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when applying for a loan you may be asked for copies of your recent tax returns lenders often request tax returns as part of the loan application process to verify the financial info provided by applicants mortgage lenders commonly require tax returns to assess an individual s financial stability so they may ask for multiple years | in the context of a rental application maintaining tax returns for several years is advisable landlords may request tax information as part of the rental application process to evaluate an applicant s financial capability and responsibility certain units especially those catering to lower income individuals may require proof of income for stipended or reduced rental rates | |
when applying for financial aid through the free application for federal student aid fafsa it is prudent to retain tax returns for at least two years the fafsa requires applicants to provide detailed financial information including income and tax details | for individuals applying for government assistance programs consider keeping tax returns for at least three years some government assistance programs may require tax information to determine eligibility and calculate benefits by maintaining tax returns individuals ensure compliance with program requirements and can more quickly get the benefits they may need | |
what documents do i need to keep for my tax returns | for accurate tax filing it s crucial to retain various documents such as w 2s 1099s and receipts for deductions these documents serve as evidence of your income expenses and eligibility for tax credits | |
are there different rules for record retention for federal and state returns | yes both federal and state tax returns may have specific record retention requirements that are different ensure you understand the government entity s recommended policy before shredding or discarding documents | |
do i need to keep physical copies of documents or are digital copies acceptable | it is generally acceptable to maintain digital copies of documents for tax purposes however it is important to be able to prove the authenticity of these digital records especially in the context of a potential audit also ensure that digital copies are stored securely remain unaltered and can be readily accessed when needed the bottom linea tax return is a document filed with the tax authorities that reports income expenses and other relevant financial information to calculate and pay taxes it is recommended to keep tax returns for at least three to seven years to comply with potential audit requirements and the period of limitations for tax amendments | |
what is tax season | tax season is the period of time generally between jan 1 and april 15 of each year when individual taxpayers prepare to report their taxable income to the federal government and in most cases to the government of the state in which they live tax day in the u s is usually april 15 if that date falls on a weekend the deadline is delayed until the following monday the deadline has sometimes been extended for some or all filers the federal tax deadline for residents of 55 california counties was delayed until nov 16 2023 due to a winter storm disaster declaration in 2020 all u s taxpayers got a three month postponement for filing their 2019 taxes due to the onset of the covid pandemic tax returns submitted after the deadline are subject to late penalty fees and interest charges extensions are available but they delay only the filing of the paperwork not the payment of any taxes owed the next tax season begins on jan 1 2024 with a filing deadline of monday april 15 2024 the irs advises that all taxpayers keep copies of their prior year tax returns for at least three years in the event of an irs audit a taxpayer will be required to present the last three years of their documents in extreme cases such as suspicion of fraud they will be expected to show seven years of documents understanding tax seasonnobody expects you to spend three and a half months working on your taxes tax season is meant to provide time for employers banks financial services providers and other entities to collate and distribute all of the information individual taxpayers need to file their returns the deadline for employers to send w 2s to their employees is january 31 businesses that hire independent contractors must send these nonemployees form 1099 nec this form replaced 1099 misc which remains in effect for income received from rent and prizes among other sources independent contractors must file a return and pay self employment taxes on any net earnings from self employment of 400 or more extensionsthe irs has occasionally extended the usual mid april deadline for some or all taxpayers for a number of reasons in 2021 residents and businesses in parts of texas got a two month extension on the tax deadline after severe snowstorms caused a federal disaster declaration to be declared the following spring storms caused enough damage in tennessee and parts of alabama and kentucky to require further extensions to taxpayers in those areas | |
why filing early can make sense | many taxpayers wait to file until just before the deadline but there is no need to put it off until the last minute indeed filing an early tax return can make sense for a variety of reasons the best reason is that many taxpayers get money back from the government if you file early you ll get your money back early wait until the last minute and your return will wait for processing in a very large pile of returns the irs began accepting and processing 2022 tax year returns on monday jan 23 2023 even if you don t file early there are reasons to begin preparation as soon as you can starting your filing process early gives you the time you need to collect the evidence needed to claim all of your deductions you will avoid the headache of the middle of the night stress over figures and receipts your accountant will have a more flexible schedule and will probably be able to start working on your accounts immediately also by filing early you will short circuit would be identity thieves | |
how early in 2024 can i start filing my taxes | the irs begins accepting returns sometime in january every year although no exact date has been specified at this writing in any case it will probably be late january before you receive all of the necessary forms from your employer and any other source of taxable income if you plan to file directly you might consider creating an account at irs gov account where you ll find useful information about filing | |
do i need to pay to get my taxes done | the internal revenue service says that almost all individual taxpayers regardless of income can now file their federal tax returns electronically free of charge using the irs gov website or the irs2go app through an agreement with the irs taxpayers with income below certain levels can use any of a number of tax return software programs state taxes are a separate matter and state rules apply | |
when should i receive my tax refund in 2024 | the irs states that most tax refunds are distributed within 21 calendar days of filing you ll get your refund fastest if you file early and get ahead of the procrastinators the bottom linetax season is the period when individuals and businesses prepare their documents for filing taxes which are generally due on or about april 15 of each year most individuals and businesses start receiving the needed documents to fill out their tax forms in january therefore tax season is usually considered to be between jan 1 and april 15 during this time taxpayers gather together their paperwork and complete their tax forms with the use of tax preparation software or directly through irs gov whichever method you choose it s important to get the paperwork in by the deadline along with the money due if any to avoid penalties and interest charges | |
what is tax selling | tax selling refers to a type of sale in which an investor sells an asset with a capital loss in order to lower or eliminate the capital gain realized by other investments for income tax purposes tax selling allows the investor to avoid paying capital gains tax on recently sold or appreciated assets understanding tax sellingtax selling involves selling stocks at a loss to reduce the capital gain earned on an investment since capital loss is tax deductible the loss can be used to offset any capital gains to reduce an investor s tax liability 1 for example let s assume an investor has a 15 000 capital gain from the sale of abc stock they fall in the highest tax bracket and so will have to pay 20 capital gains tax or 3 000 to the government 2 but let s say they sell xyz stock for a loss of 7 000 their net capital gain for tax purposes will be 15 000 7 000 8 000 which means they ll have to pay only 1 600 in capital gains tax notice how the realized loss on xyz reduces the gain on abc and hence reduces the investor s tax bill the tax deductibility of losses might prompt investors to sell at a loss deduct the loss and then turn around and buy the same stock again in an effort to evade taxes a practice known as a wash sale when participating in tax selling the internal revenue service irs prohibits an investor from executing a wash sale wash sales to be specific occur when an investor sells an asset through a broker in order to realize a loss but simultaneously repurchases the same asset or substantially identical asset from another broker within 30 days of the sale if a sell and buy security transaction is considered a wash by the irs the investor would not be allowed any tax benefits 3 tax selling vs wash saletax selling allows an investor to maintain their position while incurring a capital loss in effect wash sales are illegal whereas tax selling is allowable tax selling typically involves investments with huge losses which often means that these sales focus on a relatively small number of securities within the public markets however when a large number of sellers execute a sell order at the same time the price of the securities falls after the selling season ends shares that become extremely oversold have an opportunity to bounce back in addition the fact that tax selling often occurs in november and december as investors try to realize capital losses for the upcoming income tax season could mean that the most attractive securities for tax selling are investments that are most likely to generate strong gains early in the next year a good strategy for investors then would be to buy during the tax selling episode and sell after the tax loss has been established if investors would like to repurchase the shares sold for a loss they can do so after the 30 day wash sale rule no longer applies in addition shares sold for a loss must have been in the investor s possession for more than 30 days | |
what is tax selling | tax selling refers to a type of sale in which an investor sells an asset with a capital loss in order to lower or eliminate the capital gain realized by other investments for income tax purposes tax selling allows the investor to avoid paying capital gains tax on recently sold or appreciated assets understanding tax sellingtax selling involves selling stocks at a loss to reduce the capital gain earned on an investment since capital loss is tax deductible the loss can be used to offset any capital gains to reduce an investor s tax liability 1 for example let s assume an investor has a 15 000 capital gain from the sale of abc stock they fall in the highest tax bracket and so will have to pay 20 capital gains tax or 3 000 to the government 2 but let s say they sell xyz stock for a loss of 7 000 their net capital gain for tax purposes will be 15 000 7 000 8 000 which means they ll have to pay only 1 600 in capital gains tax notice how the realized loss on xyz reduces the gain on abc and hence reduces the investor s tax bill the tax deductibility of losses might prompt investors to sell at a loss deduct the loss and then turn around and buy the same stock again in an effort to evade taxes a practice known as a wash sale when participating in tax selling the internal revenue service irs prohibits an investor from executing a wash sale wash sales to be specific occur when an investor sells an asset through a broker in order to realize a loss but simultaneously repurchases the same asset or substantially identical asset from another broker within 30 days of the sale if a sell and buy security transaction is considered a wash by the irs the investor would not be allowed any tax benefits 3 tax selling vs wash saletax selling allows an investor to maintain their position while incurring a capital loss in effect wash sales are illegal whereas tax selling is allowable tax selling typically involves investments with huge losses which often means that these sales focus on a relatively small number of securities within the public markets however when a large number of sellers execute a sell order at the same time the price of the securities falls after the selling season ends shares that become extremely oversold have an opportunity to bounce back in addition the fact that tax selling often occurs in november and december as investors try to realize capital losses for the upcoming income tax season could mean that the most attractive securities for tax selling are investments that are most likely to generate strong gains early in the next year a good strategy for investors then would be to buy during the tax selling episode and sell after the tax loss has been established if investors would like to repurchase the shares sold for a loss they can do so after the 30 day wash sale rule no longer applies in addition shares sold for a loss must have been in the investor s possession for more than 30 days | |
what is a tax sheltered annuity tsa | a tax sheltered annuity tsa is a type of investment vehicle that lets an employee make pretax contributions into a retirement account from income because the contributions are pretax the internal revenue service irs does not tax the contributions and related benefits until the employee withdraws them from the plan since the employer can also make direct contributions to the plan the employee gains the benefit of having additional tax free funds accruing 1understanding tax sheltered annuities tsas the 403 b plan is a tax sheltered annuity in the u s 2 this plan provides employees of certain nonprofit and public education institutions with a tax sheltered method of saving for retirement there is usually a maximum amount that each employee can contribute to the plan but sometimes there are catch up provisions that allow employees to make additional contributions to make up for previous years when they did not maximize contributions 3the irs caps contributions to tsas at 22 500 for tax year 2023 increasing to 23 000 for 2024 which is the same cap as 401 k plans tsas also offer a catch up provision for participants aged 50 or over which totals 7 500 each year for 2023 and 2024 34tax sheltered annuities also include a lifetime catch up for participants who have worked for a qualified organization for 15 years or more and whose average contribution level never exceeded 5 000 over that period including the contribution catch up provisions and an employer match the total contribution cannot exceed 100 of earnings up to a certain cap 56all qualified retirement plans require that withdrawals begin only after the age of 59 early withdrawals may be subject to a 10 irs penalty unless certain exemptions apply the irs taxes withdrawals as ordinary income and requires them to start no later than the year the beneficiary turns 72 up from 70 after the enactment of the setting every community up for retirement enhancement secure act in 2019 7depending on the employer s or plan provider s provisions employees may access funds before age 59 via a loan as with most qualified retirement plans they may also permit withdrawals if the employee becomes disabled 8tax sheltered annuities tsas vs 401 k planspeople often compare tsas to 401 k plans the biggest similarity is that both plans represent specific sections of the internal revenue code irc that establish qualifications for their use and their tax benefits both plans encourage individual savings by allowing for pretax contributions toward accumulating retirement savings on a tax deferred basis 9from there the two plans diverge notably 401 k plans are available to any eligible private sector employee who works for a company with a plan 10 tsa plans are reserved for employees of tax exempt organizations and public schools nonprofit organizations that exist for charitable religious or educational purposes and are qualified under section 501 c 3 of the irc can offer tsa plans to employees 1 | |
how does a tax sheltered annuity work | a tax sheltered annuity is a type of retirement plan offered by certain organizations such as churches non profit organizations and public schools this plan works like other retirement plans employees can contribute a certain portion of their annual salaries up to a certain amount each year these contributions are made on a pre tax basis earnings grow tax free which means they aren t taxed until the plan owner begins making withdrawals during retirement can you take a loan from a 403 b plan you may be able to take a loan from your 403 b plan if your employer allows it keep in mind that plans aren t required to provide loans from tax sheltered annuities if you need to take a loan from your tsa check with your plan administrator about your rights and responsibilities | |
what s the difference between a tax sheltered annuity and a 401 k | both the tsa and 401 k are retirement plans that come with certain tax advantages to investors each allows plan holders to contribute a certain portion of their salary each year up to a maximum 22 500 in 2023 and 23 000 in 2024 also called 403 b plans tsas are designed for certain employees of churches non profits and public schools while 401 k s are established by for profit corporationsthe bottom linesaving for retirement shouldn t be difficult especially when your employer offers a retirement plan take advantage of tax sheltered annuities or 403 b plans if you work at a church non profit or public school if your employer has one available you can reap the benefits of tax advantages such as using pre tax dollars for your contributions and you may even be able to get free money in your account if your employer matches your contribution giving you more bang for your buck | |
what is a tax shield | a tax shield is a reduction in taxable income for an individual or corporation achieved through claiming allowable deductions such as mortgage interest medical expenses charitable donations amortization and depreciation these deductions reduce a taxpayer s taxable income for a given year or defer income taxes into future years tax shields lower the overall amount of taxes owed by an individual taxpayer or a business understanding a tax shieldthe term tax shield references a particular deduction s ability to shield portions of the taxpayer s income from taxation tax shields vary from country to country and their benefits depend on the taxpayer s overall tax rate and cash flows for the given tax year for example because interest payments on certain debts are a tax deductible expense taking on qualifying debts can act as tax shields tax efficient investment strategies are cornerstones of investing for high net worth individuals and corporations whose annual tax bills can be very high calculating the tax shield can be simplified by using this formula tax shield value of tax deductible expense x tax rateso for instance if you have 1 000 in mortgage interest and your tax rate is 24 your tax shield will be 240 you can deduct up to 750 000 of home mortgage interest in 2023 1 in 2025 this number rises to 1 million 2tax shields as incentivesthe ability to use a home mortgage as a tax shield is a major benefit for many middle class people whose homes are major components of their net worth it also provides incentives to those interested in purchasing a home by providing a specific tax benefit to the borrower student loan interest also functions as a tax shield in the same manner so you could say that taking on debt has a tax benefit because you can use the interest as a tax deductible expense 3tax shields for medical expensestaxpayers who have paid more in medical expenses than covered by the standard deduction can choose to itemize in order to gain a larger tax shield an individual may deduct any amount attributed to medical or dental expenses that exceeds 7 5 of adjusted gross income by filing schedule a 4tax shields for charitable givingsimilar to the tax shield offered in compensation for medical expenses charitable giving can also lower a taxpayer s obligations in order to qualify the taxpayer must use itemized deductions on their tax return the deductible amount may be as high as 60 of the taxpayer s adjusted gross income depending on the specific circumstances for donations to qualify they must be given to an approved organization 5tax shields for depreciationthe depreciation deduction allows taxpayers to recover certain losses associated with the depreciation of qualifying property the deduction can apply to tangible property such as vehicles and buildings as well as to intangible assets such as computer software and patents 6in order to qualify the depreciation must be associated with an asset used in a business or income generating activity and have an expected lifespan of more than one year other conditions may affect the ability for depreciation to be deductible including but not limited to the duration of ownership of the asset and whether the asset was used to build capital improvements 7 | |
