What Are the Tax Consequence(s)related to a Qualified Pension Plan

question 106

Multiple Choice

What are the tax consequence(s) related to a qualified pension plan?

• A)Employer contributions are deductible when made.
• B)Earnings on the contributions are taxable as they are earned.
• C)Employees are not taxed until distributions are received from the plan.
• D)Both employer contributions are deductible when made and employees are not taxed until distributions are received from the plan.

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Definitions:

FICA-Medicare Tax

The portion of the Federal Insurance Contributions Act tax that funds Medicare, deducted from employees' wages and also paid by employers.

Federal Income Tax

The tax levied by the IRS on the annual earnings of individuals, corporations, trusts, and other legal entities.

Withholdings

The portion of an employee's earnings that is deducted and sent directly to the government by the employer for tax purposes.

Salaries Expense

The total amount paid to employees in salary form over a specified accounting period, considered an operating expense.