Tag Archives: EA

Earned Income

Earned Income

Earned Income means:
a tax term describing “sweat of the brow” income, which requires obvious effort on the part of the recipient. This includes all income generated by providing goods or services, especially wages and salaries but also net profit from a trade or business; it is contrasted with income received as dividends, for instance. The term refers to self-employment income as defined in U.S. Internal Revenue Service (IRS) § 1402(a), and can also refer to pension or annuity income. Former IRC (check if this IRC provision is current here) §401(c)(2). Former IRC (check if this IRC provision is current here) §§32 and 911.

See also other Tax Terms and Definitions in U.S.A.

passive income; contrast with the entry unearned income.

In other words, compensation, such as salary, commissions and tips, the taxpayer receive for his or her personal services. This is distinguished from “unearned” income such as interest, dividends and capital gains. Includes, therfore, wages, salaries, tips, includible in gross income, and net earnings from self-employment earnings or for personal services.

U.S. and other Developed Countries International Tax Meaning

Income or compensation derived from personal services in an employment, trade, business, profession or vocation. (cf. investment income).

See Dividend in the American Legal Encyclopedia and Dividend in the World Legal Encyclopedia.

Description and Definition of Earned Income

All the money you earn including any wages, salaries, commissions, tips, net earnings from self-employment, and any other income received for personal services as opposed to unearned income from sources such as investments. You must have earned income to have a deductible IRA or to claim the earned income credit.

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Easement

Easement

The Easement are.

payment received for granting an easement (specific limited use or enjoyment) is usually considered to be from the sale of an interest in real property. The amount received reduces the basis of the affected part of the property. If the amount received exceeds the basis of the part of the property affected by the easement, the basis is reduced to zero, and the excess must be treated as a recognized gain.

Conservation Easement Issue

You may find information about Conservation Easement in this Tax Platform of the American Encyclopedia of Law.

Earned Income Credit

Earned Income Credit

Description and Definition of Earned Income Credit (EIC)

A refundable credit for low-income taxpayers with earned income. Low-income workers can file a tax return to get an earned income credit, even if no income tax was withheld from the worker's pay.

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Early Withdrawal Penalty

Early Withdrawal Penalty

Early Withdrawal Penalty means:
a charge assessed against holders of fixed-term investments, principally certificates of deposit, if they withdraw their money before maturity. Such a penalty would be assessed, for example, if a person who had a 4-year CD withdrew the money after 3 years. The full amount of interest must be included in income, but a taxpayer is allowed a deduction for Adjusted Gross Income for any forfeited amount.

Description and Definition of Early Withdrawal Penalty

A penalty you pay for liquidating a certificate of deposit or time deposit account before its maturity date. You report your interest income in full but you are allowed to take an adjustment to your gross income for the penalty.

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Earnings Stripping

Earnings Stripping

About Earnings Stripping:

Earnings Stripping Rules are rules stipulating that thinly capitalized corporations may not claim a current deduction for excessive interest paid to a related party if the interest income is exempted from U.S. taxation. These rules apply to a corporation only if it has a debt-to-equity ratio in excess of 1.5 to 1. In this situation, a corporation's interest deduction is disallowed to the extent that the corporation's net interest expense exceeds 50% of its adjusted taxable income for the year. Disallowed interest expense may be carried forward indefinitely and deducted in a tax year in which the corporation has excess limitation (i.e., net interest expense in an amount less than 50% of its adjusted taxable income).

See also other Tax Terms and Definitions in U.S.A.

thin corporation; thin capitalization.

U.S. and other Developed Countries International Tax Meaning

Practice of reducing the taxable income of a corporation by paying excessive amounts of interest to related third parties.

Earnings

Earnings

About Earnings:

for Social Security, the most important factor used to determine the amount of a person's benefits. Benefits are based on earnings (adjusted annually for inflation) averaged over most of the working lifetime. It is a good policy to verify the amount of your earnings at least every 3 years by completing Former Federal Tax Form (check here if the Form is current) 7004-PC and mailing it to the Social Security Administration.

See Tax Forms in the Encyclopedia.

Earned Income Tax Credit

Earned Income Tax Credit

Earned Income Tax Credit means:
a refundable credit that is adjusted for family size. For a taxpayer with one qualifying child (see qualifying person), the EITC is 26.3% of the first $7,750 of earned income in 1994. The maximum credit in 1994 is $2,038, which is reduced by 15 98% of earned income (or Adjusted Gross Income, if greater) in excess of $11,000. For 1995 and thereafter, the credit rate increases to 34.0%. The maximum amount of earned income on which the credit can be claimed is (an estimated) $6,170 (this is a $6,000 base in 1994, adjusted for projected inflation). The phase-out rate for 1995 and thereafter is 15.98%.

For a taxpayer with two or more qualifying children, the EITC is 30.0% of the first $8,425 of earned income in 1994. The maximum credit for 1994 is $2,257, which is reduced by 17.68% of earned income (or Adjusted Gross Income, if greater) in excess of $11,000. The credit rate increases over time and equals 36.0% for 1995 and 40.0% for 1996 and thereafter. The phase-out rate is 20.22% for 1995 and 21.06% for 1996 and thereafter.

Under certain conditions, a credit may be available to a taxpayer with no qualifying children. Former IRC (check if this IRC provision is current here) §32.

See the entries Income Tax and State Income Tax in the American Encyclopedia of Law.

Early Retirement

Early Retirement

Early Retirement means:
a term used in relation to pensions; it denotes leaving a job before normal retirement age, subject to minimum requirements of age and years of service. There is usually a reduction in the monthly retirement benefit, and an early distribution (say before age 59 V2) from a qualified retirement plan results in an additional 10% tax.

Earnings and Profits

Earnings and Profits

Earnings and Profits means:
a term referring to the economic capacity of a corporation to make a distribution to shareholders that is not a return of capital. Such a distribution would constitute a taxable dividend to the shareholder to the extent of current and accumulated earnings and profit. The concept is similar to retained earnings; however, although the calculation of earnings and profits starts with taxable income, the amount in the account more closely resembles the economist's approach to income (i.e., inflow and outflow of wealth). Former IRC (check if this IRC provision is current here) §312.

See also other Tax Terms and Definitions in U.S.A.

current earnings and profits.

See Dividend in the American Legal Encyclopedia and Dividend in the World Legal Encyclopedia.

Early Retirement Benefits

Early Retirement Benefits

Early Retirement Benefits means:
the benefits to which a person who retires before the formal retirement age is entitled. Early retirement is increasingly common in the United States. Early retirement benefits make it possible for more senior employees to retire early and for the company to promote younger employees without layoffs. However, there is an additional 10% tax on early distributions from a qualified retirement plan (before age 59V2, for example).