what is the formula for tax shield | the formula for tax shield is tax shield value of tax deductible expense x tax rate | |
is tax shield the same as tax savings | tax shields result in tax savings tax shields allow for taxpayers to make deductions to their taxable income which reduces their taxable income the lower the taxable income the lower the amount of taxes owed to the government hence tax savings for the taxpayer | |
what is a tax shield example | a common example of a tax shield is mortgage interest a person buys a house with a mortgage and pays interest on that mortgage that interest is tax deductible which is offset against the person s taxable income this then reduces their overall tax burden 8the bottom linetax shields allow taxpayers to reduce the amount of taxes owed by lowering their taxable income when filing your taxes ensure you are taking these deductions so that you can save money when tax season arrives | |
what is a tax table | the term tax table refers to a chart that displays the amount of tax due based on income received tax tables are provided by the internal revenue service irs to help taxpayers determine how much tax they owe and how to calculate it when they file their annual tax returns the irs provides different tax ranges in the tax table by tax filing status tax rates may be shown as a discrete amount a percentage rate or a combination of both tax tables are used by individuals companies and estates for both standard income and capital gains they are updated annually | |
how tax tables work | business and individual taxpayers pay an effective tax rate on their income every year the tax paid by each entity depends on a number of factors such as based on these factors and the tax rates set for the year taxpayers and taxing authorities can determine the amount of tax to be paid by each taxpayer a typical tax table shows breakpoint income levels above and below which different tax rates will apply but the income used in tax tables is taxable income not the gross income taxable income refers to gross income minus deductions thus only the dollar amount left after factoring in deductions is subject to income tax for example the standard deduction for 2022 is 12 950 for single taxpayers 13 850 for 2023 12a taxpayer who earns 65 000 for the year and only qualifies for the standard deduction pays income tax on 52 050 65 000 12 950 in 2022 generally speaking the higher a taxpayer s taxable income the more they are taxed tax tables are set up with different columns for each filing status and rows of various taxable income amounts on the left a person s tax liability can be traced on the table based on their tax filing status and the amount transferred to the individual s income tax form qualifying widows or widowers can use the married filing jointly category for at least two years following the death of their spouses 3special considerationstax tables are commonly used by individual and corporate taxpayers with modest income levels high income earners tend to use more detailed tax rate schedules in conjunction with itemized deductions most states use tax tables to determine personal income tax the states that do not assess personal income tax are alaska florida nevada south dakota tennessee texas washington and wyoming new hampshire only assesses a tax on dividend and interest income 4as noted above tax tables change from year to year and vary from state to state investors should always be sure that they use the correct tax tables based on their income sources and area of residence example of a tax tableas noted above the irs provides updated tax and earned credit tables each year it provides a tax range based on income levels and divides the amount owed based on your tax filing status the following is the tax table for taxpayers who fall in the 46 000 taxable income range for 2022 5 | |
what is the tax to gdp ratio | the tax to gdp ratio is a gauge of a nation s tax revenue relative to the size of its economy as measured by gross domestic product gdp the ratio provides a useful look at a country s tax revenue because it reveals potential taxation relative to the economy it also enables a view of the overall direction of a nation s tax policy and international comparisons between the tax revenues of different countries understanding the tax to gdp ratiotaxes are a critical measure of a nation s development and governance the tax to gdp ratio determines how well a nation s government directs its economic resources higher tax revenues mean a country can spend more on improving infrastructure health and education which are keys to the long term prospects for a country s economy and people tax policy and economic developmenttax revenues above 15 of a country s gross domestic product gdp are a key ingredient for economic growth and poverty reduction according to the world bank this level of taxation ensures that countries have the money necessary to invest in the future and achieve sustainable economic growth 1developed countries generally have a far higher ratio the average among members of the organisation for economic cooperation and development was 34 0 in 2022 2the tax to gdp ratio in the united states was 27 7 in 2022 2according to one theory people generally begin to demand more services from the government as economies become more developed and incomes rise their demands might focus on healthcare public transportation or education this would explain why the european union s tax to gdp ratio of 26 7 in 2022 was so much higher than most asia pacific nations 3 tax to gdp ratios in these countries ranged from 10 9 in indonesia to 25 3 in samoa only japan korea new zealand and nauru were higher than the eu and all but nauru averaged less than the oecd average 4the direction of tax policypolicymakers use the tax to gdp ratio to compare tax receipts from year to year because it offers a better measure of the rise and fall in tax revenue than simple amounts tax revenues are closely related to economic activity rising during times of faster economic growth and declining during recessions as a percentage tax revenues generally rise and fall faster than gdp but the ratio should stay relatively consistent barring extreme swings in growth the ratio can shift dramatically however in cases of significant shifts in tax law or during severe economic downturns the united states ranked 31st out of 38 oecd countries in terms of its tax to gdp ratio in 2022 2 | |
does gdp include tax revenue | tax revenue includes revenues collected from taxes on income and profits social security contributions taxes levied on goods and services payroll taxes and taxes on the ownership and transfer of property total tax revenue is considered part of a country s gdp as a percentage of gdp total tax revenue indicates the share of a country s output that the government collects through taxes 5 | |
what is a good tax to gdp ratio | a tax to gdp ratio of 15 or higher is believed to ensure economic growth and thus poverty reduction in the long term according to the world bank 6 the tax to gdp ratio in the united states was 27 7 in 2022 2 | |
how do i graph tax revenue as a percentage of gdp | the world bank provides line graphs that reflect tax revenue as a percentage of gdp for selected countries and economies from 1972 to 2022 the values on the horizontal axis x axis are years the values on the vertical axis y axis reflect the percentage of tax revenue compared to gdp the plotted data points reveal the change over time in these values 7 | |
where does the united states rank in terms of tax revenue as a percentage of gdp | the united states ranked 31st out of 38 oecd countries regarding the tax to gdp ratio in 2022 2the bottom linethe tax to gdp ratio measures a nation s tax revenues to its gross domestic product it indicates how much of a nation s gross domestic product goes into government funding correction july 20 2024 this article has been corrected to state that the tax to gdp ratio in the united states was 27 7 in 2022 | |
what is a tax treaty | a tax treaty is a bilateral two party agreement made by two countries to resolve issues involving double taxation of passive and active income of each of their respective citizens income tax treaties generally determine the amount of tax that a country can apply to a taxpayer s income capital estate or wealth 1 an income tax treaty is also called a double tax agreement dta 2 some countries are seen as being tax havens generally a tax haven is a country or a place with low or no corporate taxes that allow foreign investors to set up businesses there tax havens typically do not enter into tax treaties | |
when an individual or business invests in a foreign country the issue of which country should tax the investor s earnings may arise both countries the source country and the residence country may enter into a tax treaty to agree on which country should tax the investment income to prevent the same income from getting taxed twice | the source country is the country that hosts the inward investment the source country is also sometimes referred to as the capital importing country the residence country is the investor s country of residence the residence country is also sometimes referred to as the capital exporting country to avoid double taxation tax treaties may follow one of two models the organization for economic co operation and development oecd model and the united nations un model convention 3 4 oecd tax treaty model vs un tax treaty modelthe organization for economic co operation and development oecd is a group of 37 countries with a drive to promote world trade and economic progress 5 6 the oecd tax convention on income and on capital is more favorable to capital exporting countries than capital importing countries it requires the source country to give up some or all of its tax on certain categories of income earned by residents of the other treaty country 7 the two involved countries will benefit from such an agreement if the flow of trade and investment between the two countries is reasonably equal and the residence country taxes any income exempted by the source country the second tax treaty model is formally referred to as the united nations model double taxation convention between developed and developing countries the un is an international organization that seeks to increase political and economic cooperation amongst its member countries a treaty that follows the un s model gives favorable taxing rights to the foreign country of investment typically this favorable taxing scheme benefits developing countries receiving inward investment it gives the source country increased taxing rights over the business income of non residents compared to the oecd model convention 3 the united nations model convention draws heavily from the oecd model convention 8 withholding taxes policyone of the most important aspects of a tax treaty is the treaty s policy on withholding taxes because it determines how much tax is levied on any income earned interest and dividends from securities owned by a non resident 9 for example if a tax treaty between country a and country b determines that their bilateral withholding tax on dividends is 10 then country a will tax dividend payments that are going to country b at a rate of 10 and vice versa the u s has tax treaties with multiple countries that help to reduce or eliminate the tax paid by residents of foreign countries these reduced rates and exemptions vary among countries and specific items of income under these same treaties residents or citizens of the u s are taxed at a reduced rate or are exempt from foreign taxes on certain items of income they receive from sources within foreign countries tax treaties are said to be reciprocal because they apply in both treaty countries income tax treaties typically include a clause referred to as a saving clause that is intended to prevent residents of the u s from taking advantage of certain parts of the tax treaty in order to avoid taxation of a domestic source of income for individuals that are residents of countries that do not have tax treaties with the u s any source of income that is earned within the u s is taxed in the same way and at the same rates shown in the instructions for the applicable u s tax return for individuals who are residents of the u s it is important to keep in mind that some individual states within the u s do not honor the provisions of tax treaties 10 | |
what is a tax wedge | a tax wedge is the difference between before tax and after tax wages the tax wedge measures how much the government ostensibly receives as a result of taxing the labor force tax wedge may also refer to the market inefficiency that is created when a tax is imposed on a good or service the tax causes the supply and demand equilibrium to shift creating a wedge of dead weight losses understanding the tax wedgemany employees have taxes withheld from their paychecks which means their take home pay is less than the gross salary or wage or the cost of employing them the tax wedge is the difference between what employees take home in earnings and what it costs to employ them labor cost or the dollar measure of the income tax rate the organization for economic co operation and development oecd defines a tax wedge as the ratio between the amount of taxes paid by an average single worker a single person at 100 of average earnings without children and the corresponding total labour cost for the employer some argue that the tax wedge on investment income will also reduce savings and ultimately lower living standards the decrease in net income may lead to employees making a decision not to work as much or to find other ways to keep more of the income by using government benefits for example while applications for government benefits rise the workforce suffers as the employees who remain demand higher salaries causing employers to decrease their hiring rate example of the tax wedgein some countries the tax wedge increases as employee income increases this reduces the marginal benefit of working therefore employees will often work less hours than they would if no tax was imposed thus a tax wedge might be calculated to determine how higher payroll taxes ultimately affect hiring for example assume an employee s gross income is 75 000 and he falls in the 15 and 5 tax brackets for federal and state income tax respectively his net income will be 75 000 x 0 80 60 000 in a progressive tax system at some point income taxes are increased at both federal and state levels to 25 and 8 respectively tax withheld from gross income is now 24 750 and net income is 75 000 24 750 or 75 000 multiplied by 0 67 50 250 tax wedge and market inefficiencya tax wedge can also be used to calculate the percentage of market inefficiency introduced by sales taxes when a good or service is taxed the equilibrium price and quantity shifts the resulting price or quantity which deviates from the equilibrium is known as the tax wedge the market inefficiency that results from a tax wedge will cause the consumer to pay more and the producer to receive less for the good than they did before the tax due to higher equilibrium prices paid by consumers and lower equilibrium quantities sold by producers in effect the sales tax effectively drives a wedge between the price consumers pay and the price producers receive for a product | |
what is taxable income | taxable income is the portion of your gross income used to calculate how much tax you owe in a given tax year it can be described broadly as adjusted gross income agi minus allowable itemized or standard deductions taxable income includes wages salaries bonuses and tips as well as investment income and various types of unearned income investopedia paige mclaughlinunderstanding taxable incometaxable income consists of both earned and unearned income unearned income that is considered taxable includes canceled debts government benefits such as unemployment benefits and disability payments strike benefits and lottery payments taxable income also includes earnings generated from appreciated assets that have been sold during the year and from dividends and interest income 23 | |
when businesses file their taxes they do not report their revenue directly as taxable income rather they subtract their business expenses from their revenue to calculate their business income then they subtract deductions to calculate their taxable income 6 | tax brackets and marginal tax rates are based on taxable income not gross income 7 | |
