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when funds are wired between a domestic and a foreign bank that do not have a direct relationship a correspondent bank acts as the financial intermediary in the transaction to facilitate the wire the originator of the transfer sends the amount of the wire plus applicable fees to the vostro account held on its behalf by the correspondent bank the correspondent bank deducts the fees and the amount of the wire from the vostro account and executes a domestic wire to the receiving bank | in this type of relationship the correspondent bank provides regular reports to the respondent bank this includes detailing the transactions balances and other relevant information related to the vostro account this helps the respondent bank monitor its financial activities in the foreign market and maintain oversight of its funds additionally this vostro account arrangement helps mitigate risks associated with cross border transactions both banks must adhere to regulatory requirements such as anti money laundering and consumer regulations ensuring compliance and enhancing the integrity of the financial system example of a vostro accountwith a vostro account relationship in place the customer of a domestic bank can walk into the office of a correspondent bank to withdraw or deposit funds for example to process a customer s withdrawal of funds at a correspondent bank the domestic bank deducts the withdrawal amount plus any fees from the customer s account and executes a transfer to the vostro account held by the correspondent bank the funds are converted to the local currency deducted from the vostro account and paid to the domestic bank s customer minus the applicable fees | |
how does a vostro account benefit banks | vostro accounts allow banks to expand their global reach offer services in foreign currencies reduce transaction costs mitigate currency risks and provide convenient access to local banking infrastructure and services in foreign markets | |
what types of transactions are conducted through vostro accounts | vostro accounts facilitate a range of transactions including fund transfers foreign currency exchanges trade settlements payment processing and collection of local currency funds on behalf of the respondent bank s customers | |
what are the reporting requirements for vostro accounts | banks holding vostro accounts are required to maintain detailed records of transactions monitor compliance with regulatory obligations and provide regular reporting to the local regulatory authorities to ensure transparency and prevent money laundering or illegal activities | |
are vostro account balances insured | vostro account balances are generally not insured by deposit insurance schemes since they represent liabilities of the respondent bank held on behalf of the correspondent bank however deposit insurance coverage may vary by jurisdiction so it s important to understand the applicable regulations and safeguards in your specific country the bottom linea vostro account is a bank account held by one bank on behalf of another bank typically in a foreign currency it allows respondent banks to provide services to their customers in foreign markets leveraging the local banking infrastructure of the respondent bank vostro accounts facilitate international trade correspondent banking relationships foreign currency transactions and access to local banking services | |
what are voting shares | voting shares are shares that give the stockholder the right to vote on matters of corporate policymaking in most instances a company s common stock represents voting shares different classes of shares such as preferred stock sometimes do not allow for voting rights | |
how voting shares work | the holders of voting shares have the ability to weigh in on decisions about a company s future direction for instance if a company is considering an acquisition offer by another company or a group of investors the owners of voting shares would be able to cast their vote on the offer shareholders who own voting shares typically receive regular communications from the company regarding matters that would require a vote for the organization to act the decision to vote or not vote on such issues does not directly affect their ownership of shares or their value however there may be subsequent actions that result from the votes that affect the company s market value special considerationsit is not uncommon for so called activist investors to encourage the owners of voting shares to cast their votes in favor of an action or decision the activist investor wants the company to pursue hostile bids to acquire a company may see the prospective buyers campaign to the holders of voting shares in the hopes of gathering enough support to effect a new direction at the company this may include a change of the current board of directors which would allow for further changes at the organization such as the removal and replacement of executive officers of the company if the board of directors agrees to the sale of the company the approval process for the deal includes a vote among shareholders who own voting shares the owners of voting shares could reject an offer if they believe the bid does not meet their valuation of the company types of voting sharesdepending on the types of shares issued shareholders may have varying levels of voting power for example a company may reserve a class of shares for the founders upper management and early employees of the company that grants each of them several votes for each share they own management might issue additional voting shares that carry just one vote per share shares that hold no voting power may also be issued such an arrangement would grant a segment of stakeholders greater individual voting power for the decisions that shape the organization the different types of voting shares might also have a different market value particularly if new shares are offered through a stock split example of voting sharesgoogle is one of the most notable companies with multiple classes of shares there are shares that trade under the ticker symbol googl which are class a shares with voting rights and there is a class of shares trading under the symbol goog which are class c shares without voting rights google also has non traded class b shares these shares are held by company insiders and carry supervoting privileges each google class b share counts as 10 votes 1warren buffett s berkshire hathaway also has multiple share classes the company s class a shares trade under the ticker symbol brk a and have voting rights alternatively investors can purchase class b berkshire shares for a fraction of the cost but with barely any say on how the company is run 2 | |
what is a voting trust | a voting trust is a legal trust created to combine the voting power of shareholders by temporarily transferring their shares to the trustee in exchange for their shares shareholders receive certificates indicating they are beneficiaries of the trust the trustee is often obligated to vote in accord with the wishes of these participating shareholders | |
what is a voting trust | a voting trust is a legal trust created to combine the voting power of shareholders by temporarily transferring their shares to the trustee in exchange for their shares shareholders receive certificates indicating they are beneficiaries of the trust the trustee is often obligated to vote in accord with the wishes of these participating shareholders | |
definition of voting trust certificate | a voting trust certificate is a document issued by a limited life trust of a corporation established to give temporary voting control of a corporation to one or a few individuals a voting trust certificate is issued to a stockholder in exchange for his or her common stock and represents all of the normal rights of a shareholder e g receiving dividends except the right to vote the life of a voting trust certificate in many cases ranges from two to five years at which point the common stock with voting rights is returned to the shareholder breaking down voting trust certificatea voting trust certificate allows one or a small number of individuals known as voting trustees to gain control and make decisions regarding the corporation without interference a majority of shareholders must accept the voting trust certificates for the voting power arrangement to become effective the purpose is typically to allow reorganization when a corporation needs to overcome a short term financial challenge by handing over control to a group of trustees a majority of shareholders express confidence that the trustees can more quickly and efficiently execute the changes necessary to rectify a problematic situation that threatens their financial interest in the company voting trust certificates are more common among smaller firms than larger ones as it is easier in terms of administration and practice to issue them to shareholders terms of a voting trust agreementvoting trust agreements must be filed with the securities and exchange commission sec the legal document will contain among other terms the duration of the agreement the rights of shareholders other than voting rights procedures in the event of a merger consolidation or dissolution of the company and duties and rights of trustees another term in the contract is trustee compensation which by standard is normally none unless the majority of shareholders allows for a nominal amount | |
