- — Abbreviated Accounts
- — Ability to Pay Taxation
- — Double Taxation
- — Effective Tax Rate
- — Fiscal Year
- — Form 10-K
- — Form 10-Q
- — Form 8-K
- — Her Majesty’s Revenue & Customs (HMRC)
- — Income Tax
- — Individual Retirement Account
- — Internal Revenue Services (IRS)
- — Investment Tax Credit
- — Lump-Sum Distribution
- — Sales Tax
- — Tax
- — Tax Allowances
- — Tax Audit
- — Tax Haven
- — Timing Differences
- — Value-added Tax (VAT)
- — W-4 Form
An abbreviated account is essentially a tax return filed by a business in the United Kingdom. These filings are reserved for small companies that qualify to do so. The form is filed with the registrar of companies, the UK equivalent to the IRS. It is called an abbreviated accounts form because the companies that file are mostly the smaller and medium sized ones and the occasional limited liability partnerships company.
Ability to Pay Taxation
With concepts and ideas there is always a dichotomy of understanding and results. With the concept known as the Ability to Pay Taxation it is no different. Essentially the theory is this, the Ability to Pay creates a different tax rate for everyone based on their ability to pay the taxes. So, the poor would pay less in percentages of taxes and the rich would pay more. In theory this sounds like it is a fair concept. The idea is that the rich have more of an ability to pay taxes than the poor do making their contribution to government coffers increase each time their income amounts increase.
Double taxation is a taxation related principle, which refers to income taxes, which are paid two times on the same income source. The reason why double taxation is applied is because companies are taken as separate legal organizations than their shareholders. Companies have to make payments in the form of taxes on their annual incomes, like individuals. When the companies make payments as part of dividends to its shareholders, the dividend related payments attract income tax for the receiving shareholders, even when the incomes that were used for paying cash in the form of dividends had already been taxed at corporate level.
Effective Tax Rate
The effective tax rate is the rate which would be paid by a taxpayer on his tax if it was charged at a constant rate rather than progressive. Putting it other way, the effective tax rate is the average rate at which a business or individual is taxed on the earned income. It is calculated as the total tax paid divided by the taxable income.
By definition the term fiscal year is the specified time period during which all the financial statements are calculated. This is the time period of usually one year.
Form 10-K is a document that is audited and needed by the Securities and Exchange Commission and is given to a public entity or shareholders of mutual fund at the conclusion of every fiscal period. The document requires reporting of finance related results for the fiscal period (which includes the income statement, balance sheet, company operations related descriptions and cash flow statement) as well as comments on future outlook.
Form 10-Q is basically a form that the Securities and Exchange Commission needs public entities and private entities to submit on a quarterly basis. It consists of equity related statements as well as unaudited finance statements. Even though it is very similar to the report prepared for shareholders, the form consists of much more data and information, like compensation for executive and details of the structure of the organization. All the public entities and any private trading entity that has over five hundred shareholders and ten million dollars in terms of assets have to file Form 10-Q. Entities only submit three of the 10-Q forms every year since the figures for final quarter are incorporated in form 10-K. Form 10-Q also consists of management related discussion and a list of events that take place with the entity (for example acquisition or splitting of stock).
Form 8 K is essentially a document that the Securities and Exchange Commission requires for announcing certain important changes in a public listed entity, like an acquisition or merger, an address or name change, changing of auditors, bankruptcy or any other type of information that the potential investors must be aware of.
Her Majesty’s Revenue & Customs (HMRC)
HMRC, short for Her Majesty’s Revenue & Customs, is a non-ministerial department of the UK government responsible for tax collection in addition to the payment of some forms of state support. The HMRC was created as a merger of the Inland Revenue and Her Majesty’s Customs and Excise. This merger occurred on 18th April, 2005. The department features a logo as the St Edward’s Crown enclosed within a circle.
Income tax refers to a tax which is levied on the income earned by individuals as well as business firms. There are various tax systems existing with varying degrees of tax incidence. The nature of income tax can be proportional, progressive, or regressive.
Individual Retirement Account
An individual retirement account (IRA) is essentially a savings account that allows individuals to keep certain amount of money aside every year and delay the payment of taxes on their earning until a future period i.e. when they begin withdrawing the money at the age of 59 or later.
Internal Revenue Services (IRS)
Short for Internal Revenue Service, IRS functions as an intelligence agency in two respects. Firstly, through its intelligence division, it both collects general intelligence about possible tax violators in addition to investigating about the allegations of tax fraud so as to secure evidence for criminal prosecution. Secondly, the IRS accrues vast amounts of info about the personal and financial affairs of American citizens from the tax returns and supporting info which is submitted voluntarily by the Americans.
Investment Tax Credit
Investment tax credit is basically a tax related incentive that allows individuals or entities to deduct a certain percentage of specific investment related costs from their tax liability apart from usual allowances for depreciation. Thus, investment tax credits are more or less similar to investment related allowances that allow businesses or investors to deduct a specific percentage of certain capital related costs from their income, which is taxable.
Lump-Sum Distribution is essentially a payment that is made together for the amount that is due, instead of making payments in small installments. Those who took birth before the year 1936 will notice that their lump-sum distributions qualify to be treated more favorably by tax in comparison to the withdrawals made from their retirement accounts. However, a lump-sum distribution takes place only when you get your complete account balance in the same year from your pension related plans that have been maintained by the same employer or from you profit-sharing plans that also includes 401(k) plan being maintained by the same employer and from stock bonus related plans being maintained by the same employer.
Sales tax is a tax charged on products from end users. It is imposed by government of a state or country and is a percentage of the cost. Sales taxes are varying from country to country and even differ in cities of a single state. Some countries avoid imposing sales tax on food products but in restaurants sales taxes are charged on it. Services are exempted from sales taxes as well as some exemptions are also given to certain customers or on a specific group of merchandise.
Contribution for the support of the government by the citizens on income or activity is known as tax. If the contribution is against the corporate or personal income it is known as direct tax. If it is levied on the goods or services it is then known as indirect tax. Indirect taxes are usually taken from the end customer.
Tax allowances can be referred as a part of the income earned by a person and is not taxable. Putting it other way, tax allowances are concessions provided by the government and can be used for reducing the taxable income of a person. However, the tax allowances are subject to various reasons that vary depending upon the age and personal circumstances.
Audits usually done by the government appointed auditors, in order to find out if the tax was full is known as tax audit. Returns are selected on the basis of any discrepancy that the auditors suspect with respect any major change in the income level or high claim for deductions.
A tax haven is a nation or like a place where taxes become very low. Everyone can deposit in tax havens to avoid paying steep taxes in their homelands. Legality of tax havens is up for debate, but on the other side, lots of Americans continue to deposit with tax havens.
Timing difference is the concept of the accounting that occurs due to the transition problems. The timing difference is the term that is extremely used in the financial reporting or taxation purposes.
Value-added Tax (VAT)
A value added tax (VAT) can be explained as a type of consumption tax. From the buyer’s perspective, it is a tax on the purchase price. On the other hand, from a seller’s perspective, it is a tax levied on the “value added” to a product or service. The difference between these two amounts is remitted to the government by te manufacturer and the rest is retained by him to compensate the taxed which have been paid previously on the inputs.
W-4 form is a form that is filled by an employee for the purpose of indicating his/her tax related situation (status, exemptions, etc.) before the employer. The W-4 form informs the employer regarding the right tax amount that he/she needs to withhold form the paycheck of an employee.