what is the taxable wage base | the term taxable base refers to the maximum amount of earned income on which employees must pay social security taxes the employee s gross wages are generally equal to the taxable wage base an employer typically handles this calculation and withholds the correct amount of taxes from each of the employee s paychecks meanwhile the employee is still responsible for reporting the tax on their tax return each year the taxable wage base is also known as the social security wage base understanding the taxable wage basethe social security tax rate is 12 4 half of the tax which comes to 6 2 is paid by the employer and the employee is responsible for paying the other half through payroll deductions but social security tax is applied to earnings only up to a certain limit wages salaries and bonuses in excess of the stipulated maximum amount of earnings are not taxable the limit adjusts annually pegged to changes in the national average wage index 52the maximum amount of income that is subject to social security taxes is 160 200 in 2023 and 168 600 in 2024 2 this means that you don t pay social security taxes on any amount over these thresholds the social security tax is deducted from individuals payroll automatically along with the medicare tax keep in mind that although the social security tax is applied up to the taxable wage base the medicare tax of 2 9 has no such limit therefore it is applied to 100 of an employee s income 6an employee s taxable wage base is reported on their w 2 form the wage and tax statement each year employers prepare the w 2s annually sending copies to both the internal revenue service irs and the employee box 3 social security wages form essentially gives your taxable wage base detailing how much of an individual s earnings are subject to social security tax box 4 indicates the amount of social security tax withheld 7if you re self employed you re responsible for paying the employee and employer s portion of the social security and medicare tax to the irs 6special considerationsthe taxes that are taken out of social security wages go to fund the social security payments that millions receive each month the best known of these is the retirement benefits paid to those 65 years old and up here s a snapshot of how many individuals receive each different benefit through the social security program as of september 2023 social security tax and medicare tax are collectively known as federal insurance contributions act fica taxes the 7 65 of gross income that an employee pays toward them appears as fica taxes on their paystub and on their annual w 2 form 2taxable wage base and unemployment taxa taxable wage base is most often used in reference to social security taxes though it can also apply to any income based tax for example some state unemployment agencies use a taxable wage base to calculate unemployment taxes the following is a list of taxable wage bases to calculate unemployment insurance in 2023 in several states like the taxable wage base for social security the unemployment tax basis increases every year or every few years depending on the state in some instances an employee earns wages that are classified as excess wages the excess wage can be subtracted from gross income so that the taxable wage base is lower than gross income taxable wage base exemptionsnot every part of an individual s income is considered taxable as such even if they are included in a paycheck some common types of compensation are exempt from the taxable wage base either completely or within limits they include the covid related tax relief act of 2020 deferred the due date for the withholding and payment of the employee share of social security tax on q4 wages until the period beginning on jan 1 2021 and ending on dec 31 2021 this applied to employees whose social security wages for a biweekly pay period were less than 4 000 19examples of taxable wage basethe following are two examples of the taxable wage base and how social security taxes are calculated we ll use the 2024 taxable wage base in the examples let s say rob earns 85 000 in gross income and has a 6 2 social security tax withheld from his pay the federal government in effect will collect 5 270 6 2 x 85 000 from rob to help fund retirement and disability benefits for retirees now let s look at sue s situation suppose she earns 175 000 gross income the social security tax rate will only be applied up to the taxable wage base of 168 600 which is less than her gross income therefore sue will pay 10 453 20 6 2 x 168 600 as her contribution to the country s social security account for retirees and the disabled | |
what is the fica tax | short for federal insurance contributions act taxes the fica tax is a duty imposed on wages and earnings constituting 7 65 of the employee s gross pay it actually consists of two separate taxes social security 6 2 and medicare 1 45 the employee and the employer each contribute half of the fica tax which is taken out of every paycheck 20 | |
how is social security and medicare taxed for self employed individuals | self employed individuals independent contractors sole proprietors etc must pay both halves of social security and medicare taxes the entire 15 3 fica tax it is paid on the net income of their business or the sum of their self employed earnings after expenses and losses are deducted while the social security and medicare tax rate is the same as for employees the self employed can take a deduction for half the amount on their tax returns 21 | |
does social security count as income | yes for most people social security does count as income and is therefore subject to income taxes more specifically it counts as unearned income 22 whether you actually pay taxes on it however depends on your overall gross income in 2023 up to 50 of social security income is taxable for individuals with a total gross income of at least 25 000 or couples filing jointly with a combined gross income of at least 32 000 up to 85 of social security benefits are taxable for an individual with a combined gross income of at least 34 000 or a couple filing jointly with a combined gross income of at least 44 000 these sums include your benefit payments 23at what age is social security no longer taxed your social security benefits could theoretically be tax free once you reach full retirement age which is around 66 or 67 depending on your year of birth 24 but that s only if they re your sole source of income more specifically if your overall gross income is 25 000 or above 32 000 if married filing jointly they are taxable at your ordinary income tax rate 25the bottom linethe taxable wage base is the maximum annual income on which individuals are required to pay certain payroll taxes such as social security and medicare taxes in 2024 the maximum annual income limit is 168 600 and the income limit often increases every year 2 | |
what is taxation | taxation is a term for when a taxing authority usually a government levies or imposes a financial obligation on its citizens or residents paying taxes to governments or officials has been a mainstay of civilization since ancient times the term taxation applies to all types of mandatory levies from income to capital gains to estate taxes though taxation can be a noun or verb it is usually referred to as an act the resulting revenue is usually called taxes investopedia julie bangunderstanding taxationtaxation is differentiated from other forms of payment such as market exchanges in that taxation does not require consent and is not directly tied to any services rendered the government compels taxation through an implicit or explicit threat of force taxation is legally different than extortion or a protection racket because the imposing institution is a government not private actors tax systems have varied considerably across jurisdictions and time in most modern systems taxation occurs on both physical assets such as property and specific events such as a sales transaction the formulation of tax policies is one of the most critical and contentious issues in modern politics taxation in the united statesthe u s government was originally funded on very little direct taxation instead federal agencies assessed user fees for ports and other government property in times of need the government would decide to sell government assets and bonds or issue an assessment to the states for services rendered in fact thomas jefferson abolished direct taxation in 1802 after winning the presidency only excise taxes remained which congress repealed in 1817 between 1817 and 1861 the federal government collected no internal revenue 1an income tax of 3 was levied on high income earners during the civil war it was not until the sixteenth amendment was ratified in 1913 that the federal government assessed taxes on income as a regular revenue item 2 as of 2024 u s taxation applies to a wide range of items or activities from income to cigarette and gasoline purchases to inheritances and when winning at a casino or even nobel prize 345purposes and justifications for taxationthe most basic function of taxation is to fund government expenditures varying justifications and explanations for taxes have been offered throughout history early taxes were used to support the ruling classes raise armies and build defenses often the authority to tax stemmed from divine or supranational rights later justifications have been offered across utilitarian economic or moral considerations proponents of progressive levels of taxation on high income earners argue that taxes encourage a more equitable society higher taxes on specific products and services such as tobacco or gasoline have been justified as a deterrent to consumption advocates of public goods theory argue taxes may be necessary in cases in which the private provision of public goods is considered sub optimal such as with lighthouses or national defense different types of taxationas mentioned above taxation applies to all different types of levies these can include but are not limited to 6 | |
why do we need to pay taxes | there is an old saying that goes the only sure things in life are death and taxes taxation has been a feature of society going back to ancient times the role of taxes is to help governments fund various undertakings such as public works infrastructure and wars today taxpayer dollars are still used for a variety of similar purposes | |
which country has the highest income taxes | as of 2024 the top 10 countries with the highest marginal income taxes are 7 | |
what is taxation without representation | the phrase taxation without representation describes a populace that is required to pay taxes to a government authority without having any say in that government s policies the term has its origin in a slogan of the american colonials against their british rulers taxation without representation is tyranny 1investopedia candra huffhistory of opposition to taxation without representationalthough taxation without representation has been perpetrated in many cultures the phrase came to the common lexicon during the 1700s in the american colonies opposition to taxation without representation was one of the primary causes of the american revolution 1the british parliament began taxing its american colonists directly in the 1760s ostensibly to recoup losses incurred during the seven years war of 1754 to 1763 3one particularly despised tax imposed by the stamp act of 1765 required colonial printers to pay a tax on documents used or created in the colonies and to prove it by affixing an embossed revenue stamp to the documents 4violators were tried in vice admiralty courts without a jury the denial of a trial by peers was a second injury in the minds of colonists 5colonists considered the tax to be illegal because they had no representation in the parliament that passed it and were denied the right to a trial by a jury of their peers delegates from nine of the 13 colonies met in new york in october 1765 to form the stamp act congress 5william samuel johnson of connecticut john dickinson of pennsylvania john rutledge of south carolina and other prominent colonials met for 18 days 6they then approved a declaration of the rights and grievances of the colonists stating the delegates joint position for other colonists to read resolutions three four and five stressed the delegates loyalty to the crown while stating their objection to taxation without representation 1a later resolution disputed the use of admiralty courts that conducted trials without juries citing a violation of the rights of all free englishmen 5the congress eventually drafted three petitions addressed to king george iii the house of lords and the house of commons 78the petitions were initially ignored but boycotts of british imports and other financial pressures by the colonists finally led to the repeal of the stamp act in march 1766 9it was too late after years of increasing tensions the american revolution began on april 19 1775 with battles between american colonists and british soldiers in lexington and concord 10on june 7 1776 richard henry lee introduced a resolution to congress declaring the 13 colonies free from british rule benjamin franklin john adams and thomas jefferson were among the representatives chosen to word the resolution 1112the first part was a simple statement of intent including the declaration that all men were created equal and have unalienable rights to life liberty and the pursuit of happiness a second section listed the colonists grievances and declared their determination to achieve independence the final paragraph dissolved the colonists ties with britain 13following debate the second continental congress adopted the declaration of independence on july 4 1776 with the signing occurring primarily on august 2 1776 14taxation without representation in modern timestaxation without representation was by no means extinguished with the separation of the american colonies from britain not even in the u s residents of puerto rico for example are u s citizens but do not have the right to vote in presidential elections and have no voting representatives in the u s congress unless they move to one of the 50 states 15in addition the phrase taxation without representation appeared on license plates issued by the district of columbia beginning in the year 2000 the addition of the slogan was meant to increase awareness of the fact that residents of the district pay federal taxes despite having no voting representation in congress 216in 2017 the district s city council added one word to the phrase it now reads end taxation without representation 1718 | |
which tax triggered the rebellion against great britain | the stamp act of 1765 angered many colonists as it taxed every paper document used in the colonies it was the first tax that the crown had demanded specifically from american colonists 5did taxation without representation end after the american revolution yes and no while the states in the newly formed country had representation federal districts like washington d c and territories like puerto rico still lack the same representation on the federal level in the modern era 1615 | |
does taxation without representation refer to local or federal government | today the phrase refers to a lack of representation at the federal level as an example puerto rico has the same structure as a state with mayors of cities and a governor but instead of senators or representatives in congress they have a resident commissioner that represents the people in washington d c puerto ricans can only vote for president if they establish residency in the 50 states 1915the bottom line taxation without representation refers to those taxes imposed on a population who doesn t have representation in the government the slogan no taxation without representation was first adopted during the american revolution by american colonists under british rule today the phrase refers to a lack of representation at the federal level and only residents of d c and puerto rico are still taxed without representation | |
what are taxes | taxes are mandatory contributions levied on individuals or corporations by a government entity whether local regional or national tax revenues finance government activities including public works and services such as roads and schools or programs such as social security and medicare in economics taxes fall on whoever pays the burden of the tax whether this is the entity being taxed such as a business or the end consumers of the business s goods from an accounting perspective there are various taxes to consider including payroll taxes federal and state income taxes and sales taxes investopedia joules garciaunderstanding taxesto help fund public works and services and to build and maintain the infrastructure used in a country a government usually taxes its individual and corporate residents the tax collected is used for the betterment of the economy and all who are living in it in the united states and many other countries in the world income taxes are applied to some form of money received by a taxpayer the money could be income earned from salary capital gains from investment appreciation dividends or interest received as additional income payments made for goods and services and so on tax revenues are used for public services and the operation of the government as well as for social security and medicare 1 as the large baby boomer generation has aged social security and medicare have claimed increasingly high proportions of the total federal expenditure of tax revenue 2 throughout u s history tax policy has been a consistent source of political debate a tax requires a percentage of the taxpayer s earnings or money to be taken and remitted to the government payment of taxes at rates levied by the government is compulsory and tax evasion the deliberate failure to pay one s full tax liabilities is punishable by law on the other hand tax avoidance actions taken to lessen your tax liability and maximize after tax income is perfectly legal 3most governments use an agency or department to collect taxes in the united states this function is performed federally by the internal revenue service irs 4types of taxesthere are several very common types of taxes tax systems vary widely among nations and it is important for individuals and corporations to carefully study a new locale s tax laws before earning income or doing business there below we will take a look at various tax situations in the united states generally speaking the federal government levies income corporate and payroll taxes the state levies income and sales taxes and municipalities or other local governments mainly levy property taxes 5like many nations the united states has a progressive income tax system through which a higher percentage of tax revenues are collected from high income individuals or corporations than from low income individual earners taxes are applied through marginal tax rates 6a variety of factors affect the marginal tax rate that a taxpayer will pay including their filing status married filing jointly married filing separately single or head of household which status a person files can make a significant difference in how much they are taxed the source of a taxpayer s income also makes a difference in taxation 7 it s important to learn the terminology of the different income types that may affect how income is taxed capital gains taxes are of particular relevance for investors levied and enforced at the federal level these are taxes on the profit generated when you sell an asset that s increased in value 8the rate of taxation on the profit depends on the length of time for which the asset was held short term capital gains on assets sold one year or less after they were acquired are taxed at the owner s ordinary income tax rate whereas long term gains on assets held for more than a year are taxed at a lower capital gains rate based on the rationale that lower taxes will encourage high levels of capital investment 8 tax records should be maintained to substantiate the length of ownership when both the assets were sold and the tax return was filed payroll taxes are withheld from an employee s paycheck by an employer who remits the amount to the federal government to fund medicare and social security programs in 2024 employees will pay 1 45 into medicare on all wages and 6 2 into social security on the first 168 600 earned up from 160 200 in 2023 910anyone who earns more than 200 000 as a single filer or 250 000 for married couples filing jointly pays an additional 0 9 into medicare 1112payroll taxes have both an employee portion and an employer portion the employer remits both the employee portion described above and a duplicate amount for the employer portion the employer rates are the same 6 2 for social security up to the wage base limit and 1 45 for medicare on all wages therefore the total remitted is 15 3 6 2 employee social security 6 2 employer social security 1 45 employee medicare 1 45 employer medicare 13payroll taxes and income taxes differ although both are withheld from an employee s paycheck and remitted to the government payroll taxes are specifically to fund social security and medicare programs 14 a self employed individual must pay the equivalent of both the employee and employer portion of payroll taxes through self employment taxes which also fund social security and medicare 15corporate taxes are paid on a company s taxable income the steps to calculate a company s taxable income are the corporate tax rate in the united states is currently a flat rate of 21 before the tax cuts and jobs act tcja of 2017 the corporate tax rate was 35 1617in august of 2022 the united states congress passed a new 15 corporate minimum tax into law as part of the inflation reduction act of 2022 this new minimum tax only affects u s corporations with three year average book values of 1 billion or more and foreign corporations with three year average u s income over 100 million 18sales taxes are charged at the point of sale when a customer executes the payment for a good or service the business collects the sales tax from the customer and remits the funds to the government each state can implement its own sales taxes meaning they vary depending on location there s even room for cities and counties to use their own rates provided that they abide by the taxing rules of their