Chapter 14 Objectives

1. Distinguish between employees and independent contractors and explain the tax implications of each classification.

2. List the important factors determining reasonable compensation for a shareholder/employee of a closely held corporation.

3. Compute the tax savings when a family member in a low tax bracket works as an employee of a family business.

4. Identify the most common nontaxable fringe benefits.

5. Explain how employers and employees can benefit by including nontaxable fringe benefits in a compensation package

6. Describe the tax consequences to both employer and employee of stock options and incentive stock options (ISO's).

7. Contrast the tax treatment of reimbursed and unreimbursed employment-related expenses.

8. Compare the after-tax accumulation of wealth in a qualified retirement plan to the accumulation in a nonqualified savings plan.

9. Calculate the tax cost of a premature withdrawal from a qualified retirement plan

10. Explain why employers use nonqualified deferred compensation plans to provide retirement benefits to highly compensated employees.

11. Describe the tax benefit of a Keogh plan to a self-employed individual.

12. Describe the tax consequences of IRA contributions and withdrawals.