what is a voucher | a voucher is a document used by a company s accounts payable department to gather and file all of the supporting documents needed to approve the payment of a liability governments may also issue vouchers redeemable for various programs such as for school choice housing or social welfare initiatives a voucher may also refer to a document such as a coupon or ticket that is redeemable for some good or service this is prominent in the hospitality industry for instance airlines hotels and restaurants may issue vouchers that can be exchanged for rooms flights or fares understanding vouchersa voucher is essentially the backup document for accounts payable accounts payable are the short term bills owed by companies to vendors and suppliers the voucher is important because it s an internal accounting control mechanism that ensures that every payment is properly authorized and that the goods or services purchased are actually received companies have various short term financial obligations to suppliers and vendors throughout an accounting period a company might need to buy inventory or raw materials from suppliers that are used in the production of the company s goods the suppliers essentially grant an extension of credit to the company allowing for payment to be made in the near future such as 30 60 or 90 days a voucher is a form that includes all of the supporting documents showing the money owed and any payments to a supplier or vendor for an outstanding payable the voucher and the necessary documents are recorded in the voucher register requirements of a vouchersome of the supporting documents in a voucher can include vouchers often contain expiration dates in addition to various terms conditions and restrictions be sure to understand these in order to redeem them successfully special considerationsthe total amount of all the vouchers that have outstanding balances owed is recorded as accounts payable on the balance sheet once the voucher has been paid the proof of payment is included in the voucher and recorded as a paid voucher the company s vouchers serve as a key source of evidence when an audit is performed an auditor performs a set of procedures to determine if the financial statements are free of material misstatement vouchers document that the goods purchased were actually received which supports the auditor s assertion that the goods and services posted to the financial statements truly exist vouchers also justify the firm s cash payments to vendors and document the general ledger accounts used to post the transaction using a voucher system also reduces the risk of employees colluding to steal company assets businesses employ segregation of duties to prevent employee theft which means that critical tasks are assigned to different people within the organization the voucher documents that the tasks are performed by multiple people and creates a paper trail so that an auditor can confirm that the duties were properly segregated example of a vouchera local restaurant orders meat and fish every few days from its vendors the restaurant manager fills out a purchase order for 30 pounds of meat and the owner initials the purchase order to approve the shipment | |
when the shipment is received the contents of the shipment are compared with the purchase order to ensure that the shipment matches what was ordered the restaurant completes a shipping receipt to document the process and the shipping receipt is compared with the vendor s invoice | the voucher which is a cover page that explains the attached documents includes the purchase order shipping receipt and invoice the purchase amount is added and recorded to accounts payable on the balance sheet until paid the owner reviews all the voucher information before signing a check the voucher also includes the general ledger accounts used to record the transaction the restaurant for example can debit the meat inventory account and credit the cash account to record the payment the receipt of payment and the date are recorded to show that the voucher has been paid accounts payable will reflect the lower balance due to the invoice being paid assuming there are no additional payables generated | |
why is a voucher important | the importance of a voucher lies in the fact that it is an internal accounting control mechanism that ensures that every payment is properly authorized and that the purchased item is actually received | |
how are vouchers helpful | vouchers are critical when an audit is done they serve as a key source of evidence as they document that the goods and services posted to the financial statements truly exist they also corroborate the firm s cash payments to outside parties such as vendors additionally vouchers also act as a check and balance tool and reduce the risk of employee theft | |
what is included in a voucher | a voucher typically includes all of the supporting documents showing the money owed and any payments made for an outstanding payable some of the common documents are supplier invoices supplier name terms for payment such as the amount owed the due date and any discounts for paying the invoice early company s purchase order receipt of goods received general ledger accounts signatures of authorized representatives proof of payment of invoice and date of payment | |
what is a section 8 housing voucher | the housing choice voucher program also known as section 8 housing is a federal program that helps low income or disabled families obtain affordable private housing eligible families can use their vouchers toward any sort of home and are not limited to subsidized housing projects or apartment units 1 | |
what is a school voucher | a school voucher gives eligible families the right to choose a private or charter school using a portion of state funding otherwise set aside for public schools the bottom linevouchers that companies use in accounting provide the information needed to pay liabilities primarily those to vendors vouchers help organize payments and act as evidence in audits vouchers in different terminology are redeemable for government programs as well as for benefits provided to customers from businesses | |
what is a voucher check | a voucher check is a combination of a check and a voucher also known as remittance advice which includes pertinent information about the parties to the transaction and thus creates an auditable paper trail about that check s payment understanding voucher checksthe voucher check creates a paper trail for the payment by the issuer of the check the recipient of the voucher check detaches one voucher part and retains it for record keeping before cashing the check the issuer retains the other voucher portion voucher checks that are used in computerized accounting systems have three parts that together fit on standard sized sheets of paper for ease of use in printers the checks are usually business sized longer than a standard check but with the same width one part is the check and the other two parts are the vouchers for the payee and issuer for their respective records perforations make the different sections easy to separate a voucher is a document used by a company s accounts payable department to gather and file all of the supporting documents needed to approve and track the payment of a liability a voucher is essentially the backup documents for accounts payable invoicing or payroll accounts payable are the short term bills owed by companies to vendors and suppliers the voucher is important because it is an internal accounting control mechanism that ensures that every payment is properly authorized and that the goods or services purchased are actually received who uses voucher checks voucher checks are commonly used by a company s payroll department and are referred to as payroll checks the voucher will contain a voucher number name of the payee date amount gross and net if any deductions signatures and any memo notes that need to be recorded for payroll even though direct deposit is increasingly becoming the norm for paying employees having a paper trail back up is a common practice vendors also use voucher checks in this instance a voucher check is issued when an invoice is matched with a purchase order and documentation that the order was filled in addition for the accounts payable department having a file of voucher records of payments to vendors is helpful in resolving payment disputes and in preparing books for internal month end closings | |
what is a voyage policy | a voyage policy is marine insurance coverage for risks to a ship s cargo during a specific voyage unlike most insurance policies it is not time based but expires when the ship arrives at its destination it covers only the cargo not the ship that carries it a voyage policy is also known as marine cargo insurance understanding a voyage policyvoyage policies are commonly used by exporters who need marine shipping only occasionally or for relatively small amounts of cargo large exporters who ship by sea routinely tend to prefer open cover marine insurance which covers all cargo shipped by the policyholder for a specified time period a voyage policy covers unforeseen risks but not preventable risks for a voyage policy to be valid the vessel transporting the cargo must be in good condition and capable of making the journey and the vessel s crew must be competent a voyage policy is in effect only while the ship is at sea additional insurance is needed to cover losses during loading and unloading of cargo voyage policies generally cover accidental damage and collisions as well as natural disasters losses due to delays may be covered as well voyage policies may specifically exclude losses caused by willful misconduct ordinary leakage ordinary wear and tear improper or inadequate packaging and labor strikes acts of war and terrorist activity also are usually excluded the policyholder may need to purchase additional insurance to cover the cargo during the entire transport process as voyage policies typically exclude losses that occur during the loading and unloading of the cargo the policy is in place for the duration of the voyage however long it takes if there are unanticipated delays en route the coverage remains in place this allows for factors such as inclement weather at sea or a shortage of docking at the destination port because each policy is specific to a particular cargo and voyage all details of both are recorded in the policy contract | |
what is a vulture capitalist | a vulture capitalist is an investor who seeks to extract value from companies in decline the goal is to swoop in when sentiment is low and the company is trading at a rock bottom price and take whatever action is necessary to engineer a quick turnaround and sell it on for a profit understanding vulture capitalistsa vulture capitalist is a type of venture capitalist vc who looks for opportunities to make money by buying poor or distressed firms just like the bird they are named after vulture capitalists are predatory in nature they will wait until they see the right opportunity and swoop in at the last minute buying stakes at the lowest possible price most vulture capitalists will buy companies at a very low price to maximize the potential of higher returns and minimize the risk of walking away empty handed vulture capitalists get cheap deals by targeting companies that financial institutions fis do not want to lend money to after failing to obtain credit or funds from banks and or other investors the struggling company often has no choice but to accept whatever help is on offer once onboard the vulture capitalist will piece together aggressive financial goals they start out by attempting to revive the business cutting costs wherever possible to boost profits if they don t succeed in this goal vulture capitalists will often resort to selling off assets such as land buildings and machinery regardless of the outcome vulture capitalists almost always find ways to squeeze money out of their investments that remains the case even if the company a vulture capitalist acquires eventually ends up filing for bankruptcy vulture capitalist vs venture capitalist vc the way that vulture capitalists and venture capitalists vcs operate and choose to invest their money varies considerably rather than prey on the weak and immediately identify ways to cut costs vcs are more interested in providing capital to startups displaying early success vcs also provide funding to companies unable to secure financing elsewhere the primary difference between vulture capitalists and vcs is that the success of a vcs investments hinges on the targeted companies excelling and living up to their potential vcs aim to nurse nascent companies and set them on a path to one day become large cap companies vulture capitalists also hope their investments turn a corner albeit with a more short term focus at the same time vulture capitalists explore ways to profit from the demise of the companies they invest in criticism of vulture capitalistsvulture capitalists are regularly talked about negatively critics attack them for stripping companies down to the bone in order to line their own pockets for aggressively laying off staff and for lending money at very high interest rates to companies that they should instead be trying to help often vulture capitalists will go to great lengths to make money off their investments even if it means boosting unemployment and driving a company into the ground some pundits have hit back against the criticism being dished out at vulture capitalists arguing that they are important for the economy vulture capitalists they say actually manage to revive a lot of firms and even governments that appeared to be beyond saving vulture capitalists forced argentina into bankruptcy although some have applauded paul singer and his hedge fund for their harsh penalties claiming that it forced the country to get its act together | |