state 19in 2022 the highest average state and local sales tax rate was found in tennessee at 9 55 five states alaska delaware montana new hampshire and oregon did not have a state sales tax although alaska did allow municipalities to charge local sales tax 19a common property tax in the united states is the real estate ad valorem tax a millage rate is used to calculate real estate taxes it represents the amount per every 1 000 of a property s assessed value the property s assessed value is determined by a property assessor appointed by the local government reassessments are typically performed every one to five years 20property tax rates vary considerably by jurisdiction and many states also tax tangible personal property such as cars and boats 21in fy 2020 the state with the highest property tax collections per capita was new jersey at 3 431 the district of columbia would rank higher if it was counted with the 50 states at 4 242 per capita the lowest state ranking was 33 per capita in kentucky 22a tariff is a tax imposed by one country on the goods and services imported from another country the purpose is to encourage domestic purchases by increasing the price of goods and services imported from other countries there are two main types of tariffs fixed fee tariffs which are levied as a fixed cost based on the type of item and ad valorem tariffs which are assessed as a percentage of the item s value like the real estate tax in the previous section 23tariffs are politically divisive with debate over whether the policies work as intended 23estate taxes are levied only on estates that exceed the exclusion limit set by law in 2024 the federal exclusion limit is 13 61 million up from 12 92 million in 2023 surviving spouses are exempt from estate taxes 24the estate tax due is the taxable estate minus the exclusion limit for example a 15 7 million estate would owe estate taxes on 2 09 million the estate tax rate is a progressive marginal rate that increases from 18 to 40 the maximum estate tax rate of 40 is levied on the portion of an estate that exceeds the exclusion limit by more than 1 million 25states may have lower exclusion limits than the federal government but no state taxes estates worth less than 1 million only oregon has the 1 million exemption limit 26 state rates are also different from the federal rate in 2023 the highest state estate tax rate implemented in hawaii and washington was 20 27some states levy their own additional estate or inheritance tax with exclusion limits that differ from those of the federal government 27estate taxes are different from inheritance taxes in that an estate tax is applied before assets are disbursed to any beneficiaries an inheritance tax is paid by the beneficiary there is no federal inheritance tax and as of 2022 only six states have an inheritance tax iowa kentucky maryland nebraska new jersey and pennsylvania 27tax delinquencyevery type of tax has a different due date or reporting requirement some are collected immediately at the time of a transaction or leading up to a transaction like sales taxes or tariffs others are on a fixed recurring schedule with a due date repeating on a specific date or specific day month combination e g property taxes being due the first day of april the due dates for similar types of taxes will vary across governing bodies i e different counties will have different property tax due dates upon failure to remit the appropriate amount of a tax to the taxing authorities various penalties may be incurred regarding the various taxes mentioned above tax penalties may include | |
why do we pay taxes | taxes are the primary source of revenue for most governments among other things this money is spent to improve and maintain public infrastructure including the roads we travel on and fund public services such as schools emergency services and welfare programs | |
how do income taxes work in the u s | in the u s taxation progressively increases as an individual s income grows there are currently seven federal tax brackets in the u s with rates ranging from 10 to 37 28 | |
are u s taxes low | generally speaking u s taxes are lower than in other developed nations in 2021 total u s tax revenue represented 24 of gross domestic product gdp according to the tax policy center whereas the average among the other 37 member countries of the organisation for economic co operation and development oecd was 34 29who needs to pay taxes the taxpayer will depend on the type of tax and associated regulation for that tax for example federal income tax legislation usually only pertains to people who have earned a certain amount of income or adjusted gross income corporate taxes may be limited to companies that have performed business in a specific area or are incorporated to do business within a specific country each tax is handled differently and there are often exceptions and qualifications for whom the tax pertains to | |
what are different types of taxes | taxes can be classified in different ways some taxes may be incurred on transactions i e sales taxes or tariffs other taxes are incurred on net financial results i e individual income taxes or corporate income taxes there are also taxes that occur due to one time or non recurring events i e estate taxes capital gains taxes the bottom linethere are many types of taxes that are applied in various ways understanding what triggers a tax situation can enable taxpayers to manage their finances to minimize the impact of taxes techniques that can help include annual tax loss harvesting to offset investment gains with investment losses and estate planning which works to shelter inherited income for heirs | |
what is a taxpayer | a taxpayer may be an individual or business entity that is obligated to pay taxes to a federal state or local government taxes from both individuals and businesses are a primary source of revenue for governments in the united states individual taxpayers are usually required to file and pay both federal and state tax returns annually businesses must also file annual returns but usually plan for and pay regular estimated tax payments throughout the year understanding taxpayersthe u s tax code is legislated and enforced by federal state and local governments the internal revenue service irs is the primary governing agency overseeing the implemented income tax code for both individuals and businesses 1state and local revenue agencies are responsible for implementing and enforcing localized taxes such as sales taxes and property taxes both individuals and businesses must be aware of their tax obligations since not paying necessary taxes can result in penalties or further legal actions types of taxpayersthere are specific thresholds governing the obligation to pay annual individual income taxes to the irs and state revenue departments the federal threshold is based on an individual s filing status each state will also have its own thresholds individual taxpayers should check both the federal and state thresholds to determine their filing obligations for a given year the internal revenue service s publication 501 dependents standard deduction and filing information provides federal tax guidance for individual taxpayers 2an individual s filing status will influence how much tax is withheld from payroll it is also a primary factor influencing annual tax obligations for a given year therefore it is important that individual taxpayers maintain the same filing status with their employer that they plan to use for their annual tax filing improperly notating the tax filing status on employee withholding forms like the form w 4 can result in withholding too much or too little which will be reconciled at tax filing time generally marriage and dependents usually children are the two things that will characterize a taxpayer s status if married an individual can choose to file separately or jointly taxpayers also have the option to file as a widower if their spouse has died 2individuals who are not obligated to file annual tax returns will still encounter taxes in their everyday life other than income taxes taxes are imposed daily and annually through sales taxes on goods and services and property taxes required to be paid separately to local governments sales taxes and property taxes vary based on location not all individuals in the u s are obligated to file a federal tax return and a state tax return the federal threshold for filing a tax return is detailed by filing the status below individual states follow similar status standards but can have differing thresholds some people may not need to file tax returns at all some people may benefit from filing a return even if below thresholds because they can be paid a refund with applicable deductions and credits 2individual taxpayers need a social security number to file tax returns social security numbers can be obtained from the social security administration a social security number will serve as a taxpayer identification number so it is important to obtain one if you plan to have tax obligations 3in general there is no age level associated with paying federal and state taxes any individual who has gross income at or above the threshold levels outlined below should file a tax return 2a taxpayer is considered single if s he is unmarried divorced a registered domestic partner or legally separated according to state law as of the last day of the tax year the head of a household or a person who is widowed does not fall under the single category for tax purposes single filers have lower income thresholds for tax filing obligations 4a head of household is a single or unmarried taxpayer who pays at least 50 of the costs of supporting his or her household and lives with other qualifying family members for whom they provide support for more than half of the year this means that the taxpayer must have paid more than half of the total household bills including rent or mortgage utility bills insurance property taxes groceries repairs and other common household expenses some examples of qualifying family members include a dependent child grandchild brother sister grandparent 5two taxpayers that wed by the end of the tax year can file their tax returns jointly when filing under married filing jointly status couples can record their respective incomes and deductions on the same tax return a joint tax return will often provide a bigger tax refund or a lower tax liability 6married filing jointly is best if only one spouse has a significant income if both spouses work and the income and itemized deductions are large and very unequal it may be more advantageous to file separately married filing separately is a tax status used by married taxpayers who choose to record their respective incomes deductions and credits on separate tax returns married filing separately may be appealing to couples who find that combining their income pushes them into a higher tax bracket than either of them would be in if they filed separately there is a potential tax advantage to filing separately when one spouse has significant medical expenses miscellaneous itemized deductions or certain available credits 7this category of taxpayer is also referred to as surviving spouse the federal qualifying widow or widower tax filing status is available for two years for widows and widowers with dependents after their spouse s death 8individual taxpayers may choose single head of household married filing jointly married filing separately or widower as their filing status for their annual income tax return filing individual tax rates and standard deductionsindividual taxpayers who must file an annual federal tax return are subject to the following tax rates and standard deductions for 2020 as detailed by their filing status 9all individual taxpayers are entitled to the following schedule a standard deductions 10form 1040the current 1040 tax form makes filing easy for individual taxpayers with simple returns it covers half a page and can be referred to as postcard filing however while the front page 1040 is simplified many taxpayers will have to attach relevant forms or schedules depending on their individual situations 1112self employed business taxes for individualsself employed or sole proprietor taxpayers may need to file a schedule c with their 1040 the schedule c is primarily an income statement for self employed workers and sole proprietors it includes 1099 income these individuals may qualify for certain business deductions 1314taxes for partnerships other small entitiespartnerships and limited liability companies llcs are business entities with more than one owner these entities make up a large portion of the small businesses in the united states other types of small entities that may need to consider annual income tax filings can include trusts estates and qualified joint ventures partnerships and llcs are usually taxed as partnerships for federal taxes partnerships typically file form 1065 which is an informational return with k 1 reporting which passes the taxable income or loss to the individual taxpayer owners therefore partners also pay taxes on their k 1 income and file this report using a 1040 form which is then subject to individual 1040 tax rates 15taxes for corporationscorporations typically make regular estimated tax payments throughout the year these payments are reconciled with the annual tax filing most corporations will file a form 1120 internal revenue service instructions for form 1120 accessed may 17 2021 form 1120 serves as the primary tax filing document for most corporations and can be compared to form 1040 for individuals like the 1040 form 1120 also requires attached forms and schedules depending on a corporation s situation 16 | |
what is a tax identification number tin | a tax identification number tin is a nine digit number used by the internal revenue service irs to identify taxpayers also known as a taxpayer identification number one type of tin includes social security numbers ssns issued by the social security administration ssa investopedia ellen lindnertypes of tax identification numbers tin a child must have an ssn before a parent can claim them as a dependent for income tax purposes so parents voluntarily apply for the number on behalf of their children 6 | |
when is a tin required | a taxpayer identification number identifies individuals corporations and entities such as nonprofit organizations npos the tin is mandatory for anyone filing annual tax returns with the irs and the agency uses it to track taxpayers 7a taxpayer identification number is required the abbreviation tin stands for tax identification number or taxpayer identification number global tinsalmost every country uses tins for various reasons canada uses social insurance numbers sins for employment tax benefits and credit purposes 8 the sin is a nine digit unique identifier that s formatted as xxx xxx xxx countries in the european union also use tins that help government agencies identify taxpayers and allow entities to invest money across the union 9who needs a tax identification number to work in the united states or file taxes with the irs individuals need a tin a taxpayer identification number allows individuals to take advantage of benefits or services offered by the government run their day to day business operations and report their taxes | |
are tins available online | the agency that issues a tin will provide individuals with an official document with their unique identifier tins are not available online because they are considered sensitive information | |
is a taxpayer identification number the same as a social security number | a social security number is an example of a tin it allows individuals to seek employment in the united states to obtain credit with banks and other lenders and file income tax returns the bottom linea taxpayer identification number or tin is necessary to work in the united states and file a tax return individuals can get a social security number through the social security administration or obtain an individual taxpayer identification number or a number for a business directly from the irs | |
what is the taylor rule | the taylor rule sometimes referred to as taylor s rule or taylor principle is an equation linking the federal reserve s benchmark interest rate to levels of inflation and economic growth stanford economist john taylor originally proposed the rule as a rough guideline for monetary policy but has subsequently urged a fixed rule policy based on the equation a cause adopted by republicans seeking to limit the federal reserve s policy discretion the taylor rule s formula ties the fed s key interest rate policy instrument the federal funds rate to two factors the difference between the actual and targeted inflation rates and that between the desired and apparent growth in the real gross domestic product gdp because policymakers aim for maximum sustainable growth at the economy s productive potential the difference between the actual and desired real gdp growth rates can also be described as an output gap 1understanding the taylor rule | |
when taylor introduced the taylor rule formula he noted it accurately reflected federal reserve policy during several years leading up to 1993 but also described it as a concept in a policy environment where it is practically impossible to follow mechanically any particular algebraic formula that describes the policy rule 2 | the rule prescribes a higher federal funds rate when inflation is above the fed s inflation target and a lower one if inflation is lagging similarly real gdp growth above a target typically defined by the economy s full potential would dictate a higher interest rate while growth short of the mark would serve to lower it the taylor rule formulataylor s equation in its simplest form looks like r p 0 5y 0 5 p 2 2 | |
where | the equation assumes the equilibrium federal funds rate of 2 above inflation represented by the sum of p inflation rate and the 2 on the far right from that equilibrium the federal funds rate is assumed to move up or down by half the difference between actual and targeted inflation with overshoots relative to the target increasing the rate and undershoots lowering it the other variable is the output gap or the difference between actual and targeted growth in real gdp as with inflation each percentage point of the output gap moves the expected federal funds rate by half a percentage point with growth above target raising it and shortfalls lowering it 1taylor rule limitations and criticismthe taylor rule has tended to serve as a fairly accurate guide to monetary policy during relatively calm periods marked by steady growth and moderate inflation but much less so during economic crises for instance the taylor rule and its derivatives prescribed a sharply negative federal funds rate during the short deep recession caused by the covid 19 pandemic while in practical terms the fed funds rate is constrained by the zero bound the federal reserve noted in its june 2022 monetary policy report to congress 3because monetary policy becomes ineffective at negative interest rates central banks have responded to severe economic crises with alternative tools including large scale asset purchases also known as quantitative easing the basic taylor rule does not consider these policy options the fed noted nor does it apply risk management principles treating the output gap and the inflation rate as predictable and their divergences from targets as equally important 4in times of economic stress these measures are subject to large fluctuations that can complicate policymakers assessments of their sustainable path few faulted the fed for focusing on downside risks at the depths of the covid 19 panic while the taylor rule will always treat recent inflation as an equally important consideration regardless of circumstances former federal reserve chairman ben bernanke used similar arguments in responding to taylor s criticisms of the fed s monetary policy before and after the 2007 2009 global financial crisis given the limitations of the taylor rule formula i don t think we ll be replacing the fomc with robots anytime soon bernanke concluded 1taylor rule variationsby assuming a base short term interest rate 2 above annual inflation the taylor rule makes inflation its single most important factor while federal reserve vice chair janet yellen referenced a modified taylor rule giving equal weight to deviations from the fed s inflation and growth targets while noting that it would still have prescribed suboptimally tight monetary policy 5the federal reserve s monetary policy report in june 2022 presented a version of such a balanced approach rule along with an alternative modification of the taylor rule delaying the prescribed increases in rates to offset cumulative shortfall in policy accommodation as a result of the effective lower bound limit 3bernanke has written that the fed is more likely to trust a taylor rule formula doubling the weighting of the output gap factor relative to inflation as most consistent with its dual mandate to promote stable prices and maximum employment 1the federal reserve s versions of the taylor rule also replace the output gap with the difference between the long run unemployment rate and current unemployment in keeping with the employment part of the fed s mandate the federal reserve focuses on the personal consumption expenditures pce price index as its preferred measure of inflation 6the bottom linein assuming an equilibrium federal funds rate 2 above annual inflation the taylor rule fails to account for both the federal reserve s mandate to promote maximum employment and the range of policy tools at the fed s disposal moreover a fixed rule monetary policy discounts the variety and unpredictability of the real world taylor himself noted in 1993 that it is difficult to see how algebraic policy rules could be sufficiently encompassing to guide rates in the same paper he acknowledged that there will be episodes where monetary policy will need to be adjusted to deal with special factors 7 | |
