We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.
Nobody downloaded yet

Type Of Tax-Book Difference - Essay Example

Comments (0)
The defined contribution plan is a type of pension plan whereby the employer and the employee both contribute to the fund in a defined manner. Basically, employers are the one who establish the plan and are responsible to make their contributions (Retirement Plan Basics, n.d…
Download full paper

Extract of sample
Type Of Tax-Book Difference

Download file to see previous pages... The contribution that can be deductible by the employer must not exceed 25% of employee's total compensation (Green, n.d., retrieved 07.09.06).
The employer receives a tax deduction equaling his contribution in the employee's defined contribution plan. The employees benefit from deduction of contribution from pre-tax salary, which enables them to save taxes and fund the retirement plan with the gross amount. The tax continues to be deferred until the plan is distributed and therefore there remain opportunities for fast investment growth (Building Your Retirement Funds, 2006).
The advantages for defined contribution plan are that this plan allows the employees to save the tax payments until the plan is withdrawn, employees also benefit from employer contribution into the fund, the employees will have the opportunity after the retirement to either receive the entire amount or a series of payment over their entire life etc. The major advantage for employer underlying this plan is that it enables him to evade the risk on investment and also the burden of plan contribution is shared between the employer and the employees. Its major disadvantage is the complexity and strictness of the rules concerning the plan administration (Employer-Sponsored Retirement Plans, 2005). Being the one who establishes the pension plan, an employer is expected to administer it and meet its requirements. The employer will monitor and supervise the investment poured into the plan and review the growth of funds. Moreover, he is also required to provide periodical information to the employees concerning the operation and status of the invested funds (Retirement Plan Basics, n.d. retrieved 08.09.06)

The contribution on the part of employer is limited to a maximum of $40,000 or 25% of the employees' compensation whereas, for the year 2006, the contribution by employees has been defined as limited to 100% of his compensation up to the maximum of $15,000 (Green, n.d., retrieved 07.09.06). The distribution from a defined contributed plan is not allowed whilst the employee is still working. However, when this distribution takes place, it is taxed as an ordinary income. The Internal Revenue Service states the minimum age limit for pension plan distribution as 70-1/2 years, from which the employees should start withdrawing the funds. The distribution is not allowed before the employees reach the age of 59-1/2. If it is done, the investment would be subjected to an early-withdrawal penalty of 10% (Retirement Planning, 2006).

The financial statements of XYZ Corporation should include a statement of net assets available for benefits at the end of the plan year. Moreover, the company also needs to present a statement of changes in net assets available for the benefits at the same time. Also, the GAAP requires the financial statements to be prepared under the accrual basis so as to ease the evaluation of plan assets composition (Defined Contribution Pension Plans, 2005)
Type Of Tax-Book Difference
The discrepancies in the rules and principles set down for financial reporting and tax accounting lead to significant differences in the tax amounts shown in financial statements and the tax returns. These differences are known as the book-tax differences, which are further classified as either temporary or permanent tax differences (Michel, 2005).

Permanent tax difference originates when an income or expense amount needs to be recognized by any of the two methods but not by both of ...Download file to see next pagesRead More
Comments (0)
Click to create a comment
Accounting and Society(The Minerals Resource Rent Tax)
The Government of Australia has proposed a new resource rent tax known as Mineral Resource Rent Tax (MRRT) that will be effective from the beginning of July in 2012. It replaces the earlier proposed Resource Super Profits Tax or RSPT. Australia is quite rich in its natural resources in the form of minerals, oil, natural gas, etc.
12 Pages(3000 words)Essay
The Difference between the Book and the Film Girl with a Pearl Earing
The book was written by the author inspired by the famous painting called “Girl with a Pearl Earring” created by famous painter Johannes Vermeer. Then the book was cinematized in 2003 and it was a very close to plot adaptation of the book. Many people, especially devoted readers tend to think that it is much more interesting to read books than to watch their screen versions.
4 Pages(1000 words)Essay
A Joint Venture Company. What Is The Difference Between This Type Of Companies And Joint Stock Companies
What is a joint venture company? And what is the difference between this type of companies and joint stock companies? A joint venture company is one in which two parties form a partnership for the short term in order to benefit in terms of monetary profits from a business transaction whose risks and costs they both bear.
5 Pages(1250 words)Essay
Contract for difference(CFDs)
Following this the next chapter will detail the working of contract for differences. This will include a detailed discussion of the trade types, how CFDs are sold will be discussed in detail. Also details for CFD strategies will be discussed within
50 Pages(12500 words)Essay
Political science; Multicultural Nature;The book Privilage, Power, and Difference and the movieCrash
The book "Privilege, Power, and Difference" and the movie” Crash" belong to the genre that exposes these issues. In "Privilege, Power, and Difference" Allan Johnson (2001), says that human beings are part of these problems
5 Pages(1250 words)Essay
Book review forthe permanent tax revolt
This implies that taxation mechanisms and government regulatory dynamics constitute one of the least studied subjects in the discipline of economic
6 Pages(1500 words)Book Report/Review
Difference Between the Tax System - the United States vs Italy
Instead of the revenue authority reviewing tax returns and investigating taxpayers who are suspected to have understated their returns, the Italian authority believes that taxpayers always understate their revenues and therefore establishes a benchmark for negotiating for higher tax payables. 
2 Pages(500 words)Case Study
Although taxation should be done on an equal level, government departments are considering a reduction for the middle class and an increase for the wealthy. The changes in tax systems are indicators of economic development of the US and other countries.
2 Pages(500 words)Essay
This means that this individual has made a gain of 20000 USD. The seller of this painting should pay tax for the 20000 USD gains which he or she has acquired as profit. It is worth
4 Pages(1000 words)Essay
The primary aim of the codes of ethics is to articulate highest behavioural standards in the organizations. Therefore, a code of ethics can be clearly
9 Pages(2250 words)Essay
Let us find you another Essay on topic Type Of Tax-Book Difference for FREE!
Contact us:
Contact Us Now
FREE Mobile Apps:
  • About StudentShare
  • Testimonials
  • FAQ
  • Blog
  • Free Essays
  • New Essays
  • Essays
  • The Newest Essay Topics
  • Index samples by all dates
Join us:
Contact Us