when this isn t the case proponents claim that vulture capitalists are at least instrumental in reallocating resources in the economy they take people and resources out of companies where they are not being utilized properly enabling them to be put to better use elsewhere | without vulture capitalists some pundits argue that more businesses would have to be bailed out at the expense of taxpayers example of a vulture capitalistalthough vulture capitalism has been part of american culture for a long time the term came into the spotlight during the republican primaries leading up to the 2012 general election during the primaries mitt romney said he was the best candidate to lead the party to the presidency because of his time at bain capital a private equity firm he helped co found in 1984 during several debates he stated that he helped rebuild companies that were struggling and in turn helped create jobs he promised to do the same thing for the u s that he said he did for bain capital citing his track record for building businesses creating jobs and boosting the economy unfortunately his opponents did not see it the same way while romney called himself a venture capitalist who helped companies in trouble they said he did nothing but prey on businesses and the people who worked for them rick perry newt gingrich and ron paul all took shots at romney who claimed bain capital put people out of work in order to boost its own profits in the end romney succeeded in becoming the republican nominee however he eventually lost to barack obama who went on to lead the country in his second term as president | |
what is a vulture fund | a vulture fund is an investment fund that seeks out and buys securities in distressed investments such as high yield bonds in or near default or equities that are in or near bankruptcy the goal is to swoop in and pick up underpriced shares that are perceived to have been oversold to make high risk but potentially high reward bets understanding vulture fundsvulture funds take extreme bets on distressed debt and high yield investing also deploying legal actions in their management strategies to obtain contracted payouts these funds are typically managed by hedge funds using various types of alternative strategies to obtain profits for their investors to achieve the strategy portfolio managers seek deeply discounted investments with high potential rates of return due to the high default risks generally investments are focused on fixed income instruments such as high yield bonds and loans that pay fixed or variable interest rates oftentimes the investments will be in government debt of distressed countries which requires even greater lobbyist involvement in resolving unpaid debts a number of legacy cases involving hedge funds and sovereign debt highlight the processes and procedures that vulture funds undergo to receive payouts for invested assets argentina s debt crisisafter 15 years of negotiations ending in february 2016 argentina agreed to repay six vulture funds that had invested in the country s debt leading hedge funds involved included elliott management s nml capital unit and aurelius capital management the final payout on the debt to the bondholders was negotiated at 6 5 billion 1puerto rico s debt crisisa similar situation emerged in puerto rico facing acute budgetary crises in 2006 2007 and from 2013 2016 when the u s territory has filed for bankruptcy 2 the country owed as much as 120 billion in bond and pension debt to its creditors which included u s mutual funds and hedge fund managers leading fund managers seeking repayment included oppenheimer franklin and aurelius capital management as a result the e puerto rico oversight management and economic stability act promesa was enacted in 2016 to restructure the territory s debts and adjust its budget most of puerto rico s debts incurred in the 2010s are undergoing one of the largest restructurings of public debt in u s history with vulture funds having played a prominent role in the debt restructuring 2vulture fund investmentswhile argentina and puerto rico are extreme cases they highlight some of the investments made by vulture funds resulting in substantial gains in addition to government debt real estate properties and highly leveraged firms are also top investments for vulture funds these funds are often willing to patiently wait for payouts resulting in substantial returns vulture funds use alternative investing strategies seeking bargain discount prices with substantial expected returns some people have looked down upon investment companies that operate like vulture funds since they prey on the cheap debt of struggling investments forcing companies to make payouts plus interest overall vulture funds and vulture fund management are not typically for the risk averse across the u s there are several investment managers who engage in this type of investing some of the most popular include autonomy capital canyon capital monarch alternative capital and aurelius capital management vulture capitalistsa vulture capitalist is a type of venture capitalist who specifically looks for opportunities to make money by buying poor or distressed firms they are also known for taking control over someone else s innovations and as a result the money that person would have acquired from those innovations the term is slang for someone who is an aggressive venture capitalist and as such is believed to be predatory in their nature just like the bird they are named after vulture capitalists will wait until they see the right opportunity and swoop in at the last minute taking advantage of a situation with the lowest possible price vulture capitalists are often criticized for their aggressive behavior because they are seen as preying on the companies they buy in order to make a profit they are called out because they will seek out the most distressed companies at really low prices they will go to great lengths in order to keep their costs down so as to make the most profit a venture capitalist may look first at cutting down staff which can lead to unemployment and cause a ripple effect in the economy | |
what is a vwap cross | a vwap cross is a trading indicator that occurs when a security s price crosses the volume weighted average price vwap breaking down vwap crossa vwap cross requires a trader to closely follow a security s current price and its volume weighted average price vwap vwap cross chartingtechnical systems can typically be programmed to chart a security s market price and vwap through candlestick patterns and trendlines drawn on a technical chart when a security s price crosses a vwap trendline then a vwap cross signal occurs traders typically consider vwap trendlines similar to resistance and support trendlines in a vwap charting pattern a vwap trendline is a single trendline charted on a candlestick chart this price pattern focuses on the movement of the vwap for a trader using a vwap trendline it is important to understand the vwap s calculation vwap security shares bought security share price security shares bought begin aligned text vwap frac text security shares bought times text security share price text security shares bought end aligned vwap security shares boughtsecurity shares bought security share price vwap is a moving average trendline that allows a trader to visually chart the affects of a security s volume in comparison to its price the vwap calculation is centered around the volume a security is experiencing from day to day other potential volume variables that may be used in conjunction with vwap include the positive volume index and the negative volume index vwap cross signal indicatorsvwap is a trendline that has two influencing factors volume and price thus several scenarios can occur from changes in volume and price generally vwap can be a useful trendline to include on a trader s candlestick chart vwap may be trending above or below a security s candlestick pattern inferences from the variables in vwap are primary drivers of buy and sell signals for traders the immediate affects of drastic volume and price changes that can be seen from following vwap make the vwap trendline a popular trendline for traders to follow if a security s price is trending below its support level a rapid increase in volume and price simultaneously will cause the vwap trendline to spike significantly crossing over the security s current price this can create a potential bullish buy signal adversely if vwap has been high and spikes to the downside it can be a bearish sell signal indicating that the security is expected to trend lower following the cross pattern using a vwap trendline and vwap cross can help a technical analyst to detect price movement in securities that may not yet be fully factored into the security s short term or long term price | |