what is the teacher retirement system trs | the teacher retirement system trs is a network of state and city level organizations that collectively administer pensions and retirement accounts for public education employees within their states they also provide educators with help and advice regarding their retirement planning each state organization offers a different array of plans and benefits to its beneficiaries which may include not only teachers but other public education staffers such as maintenance workers janitors and administrators the biggest such systems the california state teachers retirement system the teacher retirement system of texas and the new york state teachers retirement system are among the 10 largest pension plans in the u s 1 | |
how a teacher retirement system trs works | a trs typically provides a defined benefit pension plan which guarantees a monthly benefit based on plan specific features most pensions that use the trs name are qualified retirement plans under the employee retirement income security act erisa 2as with many pensions trs plans typically award benefits based on a pension factor that is multiplied by your age or years of service in the plan which is then multiplied by your final average salary or an average of your highest earning years of employment 23in addition to a trs pension plan many teachers are eligible for a 403 b plan a 403 b operates much like a 401 k which allows participants to defer some of their own salaries into the plan offering an effective way for teachers to save in addition to their trs pension plan 4a teacher retirement system may offer disability and death benefits to its members 56calls for reformexperts say the plans are in dire need of reform in a recent study 20 state teacher retirement systems received an f grade while none received an a grade the situation is not improving it s getting worse new teachers are facing benefit cuts in order to make up the shortfall for older workers this means that new hires need to work more years before they can receive benefits 7reports also indicate that only 50 of teachers remain in a trs long enough to receive minimum benefits 7 | |
what is the retirement plan for teachers | public school teachers have access to defined benefit pension plans through their state s teacher retirement system teachers can also contribute to defined contribution plans such as 403 b plans most teachers are not likely to qualify for social security as they do not pay into the system at what age do most teachers retire most teachers retire at the age of 58 the age at which teachers can start receiving retirement benefits will depend on the state many states require teachers work for a certain number of years before being eligible regardless of their age 8 | |
what state has the best teacher retirement plan | according to bellwether a national nonprofit the state that has the best teacher retirement plan is south dakota earning an 88 4 other states that also ranked high include tennessee 82 5 and washington 81 9 the worst scores were earned by kentucky 39 7 new jersey 36 2 and illinois 34 9 9the bottom linea teacher retirement system is a state level organization that administers retirement savings plans for workers in public schools and colleges the majority of state teacher retirement systems receive low rankings only 1 out of 5 teachers receive their full pensions experts recommend that teachers do not cross state lines for new jobs as it is one of the sure fire ways to lose out on their pension | |
what is the teachers insurance annuity association tiaa | the teachers insurance and annuity association tiaa is a financial organization that provides investment and insurance services for those working for organizations in the nonprofit industry in academic research medical government and cultural fields tiaa has a history that dates back to the late andrew carnegie whose carnegie foundation for the advancement of teaching created the initial organization in order to service the pension needs of professors the financial services company was founded in 1918 with a 1 million endowment from the carnegie foundation 12 it went by the name tiaa cref short for teachers insurance and annuity association college retirement equities fund until 2016 when it rebranded under the shortened name of tiaa 3understanding the teachers insurance annuity association tiaa tiaa was founded as a nonprofit which is still part of its charter however congress revoked its tax exempt status in the taxpayer relief act of 1997 it is now structured as a nonprofit organization that has taxable subsidiaries and all profits are returned to policyholders tiaa offers retirement products 529 college savings plans managed investment accounts savings products and brokerage accounts 45distributions to policyholders of the tiaa traditional account are based on a yearly determination by the tiaa board 67 the main office is in new york and as of 2024 there are 133 offices in the u s 89as of 2024 tiaa has nearly 5 million active and retired employee accounts at more than 15 000 institutions with 1 2 trillion under management 10 its investment manager nuveen is the no 1 ranked asset manager of real assets in farmland as of 2024 11 it was ranked the no 1 best overall large fund company by the refinitiv lipper fund awards for six years in a row from 2013 to 2018 12 it also won the lipper best mixed assets large fund group award for five consecutive years from 2016 to 2020 13adding the college retirement equities fund cref while the creation of tiaa in 1918 as a means of providing guaranteed lifetime income and insurance was a groundbreaking new resource for teachers and educators it was the establishment of the college retirement equities fund cref in 1952 that started the company on the road to becoming a diversified financial services firm citing rapidly increasingly life expectancies cref allowed individuals the opportunity to add equity investments to their personal portfolios through a variable annuity product it was designed to use the higher expected returns of stocks to help stretch out the retirement income streams of workers fortune magazine described cref in 1952 as the biggest development in the insurance investment business since the passage of the social security act in 1935 14 tiaa dropped cref from its name in 2016 3tiaa acquisitionsin the past decade tiaa has made some acquisitions to grow its portfolio and product offerings tiaa has demonstrated a history of accepting investment strategies before the strategies became mainstream in 1979 the company was one of the first to utilize a broad portfolio of international stocks as part of its investment strategy in 1990 it added the cref social choice account to its lineup giving customers a socially responsible investing option in 1992 it introduced the rollover ira in 1995 tiaa offered individuals the ability to invest in directly owned real estate properties 19 in 1998 the company entered the 529 marketplace 20on may 1 2021 thasunda brown duckett became tiaa s president and chief executive officer ceo making her one of only two black women heading fortune 500 companies previously she was the ceo of chase consumer banking 2122duckett was named one of fortune s most powerful women in 2021 23 american banker magazine named her the 7th most powerful woman in banking in 2019 24 black enterprise magazine included her on its most powerful women in corporate america list in 2015 25tiaa retirement productstiaa offers a variety of retirement products among the most popular are this employer sponsored plan is a defined contribution plan like a 401 k and there are significant differences between the two when it comes to their structure funding investments and payouts the tiaa cref traditional plan can be funded with either fixed or variable annuities and its emphasis is on providing lifetime income at retirement rather than tax exempt wealth accumulation there are eight different variable cref structures tiaa plans aren t as concerned with the amount of money saved which is intended to supplement other retirement income instead they look to future annual income generated by the accumulated money the funds are annuitized to provide guaranteed lifetime annual income in that sense the tiaa traditional plan functions more like a defined benefit pension plan than a 401 k 27you can also purchase a personal annuity directly from tiaa which offers both the fixed and variable kinds a fixed annuity grows at a slow but steady rate as you save even during financial downturns there are no mandatory withdrawals prior to age 90 and the money in your annuity grows tax deferred a variety of time periods are available 28a variable annuity offers a chance for greater growth through investments but is subject to the vagaries of the market there are virtually no contribution limits allowing you to continue investing retirement money after you have maxed out your 401 k 403 b or individual retirement account ira tiaa offers more than 60 investment choices and your money grows tax deferred you can invest or withdraw funds at any time and both you and your spouse can receive payments in retirement at retirement you can choose to generate a set amount of annual lifetime income or take the money in a lump sum payment you never pay a surrender charge 29tiaa offers traditional and roth iras and it also allows you to roll over other retirement accounts 401 k 403 b or ira plans into a new or existing tiaa ira rollovers can also go the other way from a tiaa plan to a regular retirement account 30 traditional iras provide a tax break on the money you deposit but you must pay taxes on the money when you withdraw it roth iras involve after tax contributions meaning that you don t pay taxes on withdrawals tiaa also has sep and simple iras for small businesses 31target date funds are labeled lifecycle funds by tiaa and allow you to invest in mutual funds you pick a retirement date and the fund automatically adjusts its mix of high risk and low risk investments over time with the latter increasing as you come closer to your retirement date 32who is eligible for a tiaa cref retirement plan these plans are available to workers in the nonprofit sector in academic research medical government and cultural fields tiaa was originally started in 1918 to provide pensions for professors | |
is a tiaa cref plan the same as a 401 k | no though there are some similarities both are defined contribution plans but a 401 k is designed to provide supplemental income in retirement and attempts to maximize the funds in it while a tiaa plan is intended to provide a guaranteed lifetime annual income by annuitizing the money in the plan making the amount saved less paramount | |
is the tiaa a nonprofit organization | no however they are owned by a not for profit company and have a charter to operate without profit 33 such an organization came into being after congress stripped the tiaa of its tax exempt status in the taxpayer relief act of 1997 the bottom linethe teachers insurance and annuity association tiaa is a for profit financial organization that provides pension insurance and investment services mainly for teachers and their families the mission of the organization founded more than 100 years ago is helping those who help others find confidence in retirement 10tiaa serves over five million active and retired employees participating at more than 15 000 institutions today tiaa s reach extends well beyond education being the leading provider of financial services also in the research medical cultural and governmental fields | |
what is technical analysis | technical analysis is a method of evaluating statistical trends in trading activity typically involving price movement and volume it is used to identify trading and investment opportunities unlike fundamental analysis which attempts to evaluate a security s value based on financial information such as sales and earnings technical analysis focuses on price and volume to draw conclusions about future price movements investopedia candra huffunderstanding technical analysistechnical analysis is used to scrutinize the ways supply and demand for a security affect changes in price volume and implied volatility it assumes that past trading activity and price changes of a security can be valuable indicators of the security s future price movements when paired with appropriate investing or trading rules technical analysis various charting tools are often used to generate short term trading signals they can also help improve the evaluation of a security s strength or weakness relative to the broader market or one of its sectors this information helps analysts improve their overall valuation estimate technical analysis as we know it today was first introduced by charles dow as the dow theory in the late 1800s 1 several noteworthy researchers including william p hamilton robert rhea edson gould and john magee further contributed to dow theory concepts nowadays technical analysis has evolved to include hundreds of patterns and signals developed through years of research professional analysts often use technical analysis in conjunction with other forms of research retail traders may make decisions based solely on the price charts of a security and similar statistics but practicing equity analysts rarely limit their research to fundamental or technical analysis alone technical analysis can be applied to any security with historical trading data this includes stocks futures commodities fixed income securities currencies and more in fact technical analysis is prevalent in commodities and forex markets where traders focus on short term price movements technical analysis attempts to forecast the price movement of virtually any tradable instrument that is generally subject to forces of supply and demand some view technical analysis as simply the supply and demand forces reflected by the market price movements of a security technical analysis most commonly applies to price changes but some analysts track numbers other than just price such as trading volume or open interest figures hundreds of patterns and signals have been developed by researchers to support technical analysis trading technical analysts have also developed numerous types of trading systems to help them forecast and trade on price movements some indicators focus primarily on identifying the current market trend including support and resistance areas others focus on determining the strength of a trend and the likelihood of its continuation commonly used technical indicators and charting patterns include trendlines channels moving averages and momentum indicators in general technical analysts look at the following broad types of indicators the cmt association supports the largest collection of chartered or certified analysts using technical analysis professionally around the world the association s chartered market technician cmt designation can be obtained after three levels of exams that cover both a broad and deep look at technical analysis tools 2underlying assumptions of technical analysistechnical analysis attempts to decipher the market sentiment behind price trends by looking for price patterns and trends charles dow released a series of editorials discussing technical analysis theory he had two basic assumptions that continue to form the framework for technical analysis trading today the field of technical analysis builds on dow s work professional analysts typically accept three general assumptions fundamental analysis vs technical analysisfundamental analysis and technical analysis the major schools of thought when it comes to approaching the markets are at opposite ends of the spectrum both methods are used to research and forecast future trends in stock prices and like any investment strategy or philosophy both have their advocates and adversaries fundamental analysis is a method of evaluating securities by attempting to measure the intrinsic value of a stock fundamental analysts study everything from the overall economy and industry conditions to the financial condition and management of companies earnings expenses assets and liabilities are all important characteristics of fundamental analysis that help analysts determine the fair value of a business technical analysis differs from fundamental analysis in that the stock s price and volume are the only inputs the core assumption is that all publicly known fundamentals have factored into price thus there is no need to pay close attention to them technical analysts do not attempt to measure a security s intrinsic value but instead use stock charts to identify patterns and trends that suggest how a stock s price will move in the future limitations of technical analysis1 for some analysts and academic researchers the emh demonstrates why no actionable information is contained in historical price and volume data however by the same reasoning nor should business fundamentals provide actionable information these points of view are known as the weak form and semi strong form of the emh 2 another criticism of technical analysis is that history does not repeat itself exactly so price pattern study is of dubious importance and can be ignored prices seem to be better modeled as a random walk 3 a third criticism of technical analysis is that it works in some cases but only because it constitutes a self fulfilling prophecy for example many technical traders will place a stop loss order below the 200 day moving average of a certain company if a large number of traders have done so and the stock reaches this price there will be a large number of sell orders which will push the stock price down confirming the movement traders anticipated then other traders will see the price decrease and sell their positions reinforcing the strength of the trend this short term selling pressure can be considered self fulfilling but it will have little bearing on where the asset s price will be weeks or months from now in sum if enough people use the same signals they could cause the movement foretold by the signal however over the long run this sole group of traders cannot drive the price | |
what assumptions do technical analysts make | professional technical analysts typically assume three things first the market discounts everything second prices even in random market movements will exhibit trends regardless of the time frame being observed third history tends to repeat itself the repetitive nature of price movements is often attributed to market psychology which tends to be very predictable | |
