A reference used to indicate the combination of the Social Security tax and the Medicare tax. For the year 2024, the employee’s portion of the FICA tax is 7.65% (the Social Security tax of 6.2% plus the Medicare...
A reference used to indicate the combination of the Social Security tax and the Medicare tax. For the year 2024, the employee’s portion of the FICA tax is 7.65% (the Social Security tax of 6.2% plus the Medicare...
Our Explanation of Payroll Accounting discusses the taxes and benefits which are withheld from employees' pay as well as the taxes and benefits that are expenses for the employers. Also provided are examples of the...
What is cash flow net of tax? I view cash flow net of tax as the amount of cash spent minus the income tax savings when the amount is deductible on the corporation’s income tax return. To illustrate this, let’s...
The U.S. government agency responsible for federal income tax regulations.
A publication by the U.S. Internal Revenue Service (IRS) to assist employers with federal payroll taxes. The complete title of the publication is Publication 15 (Circular E), Employer’s Tax Guide. It is available...
A publication by the U.S. Internal Revenue Service (IRS) to assist employers with federal payroll taxes. The complete title of the publication is Publication 15 (Circular E), Employer’s Tax Guide. It is available...
A publication by the U.S. Internal Revenue Service (IRS) to assist employers with federal payroll taxes. The complete title of the publication is Publication 15 (Circular E), Employer’s Tax Guide. It is available...
Form 990 is the Internal Revenue Service (IRS) form entitled Return of Organization Exempt from Income Tax. This federal form must be filed annually by tax exempt organizations. However, some organizations such as...
assume that a regular U.S. corporation has: A loan with an annual interest rate of 10% An incremental tax rate of 30% (combination of federal and state) If the corporation has a loan of $100,000 with an annual interest...
Is income tax an expense or liability? Definition of Income Tax In the accounting for a regular U.S. corporation, income tax usually refers to the federal, state, local, and foreign countries’ taxes that are levied...
expensive components of the cost of capital. One reason is that the interest is deductible for income taxes. For example, a corporation paying 6% on its loans may have an after-tax cost of 4% when its combined federal...
, if a corporation’s incremental federal and state income tax rate is 30%, bond interest payments of $40,000 will reduce the income tax payments by $12,000 (30% of the $40,000 reduction in taxable income). If the bond...
Our Explanation of Payroll Accounting discusses the taxes and benefits which are withheld from employees' pay as well as the taxes and benefits that are expenses for the employers. Also provided are examples of the...
What is the employer matching of FICA? Definition of FICA FICA is the acronym for Federal Insurance Contributions Act, which requires employers to withhold the following from each employee’s paycheck: Social Security...
pays $100,000 in interest to its lenders. The $100,000 will appear on the corporation’s income statement as interest expense and will reduce the line net income before income tax expense and the line income tax...
See payroll taxes payable.
The result after subtracting the income tax associated with a given amount. For example, if a corporation has a gain of $100,000 before tax, and its income tax rate is 30%, its after-tax gain is $70,000. If a corporation...
The amount of income tax that is associated with (matches) the net income reported on the company’s income statement. This amount will likely be different than the income taxes actually payable, since some of the...
The depreciation computed on the tax return according to the income tax code and regulations. This amount is usually different from the depreciation used on the financial statements (book depreciation).
The allocation of one year’s income tax expense to the various sections of the income statement. For example, extraordinary items must be reported after income tax on the income statement, while operating revenues...
Income tax allocations arising from differences between income tax rules and generally accepted accounting rules. For example, depreciation for income tax purposes is based on the income tax code and may require that...
A gross amount minus the income tax associated with the gross amount. For example, a company may dispose of one of its business segments and show a gain (proceeds exceed carrying amount) of $10,000,000. However, if the...
The depreciation used on a company’s income tax return. Usually this is different from the depreciation used on the financial statements.
This current liability account reports the amount a company owes (must remit) for its employees’ Social Security and Medicare taxes as of the date of the balance sheet.
Our Explanation of Nonprofit Accounting includes a chart that contrasts the financial statements of a nonprofit (or not-for-profit) organization with those of a for-profit business corporation. There are many examples to...
payroll withholding taxes include: Each employee’s portion of the Social Security and Medicare taxes (also referred to as FICA) Each employee’s federal income tax Each employee’s state, county, municipality income...
Is sales tax an expense or a liability? Definition of Sales Tax In the U.S., a sales tax is a state tax (and possibly an additional city and/or county tax) that is paid by the buyer at the time of purchase. The...
The cash amounts received after deducting the related income taxes and also the cash amounts paid after deducting the cash saved when the amounts are income tax deductible.
A tax imposed on income earned by a nonprofit that is unrelated to its exempt purpose.
The interest rate of debt (bonds, loans) after deducting the income tax savings. For example, if a corporation has issued bonds with an interest rate of 8% and the corporation’s income tax rate is 25%, the...
What is Additional Medicare Tax? Definition of Additional Medicare Tax The Additional Medicare Tax is one of the U.S. government’s payroll withholding taxes that is paid solely by employees and the self-employed. In...
by the corporation will be deductible on the corporation’s income tax return. If a corporation’s combined federal and state income tax rate is 35%, then $100,000 of interest expense will save the corporation $35,000...
Compensation for employees that is in addition to salaries and wages. Examples include paid absences (vacation, sick, holiday), insurances (health, dental, vision, life), pensions, profit sharing contributions, employer...
plan, a deferred profit sharing plan, and/or a charitable giving plan may require an expense of 25% of its pretax profits. In addition, a U.S. corporation might have a combined federal and state income tax rate of...
See Federal Insurance Contribution Act (FICA).
financial statements while at the same time be using one of the Internal Revenue Service’s faster depreciation methods on its federal income tax return. Example of Straight-Line Depreciation To illustrate...
What is the profit margin (after tax) ratio? Definition of Profit Margin Ratio The after tax profit margin ratio expresses the company’s net income or earnings as a percent of the company’s net sales. In other words,...
This current liability account reports the amount a company owes the state governments as of the balance sheet date for the state income taxes withheld from its employees’ salaries and wages.
for the employee’s health, life and disability insurances $2,000 for the employee’s retirement benefits $1,000 for worker compensation insurance and unemployment tax $3,000 for the employer’s portion of the Social...
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