What would you like to do?
What are the Advantages of tax deferred retirement plans?
First off, there are very few, if any, disadvantages. Advantages include the basic concept that paying taxes later, in this case frequently much later, is much bettr than paying them now. Add to it, the taxes you don't pay you get to invest and earn a return on. Those earnings are generally tax deferred too. Special status of most qualified deferred plans means they are exempt from attachment or seizure, even during a bankruptcy. (Security of savings). There are generally methods to obtain hardship or special purpose early withdrawals. If the funds pass to your heirs, upon death, before or after you start withdrawing them, they generally pass without being taxed too.
Was this answer useful?
Thanks for the feedback!
Deferred tax assets is a companies asset that may reduce their income tax expenses. These can arise from net loss carryovers and can be applied to future fiscal periods.
This response is for tax year ending 2009 only: Yes there is. It usually is placed in on the standard 1040 in line #32. "IRA deduction" be sure to read page 31 of the instruct…ions if you are taking this deduction because not everything is always deductible. If you have exceeded the maximum contribution, that amount would not be deductible. In addition, ROTH IRA contributions are not tax deductible either. There is also a credit if your income falls below a certain threshold and you have contributed to an IRA account. It is found on the standard 1040 line 50 and requires that form 8880 be filed along with the line on 1040 to receive the credit. The income limits for the credit are $27,750 - Single, 41,625 - Head of Household and 55,500 - Married filing jointly.
Under which type of plan can employees delay getting some of their salary with the deferred money going into an account that will not be taxed until it is distributed?
Yes, but only if the entity has the legal right to settle on a net basis and they are levied by the same taxing authority on the same entity or different entities that intend …to realise the asset and settle the liability at the same time.
The tax deferred annuity is used to keep the government from taxing your earnings for a certain period of time. It has two phases. It has the accumulation phase and then the d…istribution phase. During the accumulation phase the annuity grows untaxed as the investment compounds. Distribution is when the annuity is paid out.
Answer Deffered Tax is the amount the payment of which you delayed to pay in future. There are many reasons for deffered taxation. There are so many expanses and incom…es which are not allowed by taxation department of Government but we enter as income and expenses in our financial statements because in accounting they are allowed as income or expense and that's why in the end the net income calculated by company and tax department is rearely reconsile due to problems mentioned above and due to that tax calculated by company is different the tax calculated by tax departments that's why deffered taxation is use to adjust tax between entity and tax department.
A 401K retirement plan is an account to which an individual can add funds via pre-tax payroll deductions. The advantages of the 401K plan include the tax advantages, the empl…oyer matched contributions, the customization and flexibility of investments, and the portability of the product.
There are many different ways they can be set up, and many different vehicles for the funds...but generally: On set up the money put in them is NOT taxed to the employee…, although the payroll handling, from the companies side, may be different. (Also certain parts of things like FICA may need to be paid up front). The executive is defferring the income...not getting it now, not getting taxed on it now. When it is withdrawn/paid out, the original salary is taxable as is the investment growth. It is normally all taxed as ordinary income, even though the investment portion may have received a capital gain treatment...however, depending on the exact set up, sometimes the gain and salary can be differentiated and is taxable as each type. The SERP administrator should explain how and why the specific plan your in works.
Essentially, they are taxes that are 'deferred' to a later time. Tax Liabilities are typically taxes you are required to pay on income, or profit, you have obtained. Being abl…e to 'defer' them is a means by which you are allowed to push them off until a future date when your tax 'status' would place you in a tax bracket that withholds less taxes from your income (as in when you retire).
Can vary from plan to plan...qualified or non-qualified is important. This can be a very complex field, some basics: All amounts deferred under a nonqualified deferr…ed compensation (NQDC) plan for all tax years are currently includible in gross income to the extent not subject to a substantial risk of forfeiture and not previously included in gross income, unless the plan: : ... meets specified distribution, acceleration of benefit, and election requirements; and : ... is operated in accordance with these requirements. ( Code Sec. 409A(a)(1)(A)(i) ) : : If a NQDC plan doesn't comply with the Code Sec. 409A rules, all amounts deferred under the plan for the tax year and all prior tax years, by any participant to whom the failure relates, are included in income for that year to the extent not subject to a substantial risk of forfeiture and not previously included in income. This amount is also subject to: (1) interest (at the underpayment rate plus one percentage point) on the tax underpayments that would have occurred had the amount been included in income for the tax year when first deferred, or if later, when not subject to a substantial risk of forfeiture; and (2) a penalty of 20% of the compensation required to be included in income. ( Code Sec. 409A(a)(1)(B)
No. The money payments to a annuity plan when you purchase the annuity plan the amount that you pay for the plan is not tax deferred. The amount is after income tax funds. The… earnings that go on inside of the annuity plan will be tax deferred until the time that you start taking distributions from the annuity plan.
Basically, the book tax provision has 2 part - current (what you will pay this year) and deferred (what you will pay in some other period. It is determined using the financial… book income. (Yes, there are some things, called "permanent" differences which are past this discussion). Tax accounting uses different conventions and requirements to determine what "income" is TAXABLE income. So for example, while financial accounting may require a company record an expense for bad debts - using some basis, (perhaps it's past history that some percent of sales are never collected) and that reduces book income that year - tax has a different set of requirements - which says that the expense CANNOT be recoded until it is absolutely realized (an "all events" test, not just an estimate) has been met. So while over the years, the amount of bad debt (reducing income) may be very, very similar - when it happens is different. So, while the book provision, using book income, records a total tax expense that year which incorporates the booked estimate of bad debt, since tax will not report that expense until a later period and will pay the tax on that income until the tax expense is recorded, the total provision (current + deferred) carries that until tax "catches up" to books (in this case.) These differences can go either way, and therefore produce a deferred tax asset (something you paid tax on - recognized as income for tax before book, or a deferred tax liability (where say books allowed an expense before tax (as in the above)). The net position (having a deferred asset or liability) is what is commonly shown on financial statements, although depending on the level of presentation, there may be one line for each - with detail of at least the major items causing the differences, someplace else in the statements.
Tax-deferred wages is a reference to income of which there is no tax withholding. The taxes on the wages will be deferred until the end of the year.