what is cboe nasdaq volatility index vxn | the cboe nasdaq volatility index vxn is a measure of market expectations of 30 day volatility for the nasdaq 100 index as implied by the prices of options listed on this index 1 the cboe global markets cboe launched the vxn in january 2001 2understanding cboe nasdaq volatility index vxn the vxn index is a widely watched gauge of market sentiment and volatility for the nasdaq 100 which includes the top 100 u s and international non financial securities by market capitalization listed on the nasdaq the vxn is quoted in percentage terms just like its better known counterpart the cboe volatility index vix which measures 30 day implied volatility for the s p 500 index 13the cboe nasdaq volatility index was introduced in 2001 as the dot com bubble in technology stocks was deflating cboe developed the vxn because of the massive divergence between the volatility seen in the nasdaq market compared to the broader u s equity market from early 1999 onward 45indeed the nasdaq soared 157 in a 15 month period from january 1999 to its peak level of 5 048 on march 10 2000 before plunging 52 to below 2 500 by december 20 2000 6 the s p 500 by comparison only gained 21 from january 1999 to its march 24 2000 peak and then declined back down 18 by the end of 2000 7the higher the vxn level the greater the expectation for nasdaq 100 volatility like the vix the vxn functions best as a fear gauge or indicator of market nervousness about the technology sector since its introduction the highest level reached by the vxn was 71 72 in september 2001 brought on by the 9 11 attack other notable peaks include 79 16 in october 2008 at the height of the global financial crisis and 80 08 in march 2020 as the world reeled under the global economic shutdown the 2020 crisis induced vxn spike proved to be short lived as the gauge returned to levels in the 30s on the flip side the lowest level was 10 31 in march 2017 8vxn methodology and interpretationthe methodology used by the cboe to calculate the vxn whose value it disseminates continuously during trading hours is identical to that used for the vix vxn components are near term with at least one week to expiration put and call options and next term options in the first and second nasdaq 100 contract months options with more than 23 days and less than 37 days to expiration the selected options are out of the money nasdaq 100 puts and calls centered on an at the money strike price 910movement in the vxn represents the level of implied volatility from the prices of listed options on the nasdaq 100 index increases in the vxn and positive movement represent higher variances in the underlying securities price from their average this usually occurs with uncertainty decreases in the vxn and negative movement represents lower volatility and a greater propensity for prices to trade in a tighter range the vxn is generally followed along with the nasdaq 100 to understand volatility in relation to positive or negative movements in the prices of the index | |
what is form w 2 wage and tax statement | form w 2 also known as the wage and tax statement is a document an employer sends to each employee and the internal revenue service irs and shows income earned from an employer and the amount of taxes withheld from an employee s paycheck so taxpayers can file federal and state taxes a w 2 employee is someone whose employer deducts taxes from their paychecks and submits this information to the government who files form w 2 an employer must send out a w 2 form to every employee to whom they paid a salary wage or other form of compensation this does not include contracted or self employed workers who file taxes with different forms the employer must send the employee the w 2 form on or before january 31 each year so that the employee has time to file income taxes before the deadline commonly april 15 12employers use w 2 forms to report the federal insurance contributions act fica taxes withheld by the end of january employers must file for the previous year form w 2 along with form w 3 for each employee with the social security administration ssa the ssa uses the information on these forms to calculate the social security benefits each worker is entitled to 3tax documents reflect earnings and deductions for the previous year a w 2 form in january 2024 shows income earned in 2023 information included on a w 2employees receive a w 2 for their income taxes sent annually by their employer taxpayers will receive multiple w 2s if they work for more than one employer the irs also gets a copy taxpayers input the data found on the w 2 into a form 1040 individual tax return either by hand or electronically regardless of the employer or company every w 2 includes the same information 2 | |
how to read form w 2 | w 2 forms include numbered and lettered boxes that an employer must fill out to reflect how much you earned and taxes withheld employees will receive separate w 2s for federal state and local taxes form w 2 is available on the irs website related tax documentsform w 4 is completed by employees when they start working for a company the employer uses the information to determine how much tax to withhold from paychecks the information on form w 4 or sometimes form w 9 helps track payroll tax withholding employer provided benefits and pre tax contributions to things like a 401 k retirement plan 4 | |
when taxes are not withheld an employee will receive a 1099 form showing the earnings and any deductions made individuals must report this income on their annual tax filing forms this usually arrives by the end of january of the following year 5 | form w 2g is a tax form that a gaming facility such as a casino may send if a taxpayer received winnings from gambling in the prior year 6students receive a 1098 e statement when they ve paid interest on a federal student loan students also receive a 1098 t statement reporting college tuition expenses that might entitle students to tax deductions or credits 78 | |
how much money do you need to make to get a w 2 | individuals commonly receive a w 2 from an employer if they earn at least 600 contracted individuals or independent contractors are not considered employees and receive a 1099 instead of a w 2 1 | |
what is the difference between a w 2 and a w 4 | a w 4 provides an employer with an employee s tax id number usually ssn marital status number of allowances and dependents and how much tax to withhold with each paycheck the w 4 is filled out when an employee is hired or if any changes must be made to filing status or withholding the w 2 is filled out by employers at the end of the tax year and sent to employees to input on their tax returns 49the bottom lineform w 2 is an irs form that employers must send to an employee and the irs every year the form reports an employee s annual wages and the taxes withheld employees also use the form to file their taxes every year | |
what is a w 4 form | form w 4 is an internal revenue service irs tax form that is filled out by employees to indicate their tax situation to their employer the w 4 form tells the employer the amount of tax to withhold from an employee s paycheck based on their marital status number of allowances and dependents and other factors the w 4 is also called an employee s withholding allowance certificate 1 understanding the w 4 formthe employee fills out seven lines on the w 4 form the first few lines include the taxpayer s name address and social security number a worksheet included with the form lets taxpayers estimate the number of allowances on their tax withholding increasing the number of allowances reduces the amount of money withheld from the paycheck a person can claim an exemption from withholding any money if they did not have a liability during the previous year and expect to have zero tax liability in the next year 2 the accompanying worksheet to the w 4 form starts by letting taxpayers add one allowance if they cannot be claimed as a dependent on someone else s income tax return employees can take another allowance if they are single and have just one job are married with one job and the spouse doesn t work or have wages from a second job within the family totaling less than 1 500 on jan 1 2018 the personal exemption federal tax break was suspended until jan 1 2026 in the wake of the tax cuts and jobs act on the next line of the worksheet line e for the child tax credit employees can claim allowances for each of their eligible children depending on income earned and how many children they have the following line line f for credit for other dependents asks employees to enter allowances for other dependents that will be claimed on their tax return irs publication 501 spells out who qualifies as a dependent there are income limitations for credit in this section 3those looking to apply other credits such as the earned income credit eitc will fill out line g to see if you may be entitled to additional allowances see worksheets 1 6 in irs publication 505 on the final line line h add up all the numbers from the previous lines and enter the total the worksheet also has additional pages for more complex tax situations such as itemizing deductions on your tax return instead of taking the standard deduction the employer then calculates how much to withhold from a paycheck based on the allowances calculated on the w 4 form the money withheld goes to the irs after each paycheck special considerations for the w 4 formtaxpayers can file a new w 4 at any time and should do so whenever their situation changes such as when they marry divorce have a child or when a dependent dies a change in status can result in the employer withholding more or less tax as well the elimination of the personal exemption for tax years 2018 through 2025 could change the number of allowances that should be taken | |
what are w 8 forms | w 8 forms are internal revenue service irs forms that foreign individuals and businesses must file to verify their country of residence for tax purposes certifying that they qualify for a lower rate of tax withholding although the w 8 forms are issued by the irs they are submitted only to payers or withholding agents not to the irs failure to submit the form may result in a withholding at the full 30 rate that applies to foreign entities 1who can file w 8 forms w 8 forms are filled out by foreign individuals or entities that lack u s citizenship or residency but have worked in the u s or earned income in the u s this usually applies to foreign domiciled businesses and non resident aliens for example a nonresident foreigner who earns interest or dividends from u s issued securities would likely file a w 8ben while a foreign nonprofit with operations in the u s might need to file form w 8eci former u s residents who earn retirement income or who occasionally perform freelance work for u s clients might also have to submit the form to reduce their tax withholdings a u s citizen or resident alien will never have to complete a w 8 form foreign individuals or businesses that earn income in the u s must pay a 30 tax on certain income types the w 8 form will collect information on who the individual or business is where they re from and the types of income earned 1 | |