what s the difference between fundamental and technical analysis | fundamental analysis is a method of evaluating securities by attempting to measure the intrinsic value of a stock the core assumption of technical analysis on the other hand is that all known fundamentals are factored into price thus there is no need to pay close attention to them technical analysts do not attempt to measure a security s intrinsic value but instead use stock charts to identify patterns and trends that might suggest how the security s price will move in the future | |
how can i learn technical analysis | your first step is to learn about investing stocks markets and financials this can be done through books online courses and materials and in person classes once you understand the basics you can start studying technical analysis the bottom linetechnical analysis is a longstanding method of analyzing the price and volume data of securities to determine future price action this data usually appears on charts investors and professional traders apply a variety of technical indicators to these price and volume charts to draw conclusions and make decisions about entry and exit points for trades | |
what is technical analysis | technical analysis is the use of historical market data to predict future price movements using insights from market psychology behavioral economics and quantitative analysis technical analysts aim to use past performance to predict future market behavior the two most common forms of technical analysis are chart patterns and technical statistical indicators investopedia jessica olahunderstanding technical analysistechnical analysis is a blanket term for a variety of strategies that depend on interpretation of price action in a stock most technical analysis is focused on determining whether or not a current trend will continue and if not when it will reverse some technical analysts swear by trendlines others use candlestick formations and yet others prefer bands and boxes created through a mathematical visualization most technical analysts use some combination of tools to recognize potential entry and exit points for trades a chart formation may indicate an entry point for a short seller for example but the trader will look at moving averages for different time periods to confirm that a breakdown is likely a brief history of technical analysisthe technical analysis of stocks and trends has been used for hundreds of years in europe joseph de la vega adopted early technical analysis techniques to predict dutch markets in the 17th century in its modern form however technical analysis owes heavily to charles dow william p hamilton robert rhea edson gould and many others including a ballroom dancer named nicolas darvas these people represented a new perspective on the market as a tide that is best measured in highs and lows on a chart rather than by the particulars of the underlying company the diverse collection of theories from early technical analysts were brought together and formalized in 1948 with the publishing of technical analysis of stock trends by robert d edwards and john magee 1candlestick patterns date back to japanese merchants eager to detect trading patterns for their rice harvests studying these ancient patterns became popular in the 1990s in the u s with the advent of internet day trading investors analyzed historical stock charts eager to discover new patterns for use when recommending trades candlestick reversal patterns in particular are critically important for investors to identify and there are several other commonly used candlestick charting patterns the doji and the engulfing pattern are all used to predict an imminent bearish reversal technical analysis uses historical market behavior to anticipate future movements while it can often be effective past performance is no guarantee of future results and traders should be careful not to over rely on any one analytical tool | |
how to use technical analysis | the core principle underlying technical analysis is that the market price reflects all available information that could impact a market as a result there s no need to look at economic fundamental or new developments since they re already priced into a given security technical analysts generally believe that prices move in trends and history tends to repeat itself when it comes to the market s overall psychology the two major types of technical analysis are chart patterns and technical statistical indicators chart patterns are a subjective form of technical analysis where technicians attempt to identify areas of support and resistance on a chart by looking at specific patterns these patterns underpinned by psychological factors are designed to predict where prices are headed following a breakout or breakdown from a specific price point and time for example an ascending triangle chart pattern is a bullish chart pattern that shows a key area of resistance a breakout from this resistance could lead to a significant high volume move higher technical indicators are a statistical form of technical analysis where technicians apply various mathematical formulas to prices and volumes the most common technical indicators are moving averages which smooth price data to help make it easier to spot trends more complex technical indicators include the moving average convergence divergence macd which looks at the interplay between several moving averages many trading systems are based on technical indicators since they can be quantitatively calculated the difference between technical analysis and fundamental analysisfundamental analysis and technical analysis are the two big factions in finance whereas technical analysts believe the best approach is to follow the trend as it forms through market action fundamental analysts believe the market often overlooks value fundamental analysts will ignore chart trends in favor of digging through the balance sheet and the market profile of a company in search of intrinsic value not currently reflected in the price there are many examples of successful investors using fundamental or technical analysis to guide their trading and even those who incorporate elements of both on the whole however technical analysis lends itself to a faster investing pace whereas fundamental analysis generally has a longer decision timeline and holding period by virtue of the time required for the extra due diligence limitations of technical analysistechnical analysis has the same limitation of any strategy based on particular trade triggers the chart can be misinterpreted the formation may be predicated on low volume the periods being used for the moving averages may be too long or too short for the type of trade you are looking to make leaving those aside the technical analysis of stocks and trends has a fascinating limitation unique to itself as more technical analysis strategies tools and techniques become widely adopted these have a material impact on the price action for example are those three black crows forming because the priced in information is justifying a bearish reversal or because traders universally agree that they should be followed by a bearish reversal and bring that about by taking up short positions although this is an interesting question a true technical analyst doesn t actually care as long as the trading model continues to work further readinginvestopedia has several articles and tutorials on the topic of technical analysis follow the links to articles in this journey on the menu bar to the left of this page in addition for further reading you may want to check out the following | |
what is the best technical indicator | while there is no best technical analysis tool the most popular indicators are moving averages these lines represent the average price of an asset over several trading sessions without the noise of daily price movements by comparing longer term moving averages with shorter term ones traders can anticipate changes in market sentiment | |
how does technical analysis work | technical analysis is premised on the belief that most traders will behave in predictable ways due to herd dynamics and group psychology for example many traders will tend to exit a position after a sharp drop in market price or to take profits when the asset gains a certain level since all traders have access to the same market information and many of them are using the same technical analysis tools there is also an element of self fulfillment in technical predictions | |
what does technical analysis look for | technical analysis examines volume and price movements to predict the behavior of other traders in the market because these trades cause price movements technical analysts hope to predict future price movements based on current market behavior the bottom linetechnical analysis refers to a variety of methods to forecast future price movements in an asset or security by watching chart patterns and sentiment indicators these traders hope to anticipate the behavior of the wider market | |
what is a technical analyst | a technical analyst also known as a chartist or market technician is a securities researcher or trader who analyzes investments based on past market prices and technical indicators technicians believe that short term price movements are the result of supply and demand forces in the market for a given security thus for technicians the fundamentals of the security are less relevant than the current balance of buyers and sellers based on the careful interpretation of past trading patterns technical analysts try to discern this balance with the aim of predicting future price movements understanding technical analyststechnical analysis is a trading discipline employed to evaluate investments and identify trading opportunities it involves analyzing statistical trends gathered from trading activity such as price movement and volume unlike fundamental analysts who attempt to evaluate a security s intrinsic value technical analysts focus on patterns of price movements trading signals and various other analytical charting tools to evaluate a security s strength or weakness technical analysis utilizes price movements and chart histories to uncover trends and sentiment based on revealed market psychology technical analysts have developed an extensive toolbox of analysis techniques and indicators typically the use of one technical indicator does not provide enough information to make a trading decision technicians use several indicators to confirm a hypothesis before taking action there is no broad consensus on the best method of identifying future price movements so most technicians gradually develop their own set of trading rules based on their knowledge and experience technical analysts can work in either buy side or sell side firms and as of 2022 earn an average income of 108 080 1technical analysts rely on technical analysis trading systems which form the basis for their investment trades since many technical analysts are day traders these systems are typically targeted at individual traders chartists have a variety of options to choose from with many programs available through brokerages brokerages will often include comprehensive charting software with featured charting patterns in their service offering many advanced chartists however choose to obtain charting software from independent vendors in order to have access to the full range of available charting patterns technical analyst certification and licensinglicensing is required for most technical analysts although it will depend on the specific duties they perform the organization they work for and the state in which they reside the financial industry regulatory authority finra issues licenses to technicians who are sponsored by the firm that employs them many technical analysts hold certifications from industry recognized professional associations such as the cfa institute to earn the chartered financial analyst designation from the institute technical analysts must have relevant work experience and pass several exams other prominent associations that technical analysts may belong to include the american association of professional technical analysts and the international federation of technical analysts the chartered market technician cmt designation marks the highest level of training within the discipline and is the preeminent designation for practitioners worldwide it is issued by the cmt association formerly the mta a global credentialing body with nearly 50 years of service to the financial industry technical analysis provides the tools to successfully navigate the gap between intrinsic value and market price across all asset classes through a disciplined systematic approach to market behavior and the law of supply and demand earning the cmt demonstrates mastery of a core body of knowledge of investment risk in portfolio management including quantitative approaches to market research and rules based trading system design and testing technical analyst job responsibilitiesa technical analyst observes and interprets the price action of a security to make predictions about its future direction they apply this price data to statistical formulas to determine probable outcomes technicians may present their findings both internally and externally for example a technical analyst may present several tactical trading ideas at their investment firm s morning meeting as well as give a presentation at a client seminar technical analysts may also work closely with fundamental analysts to compile research reports that provide comprehensive analysis for stocks that a brokerage firm covers | |
what is a technical indicator | technical indicators are heuristic or pattern based signals produced by the price volume and or open interest of a security or contract used by traders who follow technical analysis by analyzing historical data technical analysts use indicators to predict future price movements examples of common technical indicators include the relative strength index rsi money flow index mfi stochastics moving average convergence divergence macd and bollinger bands | |
how technical indicators work | technical analysis is a trading discipline employed to evaluate investments and identify trading opportunities by analyzing statistical trends gathered from trading activity such as price movement and volume unlike fundamental analysts who attempt to evaluate a security s intrinsic value based on financial or economic data technical analysts focus on patterns of price movements trading signals and various other analytical charting tools to evaluate a security s strength or weakness technical analysis can be used on any security with historical trading data this includes stocks futures commodities fixed income currencies and other securities in this tutorial we ll usually analyze stocks in our examples but keep in mind that these concepts can be applied to any type of security in fact technical analysis is far more prevalent in commodities and forex markets where traders focus on short term price movements technical indicators also known as technicals are focused on historical trading data such as price volume and open interest rather than the fundamentals of a business such as earnings revenue or profit margins technical indicators are commonly used by active traders since they re designed to analyze short term price movements but long term investors may also use technical indicators to identify entry and exit points types of indicatorsthere are two basic types of technical indicators traders often use many different technical indicators when analyzing a security with thousands of different options traders must choose the indicators that work best for them and familiarize themselves with how they work traders may also combine technical indicators with more subjective forms of technical analysis such as looking at chart patterns to come up with trade ideas technical indicators can also be incorporated into automated trading systems given their quantitative nature example of technical indicatorsthe following chart shows some of the most common technical indicators including moving averages the rsi and the macd in this example the 50 and 200 day moving averages are plotted over the top of the prices to show where the current price stands relative to its historical averages the 50 day moving averages is higher than the 200 day moving average in this case which suggests that the overall trend has been positive the rsi above the chart shows the strength of the current trend a neutral 49 07 in this case the macd below the chart shows how the two moving averages have converged or diverged slightly bearish in this case | |
what are technical job skills | technical job skills sometimes referred to as hard skills are specific talents and expertise an individual possesses that help them perform a certain task or job these skills differ from soft skills which instead describe character and personality traits technical skills are abilities an individual acquires through practice and learning although a person may bring an inherent propensity for a certain skill an individual who possesses a particular proficiency for coding for instance would have a sought after technical skill as a job candidate at a software or technology company understanding technical job skillstechnical job skills are ideal to list on the skill section of a resume because they shine a light on abilities and strengths however it is important to realize not all technical skills at an individual s disposal should be listed the list should be tailored to fit the job this gives the individual a greater chance of getting hired new or prospective employees may be subject to an aptitude test to measure their proficiency at various technical skills and abilities aptitude tests assume that individuals have inherent strengths and weaknesses and have a natural inclination toward success or failure in specific areas based on their innate characteristics note that an aptitude test does not test knowledge or intelligence only a particular skill or propensity therefore it is not a test for which a person can study employees with technical job skills are referred to as skilled labor and may be contrasted with unskilled labor technical skills vs soft skillson job applications cover letters resumes and in person during the interview process employers seek out applicants with both hard and soft skills hard or technical skills are those abilities or skill sets that are teachable and can be quantified easily examples of hard skills include certificates or degrees in specific disciplines mastery or fluidity in a foreign language efficient operation of specific machinery and the ability to generate computer programs 1soft skills differ from hard skills in that they are subjective and can be incredibly difficult to quantify soft skills are inherent skills relating to an individual s character or personality these skills are sometimes referred to as interpersonal skills or people skills examples of soft skills include effective communication working well with others time management the ability to be persuasive flexibility and patience 1technical job skills play a vital role in getting hired certain hard skills are necessary for a variety of jobs and some positions require a specific set or combination of these skills however some of the more basic or intermediate types of technical skills are fairly easy for an employer to teach to a new employee soft skills because they are essentially inherent are extremely difficult to teach in some cases soft skills cannot be taught for this reason employers constantly look for potential employees with a mix of technical and soft skills that will allow them to complete tasks in a fast and efficient way because customer service satisfaction is one of the most important aspects for any company or organization soft skills are often considered of greater value in demand technical job skillsexample of technical job skillsaccounting is a profession that requires a fairly rigid set of technical skills in addition to knowing the ins and outs of accounting practice and tax law familiarity with industry specific software such as great plains quickbooks peachtree sap software and tax preparation software is also often required these days 1213accountants need to know how to prepare and interpret financial statements and other accounting reports develop efficient financial reporting mechanisms and plan and implement accounting controls 1213note that some of the other skills accountants need might be categorized as soft skills they must be prepared to communicate effectively with regulators deal with external auditors and stay updated on current issues and changes in industry regulations 14 | |
