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Found of Taxation
Chapter 15: Compensation and Retirement Planning
| Term | Definition |
|---|---|
| employee | an individual who performs services for compensation and who works under the direction and control of an employer |
| independent contractor | an individual who performs services for compensation and who works under the direction and control of an employer |
| expatriates | an individual who is a U.S. citizen and resides and works for an extended period in a foreign country |
| foreign earned income exclusion | an annual amount of foreign source earned income on which expatriates are not required to pay federal income tax |
| fringe benefits | any economic benefit subject to valuation received by an employee as additional compensation |
| cafeteria plan | a compensation plan under which employees may choose among two or more benefits, including both cash and noncash items. |
| stock option | the right to purchase corporate stock for a stated price (the strike price) for a given period of time |
| bargain element | the excess of fair market value over cost of stock acquired on exercise of a stock option |
| incentive stock option | a qualified stock option for federal tax purposes. Individuals do not recognize the bargain element as income on the exercise of an ISO |
| qualified retirement plans | retirement plans that meet certain statutory requirements and that allow participants to save for retirement on a tax-deferred basis |
| premature withdrawal | a withdrawal from a qualified retirement plan made before the individual reaches age 59½ |
| rollover contribution | a distribution from one qualified plan contributed to another qualified plan within 60 days |
| employer provided plan | a retirement plan sponsored and maintained by an employer for the benefit of the employees |
| defined-benefit plan | a qualified plan under which participants are promised a targeted benefit, usually in the form of a pension, when they retire |
| defined-contribution plan | a qualified plan under which an annual contribution is made to each participant’s retirement account |
| profit-sharing plans | a defined-contribution plan under which an employer regularly contributes a percentage of current earnings to the employee’s retirement accounts |
| Section 401(k) plans | a defined-contribution plan under which employees elect to contribute a portion of current year compensation to an employer-provided retirement plan |
| deferred compensation | a nonqualified plan under which an employer promises to pay a portion of an employee’s current compensation in a future year |
| Keogh Plan | a qualified retirement plan for self-employed individuals |
| SEP | a SEP is a retirement plan that allows an employer (sole proprietor, partnership, or corporation) to administer and contribute to a qualified plan for themself or their employees |
| Simple IRA | a simple IRA is a retirement plan established by a small business owner (typically less than 100 employees) on behalf of the businesses owner or employees |
| traditional IRA | an investment account through which individuals with compensation or earned income can save for retirement on a tax-deferred basis |
| Roth IRA | an investment account through which individuals with compensation or earned income can save for retirement on a tax-exempt basis |
| rollover IRA | an IRA created to receive a distribution from another qualified retirement plan |
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ryanriggs18
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