how to file w 8 forms | there are five w 8 forms these forms are requested by the payers or withholding agents and kept on file with them not filed with the irs the version of the form used is determined by both whether or not the filer is an individual or a business and the nature of the income the filer received the forms are effective for the year in which they are signed and three calendar years afterward therefore a w 8ben signed on jan 25 2024 would be valid through dec 31 2027 2the w 8 series of forms are fairly complex though they require basic information such as name country of origin and taxpayer identification number tin they also ask for the contacts from which the filer is receiving the reported income a professional is often consulted to assist in completing them w 9 forms are also irs forms used to provide or confirm a person s name address and taxpayer identification number tin the w 9 forms are only required for u s citizens or resident aliens or u s entities 3types of w 8 formsthe following are the five types of w 8 forms and the circumstances where they should be used form w 8ben certificate of foreign status of beneficial owner for united states tax withholding and reporting must be submitted by foreign persons who receive certain types of income in the united states the form sometimes referred to as a certificate of foreign status establishes that the individual is both a foreign person and the owner of the business in question 4foreign individuals are ordinarily subject to a tax rate of 30 on specific types of income and capital gains they receive from u s payers including 2the form also helps you claim a reduction or an exemption from the u s tax withholding if you reside in a country with which the united states has an income tax treaty and the income you received is subject to that treaty foreign persons must provide form w 8ben to the withholding agent or payer if they are the beneficial owner of the income subject to the tax withholding you must submit the form regardless of whether you are claiming a reduced withholding 5individuals must submit the form to the payer or withholding agent prior to receiving income or credits from them failure to submit a form w 8ben could result in paying either the full 30 rate or the backup withholding rate under section 3406 5form w 8ben is used by foreign individuals who receive nonbusiness income in the u s whereas w 8ben e is used by foreign entities who receive this type of income 6form w 8ben e is also titled certificate of foreign status of beneficial owner for united states tax withholding and reporting but it is filed by foreign entities not individuals 7as with foreign persons who receive certain types of income the money generated by foreign businesses is typically withheld at a 30 rate by the payer or withholding agent in the united states however the form allows the foreign business to claim a reduction in taxes if its country of residence has a tax treaty with the united states 8non u s businesses must provide the form w 8ben e for the same sources of income that would require an individual to file a form w 8ben foreign entities that do not provide an accurate w 8ben e when required to do so will typically have to pay the full 30 tax rate 8form w 8eci is the certificate of foreign person s claim for exemption that income is effectively connected with the conduct of a trade or business in the united states it is filed by foreign individuals who engage in a trade or business in the united states and receive income from u s sources 9these proceeds are generally considered effectively connected income eci whether or not there is a connection between the income and the trade or business being conducted in the united states in a particular year 10crucially eci is not subject to the same 30 withholding that applies to interest rents and other nonbusiness income instead after subtracting applicable deductions it is taxed at the graduated rate that u s citizens and resident aliens pay if your work is covered by a u s treaty it would be taxed at the lowest rate under that treaty 11in most cases you must have engaged in trade or business activities in the united states sometime during the tax year to be able to categorize income as eci that would be the case if for example a foreign individual performed personal services in the united states during the year in addition money made by a foreigner through investments in a partnership that conducts trade or business in the u s would also be treated as eci however foreigners whose sole u s income is based on the trading of securities or commodities through a u s based broker are not considered to be engaged in a trade or business with the united states therefore they would not be subject to eci tax treatment 10form w 8exp is the certificate of foreign government or other foreign organization for united states tax withholding and reporting and is used by certain payees in order to claim a reduction of or exclusion from tax withholding these include foreign governments foundations and tax exempt organizations as well as governments of a u s possession or foreign central banks of issue 1213in order to receive a reduction or an exemption from tax withholding the entity must be eligible under irs code 115 2 501 c 892 895 or 1443 b should none of those exemptions apply the entity must file a w 8ben or w 8eci if it received effectively connected income 12as with other w 8 forms form w 8exp must be sent to the payer or withholding agent before income is paid to you not doing so could lead to a tax withholding at the 30 rate a backup withholding rate or the eci tax rate 12form w 8imy is the certificate of foreign intermediary foreign flow through entity or certain u s branches for united states tax withholding and reporting the purpose of the form is to certify that a person or business received withholdable payments on behalf of a foreigner or as a flow through entity the form is intended for intermediaries and should not be used by beneficial owners in a business 1415examples of entities who must file a w 8imy include 14a complete list of persons or entities required to file the form is in the irs instructions for form w 8imy copies of withholding statements and other documentary evidence should be included with the form when it s submitted 14 | |
what is a w 8ben | form w 8ben is submitted by foreign individuals who receive income in the u s the form establishes that the person is a foreign individual and owner of said business the w 8ben is referred to as the certificate of foreign status 16who needs to fill out form w 8ben form w 8ben is used by foreign individuals who receive income from sources in the u s only non u s persons file form w 8ben not u s persons 16 | |
how do i get my w 8ben | form w 8ben is sent by the company making payments to the individual the form should be returned to the company or entity that sent the form w 8ben not the irs it s also not meant to be filed with a tax return typically the form should be submitted before the first payment is made | |
why is a w 8ben e required | the w 8ben e is used for businesses unlike the w 8ben which is only for individuals the w 8ben e is required as foreign businesses are subject to the same withholding tax rate as individuals 30 however businesses like individuals may also qualify for a reduced tax rate the w 8ben e helps establish eligibility for reduced rates 8the bottom linethere are five types of irs w 8 forms these forms are used by foreign individuals or entities the forms are submitted to the payer or withholding agent and not the irs the forms vary but the key information requested includes the name of the individual or business address and tins | |
what is form w 9 | a w 9 form is an internal revenue service irs tax form that is used to confirm a person s name address and taxpayer identification number tin for employment or other income generating purposes the confirmation can be requested for either an individual defined as a u s citizen or a person defined as a resident alien a w 9 form is also known as a request for taxpayer identification number and certification form understanding form w 9a w 9 form is a formal written request for information only and is used solely for the purpose of confirming a person s taxpayer identification number tin an employer or other entity that is required to file an informational document with the irs such as form 1099 must obtain your correct tin to report any earnings or losses that may affect your federal tax return or your taxable income for most individuals the tin will be their social security number ssn 1the w 9 differs from a w 4 form which is more commonly supplied by employees to direct employers in that the w 9 does not inherently arrange for the withholding of any taxes due 2any required taxes based on gains related to the provided w 9 are the responsibility of the tin holder listed on the document unless the taxpayer is subject to backup withholding if backup withholding is required this will need to be noted on the w 9 to properly inform the entity receiving the information of the need to withhold accordingly 1uses of form w 9the information obtained on a w 9 form is most often used to create a version of form 1099 a 1099 form contains information about any income that may have been received by the tin holder that would not normally be listed on a w 2 3however a w 2 is only issued to employees of a company not independent contractors or unrelated vendors 4 this includes but is not limited to income paid to a person as part of a contract certain real estate transactions dividends paid against an investment and various other financial transactions 5the irs requires those who are not defined as u s citizens or resident aliens to use the appropriate w 8 form in place of a w 9 form 6form 1099 is only required to be issued once the minimum income threshold is reached which for most miscellaneous income is set at 600 7 amounts under this threshold must be reported as income by the tin holder but do not require a 1099 form 8even though employees are legally required to supply certain personal information to their employers an employee s privacy is protected by law an employer who discloses an employee s personal information in any unauthorized way may be subjected to civil and criminal prosecution 9 | |
