A type of life insurance contract that provides for insurance coverage of the contract holder for his/her entire life. Unlike term life insurance, which covers the contract holder until a specified age limit, a traditional whole life policy never runs out. Upon the inevitable death of the contract holder, the insurance payout is made to the contract's beneficiaries. These policies also include an investment component, which accumulates a cash value that the policyholder can withdraw or borrow against. Watch: Life Insurance This type of life insurance provides the policyholder with a guaranteed amount to pass on to his/her beneficiaries, regardless of how long he/she lives, provided the contract is maintained. Most policies also offer a withdrawal clause, which allows the contract holder to cancel his/her coverage and receive a cash surrender value.
The aggregation of a taxpayer's domestic and foreign income. Worldwide income is income earned anywhere in the world and is used to determine taxable income. In the U.S., citizens and resident aliens are subject to tax on worldwide income. The IRS demands to know about all of a taxpayer's worldwide income, taxable or otherwise. Money that is paid to U.S. citizens or resident aliens as wages, independent contractor payments or unearned income from pensions, rents, royalties and investments may all be subject to tax by the IRS. There are some exceptions for U.S. taxpayers who live abroad. See IRS Publication 525 for more information.
A value-based performance measure of a company's worth to shareholders. The basic calculation is net operating profit after tax (NOPAT) minus the cost of capital from the issuance of debt and equity, based on the company's weighted average cost of capital:Using the market value of the company, rather than the accounting-based value in the above calculation, will give the market value added to shareholders.
A separate, nonrefundable credit that is part of the general business credit. The work opportunity tax credit is designed to encourage employers to hire workers from certain minority groups with higher-than-average unemployment rates. This credit can be for as much as 40% of the qualified wages you pay to workers in this category in the first year. Watch: Tax Deduction Vs. Tax Credit The work opportunity tax credit is figured on Form 5884, and is aggregated with all of the other business credits. There are several targeted groups of workers that will qualify their employers for this credit, including veterans, ex-felons, high-risk youth, food stamp recipients, SSI recipients and several other groups.
An individual retirement account (IRA) that allows individuals to direct pretax income, up to specific annual limits, toward investments that can grow tax-deferred (no capital gains or dividend income is taxed). Individual taxpayers are allowed to contribute 100% of compensation up to a specified maximum dollar amount to their Traditional IRA. Contributions to the Traditional IRA may be tax-deductible depending on the taxpayer's income, tax-filing status and other factors.Other variants of the IRA include the Roth IRA, SIMPLE IRA and SEP IRA. Traditional IRAs are held by custodians, such as commercial banks and retail brokers, and investors can place IRA funds into stocks, bonds, funds, and other financial assets deemed fit by the custodian. Assets, such as real estate come with heavy restrictions from the IRS, and may be taxed differently. When the individual begins to receive distributions from a Traditional IRA, the income is treated as ordinary income and may be subjected to income tax. This differs from the Roth IRA, which can offer tax-free distributions. For people over the age of 50, higher annual contribution limits may apply if the IRA has been recently created or under-funded in previous tax years. Distributions are required to come out of the account by the time the owner reaches age 70.5.
An IRS form, also known as "Request for Taxpayer Identification Number and Certification", which is used by an individual defined as a "U.S. person" or a resident alien to verify his or her taxpayer identification number (TIN). An entity that is required to file an information return with the IRS must obtain your correct TIN to report, for example, income paid to you, real estate transactions, mortgage interest you paid, etc. For example, companies that issue dividends use the W-9 form to verify a shareholder's TIN.If you are defined as a "foreign person" for federal tax purposes, you do not use the W-9 form. Rather, the IRS requires you to use the appropriate W-8 form.Even though employees are legally required to supply certain personal information to their employers, an employee's privacy is protected by law. An employer that discloses an employee's personal information in any unauthorized way may be subjected to civil and criminal prosecution.
A form of retirement plan available only to selected company employees - usually key executives. Such plans are different from standard retirement plans in a number of ways: 1) They don't usually offer the same tax benefits of an opt-in plan.2) Not everybody can participate - even those of equal company stature may have different plans. Generally, there are two types of top hat plans: a nonqualified deferred compensation plan and a supplemental executive retirement plan. The former allows participants to defer income into the plan during each calendar year, while the latter is funded entirely by the employer. Unlike opt-in retirement plans, a top hat plan is often exempt from many government regulations. Hence, the interest rate associated with the plan is usually higher than that offered by traditional retirement plan.
Any tax that is taken directly out of an individual's wages or other income before he or she receives the funds. In other words, these funds are "withheld" from your wages.
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