The tax levied on both employers and employees used to fund the Social Security program. Social Security tax is usually collected in the form of payroll tax or self-employment tax. The Social Security tax pays for the retirement and disability benefits received by millions of Americans each year. The funds collected from employees for Social Security are not put into a trust for the individual employee currently paying into the system, but rather are used to pay existing retirees. Also, Social Security tax can refer to the tax on the benefits received from Social Security. In the past, Social Security was tax free, but today if you have other substantial income along with your benefits, you will likely end up paying some tax on them.
A law enacted by President Franklin D. Roosevelt in 1935 to create a system of transfer payments in which younger, working people support older, retired people. Under the act, the government began collecting the Social Security tax from workers in 1937 and began making payments in 1940. The Social Security tax combines with the Medicare tax to form what is known as FICA, or the payroll tax. As of 2010, the Social Security tax rate was 6.2% and the Medicare tax rate was 1.45%. The total payroll tax of 7.65% is deducted from the employee’s paycheck; the employer must make a matching contribution of an additional 7.65%. The employee effectively pays the entire tax, as the employer’s matching requirement reduces what he is able to pay his employees. Thus, Social Security represents a tax of 12.4% on the employee in addition to Medicare taxes, federal income taxes, state and local income taxes, sales taxes and numerous other less-noticed taxes.
A person who inherits some or all of the estate of a recently deceased person. The legal successor is usually selected because he or she is related to the deceased by a direct bloodline or has been designated in a will or by a legal authority. Originating in feudal times, the heir was usually the oldest male child in the family.
The filing status used by a taxpayer who is unmarried and does not qualify for any other filing status. Your filing status does affect your taxation bracket.
An emergency withdrawal from a retirement plan that may be subject to certain tax or account penalties. In the United States, funds withdrawn prior to the age of 59.5 are typically subject to a 10% Internal Revenue Service (IRS) early withdrawal penalty, as well as standard income taxes. Hardship withdrawals from a retirement plan such as a 401(k) can't be replaced. The money that is withdrawn is permanently removed from the account, and only scheduled future contributions are permitted.The stiff penalties and criteria for hardship withdrawals are meant to deter investors from using this option except as a last resort. The ability to have money free from future income taxes and capital gains taxes (a trait of most retirement accounts) is an extremely valuable asset, and is necessary for many people to achieve a stable retirement.
A tax implemented by the Canadian government on the distributions of a special type of Canadian income trust. SIFT trusts was a common business structure in Canada that provided beneficial tax advantages prior to 2006. They are actively managed and commonly used by businesses that essentially operate like corporations. In October, 2006, the Canadian government decided that the tax advantages available to SIFT trusts were "not appropriate" (meaning that the government was not collecting as much tax revenue as it wanted to), and implemented a new tax under the Tax Fairness Plan that made SIFT taxation similar to corporate taxation. Prior to the imposition of the new tax, income trusts comprised roughly 10% of companies traded on the Toronto Stock Exchange, with a large number of those being energy companies. As a result of the change in tax law, many SIFT trusts converted to a corporate structure. The tax became effective for preexisting income trusts on January 1, 2011.
As a result of changes to tax law in the United States, employers and retirement plan sponsors are required to complete new Adoption Agreements and restate their prototype qualified plans. In order for plans to maintain their qualified status, they must meet different statutory regulations. GUST comes from the combination of: General Agreements on Tariffs and Trade (GATT), the Uniformed Services Employment Rights Act of 1994 (USERRA), the Small Business Job Protection Act of 1996 (SBA-96), and the Taxpayer Relief Act of 1997 (TRA-97).
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