The use of legal methods to modify an individual's financial situation in order to lower the amount of income tax owed. This is generally accomplished by claiming the permissible deductions and credits. This practice differs from tax evasion, which is illegal. Watch: Tax Avoidance Vs. Tax Evasion Most taxpayers use some forms of tax avoidance. For example, individuals who contribute to employer-sponsored retirement plans with pre-tax funds are engaging in tax avoidance because the amount of taxes paid on the funds when they are withdrawn is usually less than the amount that the individual would owe today. Furthermore, retirement plans allow taxpayers to defer paying taxes until a much later date, which allows their savings to grow at a faster rate.
A committee created by two university professors, from Rochester and Carnegie Mellon, in the early 1970's. The committees purpose is to evaluate the policy and actions of the FOMC. Meeting semi-annually, the SOMC has expanded its scope to include discussions on a wider range of macroeconomic and public policies. Participants of the committee are drawn from both public and private institutions, and their opinions are reflections of only the committee itself.
Products on which a value-added tax (VAT) is not levied in countries that use a VAT. Examples of goods that may be zero rated include many types of food and beverage, exported goods, donated goods sold by charity shops, equipment for the disabled, prescription medications, water and sewage services, books and other printed publications, children’s clothing, and financial services. Zero-rated goods can save consumers a significant amount of money. In the United Kingdom, for example, the standard VAT rate levied on most goods is 17.5% and the reduced rate is 5%. However, because the VAT is a hidden tax, which means it is already included in the price of goods, the consumer may be unaware that a good is zero rated. A fourth category of goods - exempt goods - also carries no VAT.
A tax-free, non-reportable movement of assets between retirement plans. Generally, transfers occur between similar types of plans: for instance, from a Roth IRA to a Roth IRA. There is no limit on the number of transfers that may occur between retirement plans, but a transfer must occur between the trustees/custodians of the retirement accounts. This means that the assets are made payable to the trustee/custodian, not to the retirement account holder.
A reduction in the value of an asset or earnings by the amount of an expense or loss. Companies are able to write off certain expenses that are required to run the business, or have been incurred in the operation of the business and detract from retained revenues. For example, if you spend money on dinner to take out a client, that meal is a possible write-off towards your income because you presumably discussed business opportunities during the dinner. Suppose, for another example, you made a sale on credit to a customer, but two weeks later the client's business declared bankruptcy and became completely unable to pay off the credit account with you. This uncollectible debt would then be written-off by your company and recorded as an expense by accountants.
A marketing term referring to the amount of the customer's total spending that a business captures in the products and services that it offers. Increasing the share of a customer's wallet a company receives is often a cheaper way of boosting revenue than increasing market share. |||Increasing share of wallet can be done by adding new products or services that a firm will offer to existing customers. This can also be done by cross-selling services within the same company. As an example, a bank might recommend to an existing client a different service that they offer, such as referring a wealth management client to an individual elsewhere in the organization who might sell the client insurance or arrange for a mortgage. By cross-selling within the bank they can increase their share of the customer’s wallet.
Securities that have a market value of zero. Worthless securities can include stocks or bonds that are either publicly traded or privately held. These securities result in a capital loss for the owner and can be claimed as such when filing taxes. The problem with declaring worthless securities as a loss for tax purposes is that you must sell securities before making this claim. Unfortunately, worthless securities are unsellable. Another difficulty comes from investors who own securities that they are not sure are totally worthless in a given year. If they go ahead and declare them as such and then they are deemed to have value the next year, taxpayers can file an amended return for the previous year and redeclare the loss the following year.
A special kind of mortgage that allows the purchaser to pay a given amount of the loan balance to the lender by passing along a portion of the gain in value of the property. In return for this additional compensation, the lender agrees to charge a rate of interest on the loan that is below the prevailing market rate. Shared-appreciation mortgages allow the lender to recoup the balance of the "interest" charged when the property is sold. Shared-appreciation mortgages allow the purchaser to deduct the amount of gain passed to the lender as interest in the year paid when the property is sold. However, this type of home loan often has a time limit on when the balance must be repaid (e.g., 10 years). If the property is not sold by the deadline, the remaining balance can usually be refinanced at the prevailing market rate.
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