how can you make your cv or resume pop in a pile of many the answer could lie in whether and how you highlight your technical skills those abilities employers look for in today s digital workplaces gone are the days when resumes merely rehash your previous employers and responsibilities they are better seen as tools for showcasing the skills you have so you can hit the ground running if hired | but what should you highlight that not only gets your resume past an ai screener but also impresses those making hiring decisions should you emphasize your talents in programming languages like python or focus on your expertise in data analysis tools such as tableau or power bi perhaps your mastery of project management software like asana or trello deserves the spotlight or your ability to navigate complex crm systems like salesforce or hubspot in this article we ll explore some of the most sought after abilities in various industries and roles we ll explain how to identify your own technical strengths and highlight them on your resume to help you increase your chances of landing the job you want investopedia joules garcia | |
what technical skills are employees looking for | technical skills are practical and related to the tools and knowledge you ll need to perform a job these skills include proficiency in programming languages like python or java software applications such as adobe creative suite data analysis tools like sql or tableau and specialized equipment or machinery relevant technical skills are typically learned through formal education training or hands on experience and are essential for roles that demand specialized technical expertise in decades past technical skills were merely for would be technicians but virtually every resume includes them at this point since every job requires some expertise in the systems a business uses general abilities in communication teamwork or creativity while valuable do not count as technical skills instead these are classified as soft skills the distinction is important because technical skills reveal your ability to handle the specific technical demands of a job which can be critical in fields ranging from information technology it and engineering to marketing and finance below we provide a table with some of the key technical skills and complementary sets of expertise for major fields especially in finance and investing and go into detail about several fields below that accounting requires specific technical skills that extend beyond basic mathematics today s accounting professionals rely on a suite of software products such as microsoft excel for computing and analysis therefore these workers need a sophisticated working knowledge of various software although most accounting processes are automated accountants still need to be proficient in understanding and preparing financial statements e g balance sheets income statements and statements of cash flows central to accounting these documents shed light on the health of a company or person s portfolio research is another important and often overlooked technical skill needed in accounting some situations require extensive and independent research for example an accountant may need to learn how a new law affects how assets are classified or gather information about a new accounting principle data science combines sophisticated mathematics and statistics data scientists often work alongside and have overlapping duties and responsibilities with data engineers data analysts and machine learning engineers essential technical skills for data science professionals include the following in addition to sophisticated technical skills some data science jobs require professionals to have formal training or academic backgrounds in computer science engineering or statistics in finance sought after technical skills are more sophisticated than those in traditional business and accounting disciplines core financial technical skills include the following technical analysis in this context refers to the ability to read market charts and trends this requires various mathematical skills to produce price chart analysis and model trends that look at historical information to predict future price movements for example to produce a linear regression model for technical analysis the market analyst must have the skills and knowledge necessary to properly gather the historical data perform necessary calculations and use the output to generate a visual representation of current and historical data generally accepted accounting principles gaap outline the rules and regulations for us accountants whereas the international financial reporting standards ifrs are the standard in other nations | |
how to list technical skills on a resume | a well constructed resume will present the qualifications experience and skills that make you a qualified candidate when including technical skills it s important to list those pertinent to the job for which you re applying begin with the technical skills most critical to the role and then follow with ancillary skills that you ll need in the specific position many employers look for basic technical skills like data analysis management accounting project management and marketing here are the steps to list technical skills on a resume not every technical skill listed in a job requisition is required however the more skills you have the better your chances for selection the right technical skills show the employer that you have what it takes to perform the job | |
how to improve your technical skills education and training | here are five steps to help you gain or improve your technical skills identifying your career goals is critical in determining what technical skills you need if you re not in your desired career your goals will likely differ from those who are established in their careers professionals who seek to stay in the same career might have goals of securing promotions or enhancing their performance examples of goals for those seeking a career change include examples of goals for those in their desired field might include because some fields such as marketing are multifaceted it might be helpful to narrow your career goals to specific roles that you wish to pursue for example instead of establishing a goal to pursue a career in marketing you could set your objective as a career in digital marketing once your goals are established research what you need to do to accomplish them begin by searching online for a job with basic and sophisticated technical skills job postings can shed light on the required qualifications for different roles however you can often glean more from direct interaction consider interviewing or shadowing someone in the field you wish to enter firsthand accounts from experienced professionals and direct observations can give you more insight than what can be gathered online from your research you should be prepared to document the skills you need to realize your goals consider the specializations certifications and education needed to obtain them create categories and list all the associated skills that fall within each for example under the certification category you could list lean six sigma or prosci certified change manager some skills are more important than others consider listing them in order of importance spreadsheet programs such as microsoft excel are great tools to organize your lists from your inventory reorganize the skills list according to what you have versus what you need you might be surprised to find that you already possess some of the skills needed identify what you need to do to acquire or enhance technical skills for example if a career requires a bachelor s degree in a specific field of study research what institutions offer that degree program if seeking a promotion in your current field and a specialization is required find institutions that offer the specialization before enrolling in an academic program or pursuing professional certifications consider what alternatives may be accepted in lieu of a specific requirement for example some jobs may list a certain degree as a requirement but will accept a degree in a related field or work experience in its place now that you know what is needed it is time to plan and build develop a plan itemizing the skills you are pursuing how you will obtain them your timeline for completion and resources to help you accomplish your pursuit some skills can be acquired on the job while others must be obtained through a formal program or training if the latter enroll in the program that helps you develop the skills needed and accommodates your lifestyle some employers offer training courses to help their employees develop technical skills sometimes you may have enough critical technical skills to qualify for a job or promotion many employers will invest in skill development for the right candidates explore what the employer will do to help you develop your skills before undertaking expensive and time consuming training and academic programs | |
how important are professional affiliations on a resume | professional affiliations are essential as they demonstrate your commitment to your field and engagement with industry networks including affiliations on your resume can show potential employers that you are current with industry trends and standards more valuable than its place on your resume are the contacts you can make by participating in professional development efforts as part of your professional affiliation such as attending conferences participating in workshops and contributing to professional communities the contacts and knowledge you gain can be invaluable as you seek a foothold in the career you want | |
how do i write a professional summary | writing a professional summary involves crafting a concise paragraph that highlights your qualifications experience and career objectives start by mentioning the job title you want and your years of experience award winning data scientist with over 10 years of experience follow with your top skills and notable achievements that are relevant to the position you are applying for tailor this section to align with the job description by using specific keywords likely to be searched for by an ai screener the goal is to provide a snapshot of your professional profile that captures the attention of hiring managers and applicant tracking software | |
what s the difference between technical skills and technical analysis | technical analysis when used within the context of trading and financial markets refers to a special kind of technical skill needed in finance and investing predicting the price movements of financial instruments like stocks by studying trends in the market s past technical analysts need several technical skills to perform their jobs such as computer skills to set up complex charts as well as the technical acumen to find patterns in them strictly speaking technical analysis and technical skills are not synonymous terms although you might hear them being used interchangeably outside the context of investing the bottom linetechnical skills are the abilities and knowledge that enable someone to perform certain functions workers need these skills to successfully perform their day to day job duties whether attained through training or education technical skills are essential for increased productivity and competitive advantage by staying informed about the most sought after technical abilities investing in continuous learning and skill development and effectively showcasing your expertise you can position yourself for success | |
what is technocracy | a technocracy is a model of governance wherein decision makers are chosen for office based on their technical expertise and background a technocracy differs from a traditional democracy in that individuals selected to a leadership role are chosen through a process that emphasizes their relevant skills and proven performance as opposed to whether or not they fit the majority interests of a popular vote the individuals that occupy such positions in a technocracy are known as technocrats an example of a technocrat could be a central banker who is a trained economist and follows a set of rules that apply to empirical data | |
how technocracy works | a technocracy is a political entity ruled by experts or technocrats who are selected or appointed by some higher authority technocrats are supposedly selected specifically for their expertise in the area over which they are delegated authority to govern in practice because technocrats must always be appointed by some higher authority the political structure and incentives that influence that higher authority will always also play some role in the selection of technocrats an official who is labeled as a technocrat may not possess the political savvy or charisma that is typically expected of an elected politician instead a technocrat may demonstrate more pragmatic and data oriented problem solving skills in the policy arena technocracy became a popular movement in the united states during the great depression when it was believed that technical professionals such as engineers and scientists would have a better understanding than politicians regarding the economy s inherent complexity although democratically officials may hold seats of authority most come to rely on the technical expertise of select professionals in order to execute their plans defense measures and policies in government are often developed with considerable consultation with military personnel to provide their firsthand insight medical treatment decisions meanwhile are based heavily on the input and knowledge of physicians and city infrastructures could not be planned designed or constructed without the input of engineers critiques of technocracyreliance on technocracy can be criticized on several grounds the acts and decisions of technocrats can come into conflict with the will rights and interests of the people whom they rule over this in turn has often led to populist opposition to both specific technocratic policy decisions and to the degree of power in general granted to technocrats these problems and conflicts help give rise to the populist concept of the deep state which consists of a powerful entrenched unaccountable and oligarchic technocracy which governs in its own interests in a democratic society the most obvious criticism is that there is an inherent tension between technocracy and democracy technocrats often may not follow the will of the people because by definition they may have specialized expertise that the general population lacks technocrats may or may not be accountable to the will of the people for such decisions in a government where citizens are guaranteed certain rights technocrats may seek to encroach upon these rights if they believe that their specialized knowledge suggests that it is appropriate or in the larger public interest the focus on science and technical principles might also be seen as separate and disassociated from the humanity and nature of society for instance a technocrat might make decisions based on calculations of data rather than the impact on the populace individuals or groups within the population in any government regardless of who appoints the technocrats or how there is always a risk that technocrats will engage in policymaking that favors their own interests or others whom they serve over the public interest technocrats are necessarily placed in a position of trust since the knowledge used to enact their decisions is to some degree inaccessible or not understandable to the general public this creates a situation where there can be a high risk of self dealing collusion corruption and cronyism economic problems such as rent seeking rent extraction or regulatory capture are common in technocracy | |
what is the difference between meritocracy and technocracy | technocracy and meritocracy are similar and overlapping concepts in the context of government as defined above technocracy is a model of society in which individuals are chosen to govern by their technical expertise and background meritocracy is a system of society where people are chosen to govern based on their merit including praiseworthy ability character or other qualities 1 a society can be both technocratic and meritocractic | |
what are the features of a technocracy | the defining feature of a technocracy is a government comprised of individuals appointed or chosen for their technical expertise rather than the support they draw from the broader populace | |
what are pros and cons of technocracy | proponents of technocracies argue that technocrats bring specialized knowledge and skills to governance allowing them to make decisions based on past performance or know how critics of technocracy argue that such a system of governance effectively ignores the will of the people and is therefore inherently undemocratic the bottom linea technocracy is a form of governance whereby key decision makers are selected for their technical skills or expertise theoretically technocracies are driven by individuals who make decisions based on data empirical evidence and other objective measures in practice technocrats decisions may be vulnerable to political influence and self interest and can be criticized for failing to represent the will of the people | |
what is the technology media and telecom tmt sector | the technology media and telecom tmt sector is an industry grouping that includes the majority of companies focused on new technologies there is a substantial overlap between tmt and the 1990s idea of the new economy the tmt sector is sometimes also referred to as technology media and communications tmc the technology sector can no longer hold all the firms that depend on innovation because the role of technology in the economy has expanded for example meta meta formerly facebook and netflix nflx are both in the communication services select sector spdr fund xlc rather than the technology select sector spdr fund xlk 12 big tech companies increasingly dominate the tmt sector understanding the tmt sectorthe tmt sector includes a wide range of companies that depend on research development r d they focus on patents and other intellectual property and prefer rapid company growth as a result investors in the tmt sector often tolerate relatively high price to earnings p e ratios in favor of enterprise value to sales ev sales the tmt sector is beneficial to growth investors looking for potential tenbaggers that will dramatically outperform the market new technologies are continually developed in the tmt sector and some companies may eventually become big names in the sector by getting in early on stocks in the tmt industry growth investors hope to achieve higher returns many tmt stocks have high potential to outperform the market but they also face greater downside risks special considerationsbecause this industry segment covers a broad range it is often helpful to divide tmt into subsectors such as hardware semiconductors software media and telecom the tmt sector contains new and hi tech firms so it experiences many mergers acquisitions and initial public offerings ipos each subsector also has different growth metrics and prospects for example the telecom sector is driven by the shift toward wireless the hardware companies include computer makers ibm dell and hp but also makers of server systems mobile device handsets tablets and storage devices such as hard drives and memory within hardware semiconductor manufacturers develop and produce integrated circuits and microchips used in all sorts of applications some representative firms include intel amd texas instruments and nvidia software companies produce computer or mobile applications for both individuals and enterprises microsoft adobe and sap rank among the top software firms furthermore media and telecom companies also play essential parts in the tmt sector media firms develop produce and distribute multimedia content on tv in print and online television networks cable tv providers production studios and social media companies are all in this subsector finally telecom focuses on communications related businesses such as phone tv and internet service providers there are several significant telecoms such as at t and verizon that dominate the industry examples of technology media and telecom sectormarket participants may categorize tmt companies in different subsectors so there are many examples of companies in multiple tmt subsectors meta may be viewed as either an internet company or a media company apple can be placed in the internet hardware software or media category depending on who is judging the company other examples that cross subsectors are hulu amazon and netflix sometimes companies in one subsector of tmt will merge or acquire another to consolidate diversify and broaden product offerings examples of mergers include the aol and time warner merger in 2000 in 2015 at t and directv joined forces while the dell emc merger happened in 2016 34 | |