how to fill out form w 9 | form w 9 is one of the most straightforward irs forms to complete but if tax forms make you nervous don t worry we ll walk you through the proper way to complete it all pages of form w 9 are available on the irs website in addition the form may include a specific set of instructions provided by the irs enter your name as shown on your tax return enter your business name or disregarded entity name if different from the name you entered for step 1 for example you might be a sole proprietor but for marketing purposes you don t use your personal name as your business name instead you are doing business as some other name you would enter that name here a common disregarded entity type is a single member limited liability company smllc 10 sole proprietorships and single owner s corporations are similar in that income passes through to the single owner shareholder but they re not generally thought of as disregarded entities 111213select which type of business entity you are for federal tax classification sole proprietorship partnership c corporation s corporation trust estate limited liability company or other check the appropriate box and only one classification should be selected if you re not sure what type of business entity you should select the irs has provided a summary table for guidance as part of the form w 9 s instructions 14with exemptions chances are you re going to leave these boxes blank here are a couple of exceptions provide your street address city state and zip code use the address that you will use on your tax return for example if you re a sole proprietor who rents office space but you file your tax return using your home address enter your home address on form w 9 so the irs won t have trouble matching your 1099s with your form 1040 in addition the w 9 may be a company s primary means of obtaining your personal information as this information may get logged into their accounting system when you get set up as a supplier in their records this address may be used to furnish your 1099 or mail you other important tax documents in this optional step you can provide the requester s name and address you might want to fill out this box to keep a record of to whom you provided your tax identification number in addition you have the option to list relevant account numbers at the end of this top section of the form w 9 this account number section may be used to uniquely identify someone based on a number within the client s system for example someone may request you to fill out a form w 9 if you are supplier 45 in their records they may ask you to make note of your supplier number on this line the irs calls the next section part i here you must provide your business s tax identification number which will either be your individual social security number if you re a sole proprietor or your employer identification number ein if you re another type of business now some sole proprietorships also have eins but the irs prefers that sole proprietors use their ssns on form w 9 again doing so will make it easier to match any 1099s you receive with your tax return which you will file under your ssn | |
what if your business is new and doesn t have an ein you can still fill out a w 9 form the irs says you should apply for your number and write applied for in the space for the tin you ll want to get this number as quickly as possible because until you do you ll be subject to backup withholding 16 you can apply for an ein at the irs website see the instructions below for step 8 part ii for more on backup withholding | in part ii you must attest to the truthfulness of all of your information before you can sign form w 9 intentionally lying on a tax form could mean you ll have to pay a fine or go to jail before signing form w 9 here are the statements you must certify are true under penalty of perjury 171 the number shown on this form is my correct taxpayer identification number or i am waiting for a number to be issued to me 2 i am not subject to backup withholding because a i am exempt from backup withholding or b i have not been notified by the internal revenue service irs that i am subject to backup withholding as a result of a failure to report all interest or dividends or c the irs has notified me that i am no longer subject to backup withholding 3 i am a u s citizen or other u s person 4 the fatca code s entered on this form if any indicating that i am exempt from fatca reporting is correct who must complete a w 9 form a form w 9 must be completed by one party and furnished to a second party if the second party is going to furnish specific types of payments in the future most broadly form w 9 must be filled out by independent contractors that perform work for another party with which they are not employed this includes freelance workers or gig employees under non employment structures a w 9 is also required from people in specific circumstances a bank or lending institution may ask for a w 9 as part of the process of setting up a new account as interest and dividend payments are furnished through form 1099 int participants in a contest that may win prizes may also be required to fill out a w 9 as the prize value may be taxable income and require irs reporting forms 1098 and 1099 are also used to furnish mortgage interest payments student loan payments real estate transaction proceeds and discharge of certain types of debt for these forms the opposing party may request form w 9 to ensure they have appropriate information on file 22completing a form w 9 is required whether you are subject to withholding or not if you are exempt this form is your means of communicating that exception to the paying party 15special considerations when filing form w 9form w 9 tells you to cross out item 2 above if you have been notified by the irs that you are currently subject to backup withholding because you have failed to report all interest and dividends on your tax return you may cross out item 2 if you re filling out form w 9 in connection with a real estate transaction item 2 doesn t apply in this case so it doesn t matter if you re subject to backup withholding 1now if you read the fine print in the w 9 instructions carefully it seems to indicate that most people aren t required to sign this form at all you re generally only required to sign it if the irs has notified you that you previously provided an incorrect tin technicalities aside however the person who asked you to fill out form w 9 will probably consider it incomplete or invalid if you haven t signed it return your completed form w 9 to the business that asked you to fill it out ideally you ll deliver it in person to limit your exposure to identity theft but this method often isn t practical mail is considered relatively secure if you must email the form you should encrypt both the document and your email message and triple check that you have the recipient s correct email address before sending your message free services are available online to help you do this but check their reputations before trusting your documents to them typically the business that needs to submit a w 9 to the irs will give you one to fill out if someone asks for a completed form w 9 it s usually for a good cause be skeptical of requests where you re not sure why your information is needed or who is making the request it is expected that requests as part of normal business operating activities will be fulfilled there are some repercussions if you do not remit form w 9 first the payor is required to begin withholding taxes from future payments as of 2023 the current withholding rate is 24 18in addition there are the following penalties for non compliance investopedia s tax savings guide can help you maximize your tax credits deductions and savings order yours today form w 9 vs form w 4two commonly used forms for tax purposes are form w 9 and form w 4 though similar sounding they have very different purposes recipients and uses form w 9 serves the aim of requesting information from a taxpayer usually an independent contractor or freelancer in order to file taxes meanwhile employees utilize the w 4 form to supply information to their employers for the purpose of income tax withholding the entity paying the taxpayer the person or business rendering the services receives the w 9 form from the taxpayer when reporting the payments made to the taxpayer at the end of the year the organization uses the data on the w 9 form to create and issue form 1099 misc or other applicable tax forms this is quite different than form w 4 the employee gives their employer the w 4 the w 4 is used by the employer to determine how much federal income tax should be withheld from the employee s paycheck and reported to the irs as opposed to needing this from an external party a company seeks out a w 4 from its own internal team 2last many of the same items are collected across both forms each call for a tin name and related tax information however the nature of the recipient are very different a w 4 will request information such as the taxpayer filing status i e is the taxpayer married 24 alternatively a w 9 asks for legal company information | |
what is form w 9 used for | form w 9 is used to furnish tax information from one party to another it s a way of formally gathering personal information having a standard method of transmitting information and requiring the furnisher to certify that the information they are providing is correct form w 9 is then used to issue specific tax statements to non employees that earned certain types of payment throughout the year who needs to fill out a w 9 broadly speaking anyone who will receive compensation as a non employee is required to fill out a w 9 there are many situations that may arise when form w 9 is required for example a taxpayer who is set to collect interest receive proceeds from a real estate transaction pay home mortgage interest pay student loan interest or have debt canceled is also required to receive specific types of either form 1098 or 1099 in order to accurately furnish the tax form an opposing party may request your tax information via form w 9 | |
is a w 9 used for self employed individuals | yes a w 9 is most often used for individuals who are self employed if a worker is an independent contractor freelancer or self employed form w 9 must be provided to those whom you have earned over 600 from without having been hired as an official employee | |
should you choose not to furnish a form w 9 or if the information provided is incorrect a 24 withholding tax will be taken from future payments you receive from your client in addition there are penalties and fees for intentionally failing to furnish correct information or misuse of tins | the bottom lineform w 9 is an irs tax form that requests information for an individual defined as a u s citizen or a person defined as a resident alien the information is used to fill out form 1099 and is used for independent contractors freelancers or unrelated vendors but not employees failing to fill out the form can result in penalties | |
what is a w shaped recovery | a w shaped recovery refers to an economic cycle of recession and recovery that resembles the letter w in charting a w shaped recovery represents the shape of the chart of certain economic measures such as employment gross domestic product gdp industrial output and others a w shaped recovery involves a sharp decline in these metrics followed by a sharp rise back upward followed again by a sharp decline and ending with another sharp rise the middle section of the w can represent a significant bear market rally or a recovery that was stifled by an additional economic crisis a w shaped recovery is also known as a double dip recession understanding a w shaped recoverya w shaped recovery generally is characterized by a period of extreme volatility in comparison with other types of recoveries there are countless other shapes a recession and recovery chart could take common examples include patterns in the shapes of the letters v w u and l each letter represents the general shape of the recovery s chart of economic metrics that gauge economic health a w shaped recession begins like a v shaped recession but then turns back down again after showing false signs of recovery w shaped recessions are also called double dip recessions because the economy drops twice before the full recovery is achieved a w shaped recession is painful because many investors who jump back into the markets after they believe the economy has found a bottom end up getting burned twice once on the way down and then once again after the false recovery the u s experienced a w shaped recovery in the early 1980s from january to july 1980 the country s economy experienced the initial recession then entered recovery for almost a full year before dropping into a second recession in 1981 to 1982 1image by sabrina jiang investopedia 2022drastic shifts in market sentiment are par for the course during economic phases such as recession or recovery this is a natural part of the economic cycle and is expected based on the release of new information broadly speaking concerns of the day lead to sudden shifts in consumer or corporate behavior which in turn have a great impact on the direction of the markets and state of the economy one day it might look like the market or economy is on the road to a quick recovery but then the underlying situation changes and that market or economy dips lower again relapses in economic corporate or consumer level trends are not uncommon this is the very nature of the w shaped recovery looking at the covid 19 pandemic global economies were hit hard during the first wave and then recovered at different rates as news of a vaccine was announced then administration of it was planned and accomplished subsequent waves hit economies and markets in different ways but for many a move lower was the norm as government restrictions were altered businesses closed their doors and individuals finances were affected in many ways the covid 19 situation created a case study on the negative effects of a w shaped recovery and it continues to impact investors individuals and governments around the world looking a bit further back in history a strong example of a w shaped recession was the european debt crisis that occurred approximately between 2010 and 2014 the crisis spilled out of the great recession near the end of 2009 and was marked by high levels of government debt as the pressure of bank bailouts increased investor confidence decreased which sparked the start of an economic decline once immediate concerns over certain governments solvency levels started to wane broader economic conditions started to improve however this improvement would turn out to be short lived as further rounds of bailouts and shifts in spending would be required which in turn affected the trajectory of recovery and resulted in a double dip recession countries that were hardest hit by the double dip recession were portugal spain germany ireland and cyprus 2 | |
what is a double dip recession | a double dip recession is a term used to refer to a recession that is followed by a short lived recovery and then is followed by yet another recession such a relapse into recession after already being in a recession isn t uncommon as investors start to question the conviction of a recovery based on new or changing information | |
what is a double bottom pattern | a double bottom pattern is a chart pattern used by followers of technical analysis to mark the reversal in a primary trend while the w shape recovery is often looked to by traders on charts of equities it is also used to monitor major indexes and when trying to spot shifts in economic cycles | |
what are the most common reversal patterns | some of the most common chart patterns that technical traders use to mark major shifts in underlying trends are double bottom double top triple bottom triple top head and shoulders cup and handle reversal patterns typically have a v w or u shape the bottom linea w shaped recovery is an economic cycle of recession and recovery that looks like the letter w in investment or economic charts of certain economic measures such as employment gross domestic product gdp and industrial output people also refer to a w shaped recovery as a double dip recession this kind of recovery involves a sharp decline in these measurements followed by a sharp rise upward then another sharp decline and finally a further sharp rise the middle section of the w can turn out to be a major bear market rally or a recovery stifled by an additional economic crisis such relapses in economic corporate or consumer level trends are fairly common | |
what is a wage assignment | wage assignment is the act of taking money directly from an employee s paycheck in order to pay back a debt obligation such an automatic withholding plan may be used to pay back a variety of debt obligations including back taxes defaulted student loan debt and both child and spousal support payments | |
how wage assignment works | wage assignments are typically incurred for debts that have gone unpaid for a prolonged period of time employees may sometimes opt for a voluntary wage assignment to pay for things like union dues or to contribute to a retirement fund a wage assignment is processed as part of an employer s payroll procedure the employee s paycheck is decreased by the amount of the assignment and noted on their pay stub a wage assignment is often a lender s last resort to receive repayment from a borrower who has previously failed to pay a debt obligation wage assignments are a valuable tool for collecting unpaid debts but unfortunately they may be associated with abusive lending practices if you re struggling with your debt one of the best debt relief companies or credit counseling agencies may be able to help you get back on track before a wage assignment is incurred | |
what makes wage assignments voluntary | in a voluntary wage assignment a worker essentially asks their employer to withhold a portion of their paycheck and send it to a creditor to pay off a debt loan agreements may sometimes include a voluntary wage assignment clause in their terms should the borrower default on their loan payday lenders often include voluntary wage assignments into their loan agreements to better their chances of being repaid laws regarding wage assignments vary by state for example in west virginia wage assignments are capped at 25 of a worker s take home earnings the employee and the employer must sign the agreement and agreements must be renewed annually 1 under illinois law a lender cannot resort to wage assignment until a debt is 40 days in default the wage assignment cannot continue for more than three years and the worker can stop the wage assignment at any time 2wage garnishmentinvoluntary wage deductions known as wage garnishments require a court order and are most likely to be employed to collect spousal and child support payments that have been ordered by a court wage garnishments may also be used to collect unpaid court fines or student loans that have been defaulted on 3several states allow individuals to sign up for voluntary child support agreements in such a case both parents must agree to a plan once that happens a voluntary wage assignment may begin if a child support or welfare agency is involved they would have to approve any plan | |
how long can i have a wage assignment | since wage assignments are voluntary the length of time that you use one can vary some loans include a wage assignment agreement so you ll have to check the language of your loan to determine your obligation each state also has its own regulations regarding wage assignments | |
how much of my income can go to wage assignments | every state has its own regulations but typically 15 25 of your disposable income can be designated for wage assignments 4 | |
is wage garnishment the same as wage assignment | while they are similar wage garnishment and assignment are not the same wage garnishment is an involuntary paycheck deduction typically ordered to repay child support student loans tax debt or bankruptcy a wage assignment is voluntary and may be used to repay a consumer debt 3the bottom linewage assignments may be a useful tool to help you pay down a debt wage assignments are voluntary but they may be hidden in the fine print of some loan products so read everything carefully before signing check the regulations in your state to determine if your wage assignment is revocable | |
what is a wage earner s plan | a wage earner s plan known more formally as chapter 13 bankruptcy enables individuals with a regular income to restructure their obligations to repay their debt over time 1 in a wage earner s plan the debtor does not seek to earn general forgiveness of their outstanding debts rather the debtor offers up a repayment plan that utilizes fixed installment payments effectively consolidating debts into one monthly amount the debtor makes payments to an appointed impartial trustee who then forwards them to the creditor for a specified period usually three to five years 1 understanding wage earner s planschapter 13 bankruptcy was formerly called a wage earner s plan because relief under it was only available to individuals who earned a regular wage subsequent statute changes expanded it to include any individual including the self employed and those operating an unincorporated business 1 any individual is eligible for chapter 13 bankruptcy as long as their unsecured debts are less than 394 725 and secured debts are less than 1 184 200 and they have received credit counseling from an approved credit counseling agency either in an individual or group briefing within 180 days of filing a corporation or partnership is not eligible for chapter 13 bankruptcy 1 chapter 13 bankruptcy vs chapter 7 bankruptcyperson who is seriously in debt may file for either chapter 13 bankruptcy or chapter 7 bankruptcy chapter 13 bankruptcy allows for the reorganization of debt while chapter 7 bankruptcy involves outright liquidation with a chapter 13 bankruptcy debtors are allowed to keep their property when a debtor files for a chapter 7 bankruptcy they may be able to keep home equity or a car but equity shares second homes and or vacation properties will be forfeit to pay back creditors 2 1 one of the biggest advantages of chapter 13 is that it offers individuals an opportunity to save their homes from foreclosure by filing for chapter 13 bankruptcy individuals can halt any foreclosure proceedings and submit a plan to pay off any delinquent mortgage payments over a period of three to five years chapter 7 is the most common form of bankruptcy because it allows individuals to erase their existing debt and start over however oftentimes with a chapter 7 bankruptcy the individual filing surrenders their home in the process 2 a chapter 13 bankruptcy also allows individuals to reschedule secured debts excluding a mortgage on their primary residence and extend them over the life of the plan which may lower their payments in addition a chapter 13 bankruptcy has a special provision that may protect co signers under this provision plan payments are made to an appointed impartial trustee who distributes them to creditors so the debtor has no direct contact with creditors 1 | |