what is the technology sector | the technology sector is the category of stocks relating to the research development or distribution of technologically based goods and services this sector contains businesses revolving around the manufacturing of electronics creation of software computers or products and services relating to information technology understanding the technology sectorthe technology sector offers a wide range of products and services for both customers and other businesses consumer goods like personal computers mobile devices wearable technology home appliances televisions and so on are continually being improved and sold to consumers with new features on the business side companies are dependent on innovations coming out of the technology sector to create their enterprise software manage their logistics systems protect their databases and generally provide the critical information and services that allow companies to make strategic business decisions the term technology sector is frequently shortened to tech sector and is used interchangeably with the term technology industry or tech industry the technology sector is often the most attractive investment destination in any economy the u s technology sector boasts of companies like apple google amazon netflix ibm and microsoft these companies drive the growth in the tech sector and the enthusiasm around their long term potential has them trading at price to earnings multiples that look ridiculous compared to almost every other sector a large amount of this growth owes a debt to the buzz factor that technology companies create by launching business lines that have never existed before growth in the technology sectorthe term technology sector has been broadened many times to include businesses that may be better served by a more specific category the technology sector was initially anchored in semiconductors computing hardware and communications equipment in addition growth also includes jobs according to the u s bureau of labor statistics jobs in computer and information technology are poised to grow 13 between 2020 and 2030 1the addition of software companies expanded the perceived tech sector to include anything based on coding soon more room had to be made for internet companies which flooded during the internet boom some of these internet companies were media and content companies that used code as the medium still others were off launching rich features that grew to be e commerce social media the sharing economy and even cloud based computing the technology sector now includes such a diverse set of companies that the subsectors are far more useful than the overall one unsurprisingly there is no universal agreement some pundits want a whole new sector for each innovation but the big buckets include semiconductors software networking internet and hardware from there all the subsectors can be further broken down for example hardware breaks into wearables peripherals laptops desktops and so on people may argue that it doesn t make sense to call a cloud computing company a software company but the arbitrary separations are a bit more manageable than the massive label of tech sector for every company | |
what s the difference between a sector and an industry | in general an industry is a group of companies that are all similar in type a sector is a segment of the broader economy for example the semiconductor industry is part of the technology sector however these terms are often used interchangeably | |
what are industries within the technology sector | there are three main industries within the technology sector these are software and services semiconductors and semiconductor equipment and technology hardware and equipment each of these areas can be further broken down into sub industries | |
is social media part of the technology sector | social media is an industry within the technology sector some of the most well known tech companies are those that run social media platforms such as meta and x many of these tech companies pursue other projects in addition to social media so they can belong to other industries within the technology sector as well the bottom linethe technology sector is the part of the economy made up of businesses that focus on electronics software computers social media and other industries related to information technology these companies often invest in developing new projects with future potential even without an immediate payoff many parts of the public and private sectors rely on products and services developed by technology companies the tech sector is often a growth part of the economy | |
what is the ted spread | the ted spread is the difference between the three month treasury bill and the three month libor based in u s dollars to put it another way the ted spread is the difference between the interest rate on short term u s government debt and the interest rate on interbank loans ted is an acronym for the treasury eurodollar rate understanding the ted spreadthe ted spread was originally calculated as the price difference between three month futures contracts on u s treasuries and three month contracts for eurodollars with identical expiration months after futures on treasury bills t bills were dropped by the chicago mercantile exchange cme following the 1987 stock market crash the ted spread was amended it is calculated as the difference between the interest rate banks can lend to each other over a three month time frame and the interest rate at which the government is able to borrow money for a three month period the ted spread is used as an indicator of credit risk this is because u s t bills are considered risk free and measure an ultra safe bet the u s government s creditworthiness in addition the libor is a dollar denominated gauge used to reflect the credit ratings of corporate borrowers or the credit risk that large international banks assume when they lend money to each other by comparing the risk free rate to any other interest rate an analyst can determine the perceived difference in risk following this construct the ted spread can be understood as the difference between the interest rate that investors demand from the government for investing in short term treasuries and the interest rate that investors charge large banks according to an announcement by the federal reserve on november 30 2020 banks should stop writing contracts using libor by the end of 2021 the intercontinental exchange the authority responsible for libor will stop publishing one week and two month libor after december 31 2021 all contracts using libor must be wrapped up by june 30 2023 1 as the ted spread increases the default risk on interbank loans is considered to be increasing interbank lenders will demand a higher rate of interest or will be willing to accept lower returns on safe investments such as t bills in other words the higher the liquidity or solvency risk posed by one or more banks the higher the rate lenders or investors will require on their loans to other banks compared to loans to the government as the spread decreases the default risk is considered to be decreasing in this case investors will sell t bills and reinvest the proceeds in the stock market which is perceived to offer a better rate of return on investments calculation and example of the ted spreadthe ted spread is a relatively simple calculation ted spread 3 month libor 3 month t bill rateof course it is far easier to let the st louis fed calculate and chart it for you typically the size of the spread is designated in basis points bps for example if the t bill rate is 1 43 and libor is 1 79 the ted spread is 36 bps the ted spread fluctuates over time but generally has remained within the range of 10 and 50 bps however this spread can increase over a wider range during times of crisis in the economy for example following the collapse of lehman brothers in 2008 the ted spread peaked at 450 basis points a downturn in the economy indicates to banks that other banks may encounter solvency problems leading banks to restrict interbank lending this in turn leads to a wider ted spread and lower credit availability for individual and corporate borrowers in the economy | |
what is a telegraphic transfer tt | a telegraphic transfer tt is an electronic method of transferring funds used primarily for overseas wire transactions these transfers are used most commonly with clearing house automated payment system chaps transfers in the u k banking system telegraphic transfers are also known as telex transfers 1understanding a telegraphic transfer tt originally as the name suggests telegraphs were used to communicate transfers between financial institutions the sender went to their bank and provided the required data about the amount sent and the recipient 2 an operator at that bank would send a message to the recipient s bank using morse code while the telegraph itself has become obsolete the telegraphic transfer concept has remained although it has evolved with changing technologies and uses secure cable networks to transfer funds at times the transfer mechanism may be referred to by the more general term wire transfer or by the updated term electronic funds transfer eft telegraphic transfers are usually fairly expensive sometimes including multiple fees due to the fast nature of the transaction 3 generally the telegraphic transfer is complete within two to four business days depending on the origin and destination of the transfer as well as any currency exchange requirements 1funds sent between institutions are transferred through the federal reserve system for u s domestic transfers and the society for worldwide interbank financial telecommunication swift network for international transfers swift the society for worldwide interbank financial telecommunication was launched in 1973 the system facilitated cross border transfers between banks by introducing uniform standards which made transactions less prone to error and able to move swiftly 4while the term can refer to both u s domestic and international transfers tts are most commonly associated with transfers through swift the use of these systems provides a level of security to the transaction as well as a set of standards and regulations to control how the transfers take place 1the cost associated with a telegraphic transfer can also be affected by these variables additional factors influencing the cost can include the amount being transferred and the institution chosen to complete the transaction associated fees to complete the transfer aren t standardized across all institutions and can thus vary dramatically from one institution to the next information required for telegraphic transferscertain information regarding the sender and destination is required to complete the transfer whether a person transfers funds between two accounts that are both held in their name or between two accounts held by two different individuals the most pertinent information required for the transfer is the relevant account numbers and details of the corresponding financial institutions personal identifiable information is also required for security purposes and to confirm the identity of the sender similar requirements exist for business entities but the identifiable information relates to the business instead of the individual | |
why was it called telegraphic transfer tt | originally money transfers between financial institutions were once accomplished over telegraph wires because the telegraph itself has become obsolete the telegraphic transfer concept has evolved with changing technologies now funds move via cable networks or cloud based apps | |
what are the key characteristics of a telegraphic transfer | telegraphic transfers provide a level of security as well as a set of standards and regulations to control how the transfers take place generally the tt is complete within two to four business days depending on the origin and destination of the transfer as well as any currency exchange requirements tts are also usually fairly expensive the price one pays for the rapid service | |
how are telegraphic transfers processed | tts are used most commonly in connection with clearing house automated payment system chaps transfers in the u k banking system u s domestic transfers of funds sent between institutions are transferred through the federal reserve system while international transfers use the society for worldwide interbank financial telecommunication swift | |
what information is needed for a telegraphic transfer tt | the most pertinent information required for the telegraphic transfer is the account numbers and routing numbers of the parties and the financial institutions involved then there is the amount of money being transferred and the bank or non bank transfer provider such as western union that is chosen to actually carry out the transaction though strictly speaking tts are carried out between two banks and don t involve third parties other details may also be required for security purposes and to confirm the identity of the sender the bottom linea telegraphic transfer tt is an electronic way of transferring funds that is used primarily for overseas wire transactions usually a telegraphic transfer is complete in two to four business days depending on the origin and destination of the transfer telegraphic transfers are also known as telex transfers tt or more generically as wire transfers or electronic funds transfers tts are usually fairly expensive sometimes charging multiple fees due to the fast nature of the transfer | |
what is the temporal method | the temporal method also known as the historical method converts the currency of a foreign subsidiary into the currency of the parent company this technique of foreign currency translation is used when the local currency of the subsidiary is not the same as the currency of the parent company differing exchange rates are used depending on the financial statement item being translated understanding the temporal method | |
when a company has operations or subsidiaries in a country other than where the parent company is domiciled the parent company must convert the values on the foreign entity s financial statements back into the parent company s currency in order to calculate its profits and losses and generate the financial statements the currency used by the parent company is sometimes referred to as the subsidiary s functional currency or reporting currency | if the subsidiary s functional currency differs from its local currency the temporal method is used to perform currency translations exchange rate values are based on the time assets and liabilities are acquired or incurred which makes it possible to convert the numbers on the books of an integrated foreign entity into the parent company s currency monetary assets and liabilities are converted using the exchange rate in effect as of the balance sheet date non monetary assets and liabilities are converted using the exchange rate in effect on the date of the transaction gains and losses due to foreign exchange are reported in net earnings example of the temporal methodan example of the temporal method would be subsidiary xyz being domiciled in great britain the local currency of xyz is the british pound however if the majority of xyz s clients reside in continental europe then it may conduct its business in euros the euro would be the functional currency in this instance the parent company of xyz would use the temporal method to translate xyz s financial statements back into the currency used by the parent company monetary assets such as accounts receivable investments and cash are converted to the parent s currency at the exchange rate in effect on the balance sheet date non monetary assets are longer term assets such as property plant and equipment are converted using the exchange rate in effect on the date the asset was obtained since all foreign exchange gains and losses are reported in net earnings of the parent company the result can be an increase in the volatility of the parent company s earnings if it has substantial income coming from subsidiaries in different countries | |
what is tenancy at sufferance | tenancy at sufferance is created when a tenant has overstayed their lease term without a new agreement in this case the landlord can hold them to the terms of the old lease and collect rent payments for the time overstayed 1 this can continue until the landlord is able to obtain an eviction order or decides to extend the lease this can be contrasted with tenancy at will where a tenant occupies the property with the consent of the owner but without necessarily a written contract or lease 2understanding tenancy at sufferancetenancy at sufferance also called estate at sufferance or holdover tenancy arises when a tenant who has a lawful possession of a property for example a lease holds over without the owner s consent the only difference between a holdover tenant at sufferance and a trespasser is that the tenant entered into possession in a legal manner but has now overstayed his or her welcome 3each state may have different legal definitions and criteria to determine whether or not an occupant is classified as a trespasser if they remain on a property they previously had a lease agreement for ways a tenancy of sufferance can be put into effectthe circumstance that can lead to a tenancy of sufferance can include eviction proceedings this can be the case if a tenant s lease agreement comes to an end but they do not vacate the premises and the landlord intends to lease the space to new occupants the landlord or property owner may initiate their legal options to remove the tenant from the property but the tenant continues to dwell on the property and usually cannot be forcibly removed while the eviction process is underway the tenant must comply with the rental or lease terms however in some jurisdictions a landlord should not accept rent during this time as it may constitute an extension of the lease agreement evictions could take a relatively short time or take several months depending on the jurisdiction the property owner would have to accept the tenancy at sufferance throughout that period 34it is possible that the property owner will offer to buy out the tenant in order to see them exit the property this might be a more expensive option but it would expedite a resolution to the situation if such a buyout is accepted the tenancy at sufferance would end and the tenant would have to vacate the premises a property owner could also offer a new lease agreement acceptance of a new lease by all parties would also end a tenancy at sufferance and the tenant would be bound to the terms of the new agreement |
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