how to file for a wage earner s plan | in order to file for chapter 13 bankruptcy the debtor must first make a list of each creditor they owe money to along with the amount of money owed they must also compile a list of any property owned those filing for chapter 13 bankruptcy must also submit information about their income how much they make and where their income comes from in addition to detailed information about their monthly expenses debtors must also have completed credit counseling before becoming eligible 1 example of a wage earner s planeric and sam are a married couple eric lost his job in a round of layoffs and his husband sam was injured at his job leaving him unable to work in the same year they fell behind on their mortgage payments and eventually ended up owing 75 000 to their bank soon after the bank initiated foreclosure proceedings eric received a job offer and sam launched a small business from their home by filing for a chapter 13 bankruptcy they were able to stop the foreclosure proceedings and keep their home as a result of their now steady income stream eric and sam can pay their mortgage each month going forward the back payments they owe on their mortgage are due over a five year period with manageable payments spread out over that time | |
what is a wage expense | a wage expense is the cost incurred by businesses to pay their hourly employees as a matter of record keeping the wage expenses line item may also include the expenses of payroll taxes and employee benefits a wage expense may be recorded as a line item in the expense portion of the income statement this is a type of variable cost understanding wage expenseswage expenses are sometimes reported for each department this is usually the case when there is a production department which often has the most hourly employees as an alternative wage expenses for production workers may be added into the cost of goods sold cogs item on the income statement wage expenses vary from one period to the next depending on the number of business days in the period and the amount of overtime to be paid for many businesses wage expenses increase during the winter holiday season in response to higher demand for their products after the holiday season companies may cut back on the number of workers as sales slow accounting for wage expensesunder the accrual method of accounting wage expenses are recorded based on when the work was performed under the cash method of accounting wage expenses are recorded at the time the payments are made wages payable is the line item that records how much money is owed to workers but not yet paid it is a liability account when a wage expense is recorded it is a debit to the wage expenses account which requires a credit to the wages payable account for the same amount until the wage is paid to the worker wages are typically paid to a worker in the pay period following the period in which the work was performed so there is always a delay that must be reflected in the wages payable account a wage expense is listed on the income statement while the wages payable account is a liability on the balance sheet minimum wagea wage expense has to at least be equal to the minimum wage dictated by the federal government or the state government the current minimum wage in the u s is 7 25 an hour and has not been raised since 2009 many states have implemented minimum wages that are higher than the federal wage and employers in those states have to pay the higher state minimum wage 12many companies pay a higher minimum wage than the federal or state minimum wage they include walmart kroger target costco and amazon 3thirty states and the district of columbia guam puerto rico and the u s virgin islands all have mandated minimum wages that are higher than the federal minimum wage twenty two states increased their minimum wages on jan 1 2024 45wage expense vs salary expensewage and salary are often used interchangeably but they refer to different types of payments for employment wages most often mean hourly pay the worker is paid per hour for a set number of hours per week if they go over the set amount of hours they are usually paid overtime overtime pay is typically higher than regular hourly pay often it s 1 5x the hourly pay salary refers to a set payment and is usually quoted as an annual sum rather than an hourly wage there is no strict number of hours per week that the individual works and overtime is rarely paid salaried jobs usually also come with better benefits such as 401 k plans health insurance life insurance and flexible spending accounts fsa | |
is the minimum wage set by states or cities | all u s states may set their own minimum wage rates or accept the federal rate as the state s minimum cities and counties may impose higher rates than the state s rate for example california s minimum wage is 16 an hour as of jan 1 2024 however many cities and counties in the state have set their rates higher 6 | |
what is a decent hourly wage today | the jobs site ziprecruiter actually has a decent jobs category and it reports that 21 59 an hour is the average pay nationally in that category not surprisingly there are big differences depending on the location of the job eight of the 10 highest average hourly pay rates were in cities in california hourly wages there range from 24 48 per our to 27 16 per hour 7 | |
what is the median weekly pay in the u s | the median weekly earnings of full time wage and salary workers in the u s was 1 118 in the third quarter of 2023 according to the u s bureau of labor statistics that was an increase of 4 5 over a year earlier 8the bottom linein business and in accounting wages and salary are two different types of expenses wages are hourly rates paid to workers and they may vary seasonally along with the business demand for labor salary is considered an annual expense of doing business salaried jobs tend to be more secure and usually have better benefits than hourly work | |
what is the wage price spiral | the wage price spiral is a macroeconomic theory explaining the cause and effect relationship between rising wages and prices or inflation as rising wages increase disposable income demand for goods rises triggering prices for goods to move higher rising prices then increase demand for higher wages which leads to higher production costs and further upward pressure on prices creating a conceptual spiral investopedia julie banginflationthe wage price spiral describes the phenomenon of price increases as a result of higher wages when workers receive a wage hike they demand more goods and services and this in turn causes prices to rise the wage increase effectively increases general business expenses that are passed on to the consumer as higher prices a perpetual loop or cycle of consistent price increases is created the wage price spiral reflects the causes and consequences of inflation and it is therefore characteristic of keynesian economic theory the wage price spiral is also known as the cost push origin of inflation | |
how a spiral begins | a wage price spiral is caused by the effect of supply and demand on aggregate prices people who earn more than the cost of living select an allocation mix between savings and consumer spending as wages increase so does a consumer s propensity to both save and consume if the minimum wage increases consumers within the economy will purchase more products which would increase demand the rise in aggregate demand and the increased wage burden cause businesses to increase the prices of products and services in jan 2024 22 states increased their minimum wage states with hourly rates that match or exceed 15 per hour include maryland new jersey new york california connecticut massachusetts and washington 1although wages are higher increasing prices causes workers to demand higher salaries if higher wages are granted a spiral where prices increase may occur repeating the cycle until wage levels can no longer be supported stopping a wage price spirala wage price spiral often makes inflation higher than is ideal the federal reserve in the u s aims to sustain an inflation rate of 2 2 governments tackle an inflationary environment through the actions of the federal reserve or a central bank a country s central bank can use monetary policy the interest rate reserve requirements or open market operations to curb the wage price spiral the united states has used monetary policy to curb inflation but sometimes triggered recession the 1970s were a time of oil price increases by opec that resulted in increased domestic inflation the federal reserve responded by raising interest rates to control inflation stopping the spiral in the short term but acting as the catalyst for a recession in the early 1980s inflation targeting is a strategy for a monetary policy whereby the central bank sets a target inflation rate over a period and makes adjustments to achieve and maintain that rate in 2018 ben s bernanke thomas laubach frederic s mishkin and adam s posen argued in inflation targeting lessons from the international experience the advantages and disadvantages of inflation targeting and concluded that governments should use their discretion based on the circumstances when deciding to use inflation targeting as a tool to control the economy 3 | |
what is monetary policy | monetary policy is a set of tools a nation s central bank has available to promote economic growth by controlling the overall supply of money available to the nation s banks consumers and businesses the u s treasury department can create money but the federal reserve influences the supply in the economy through open market operations omo by buying financial securities when easing monetary policy and selling financial securities when tightening monetary policy the central bank may increase interest rates on borrowing to discourage spending or force down interest rates to inspire more borrowing and spending | |
what is the difference between the u s treasury and the federal reserve | the u s treasury and the federal reserve are separate entities the treasury manages the money coming into and out of the government the federal reserve s primary responsibility is to keep the economy stable by managing the supply of money in circulation the department of the treasury manages federal spending it collects the government s tax revenues distributes its budget issues its bonds bills and notes and prints money the federal reserve is the central banking system of the united states and is run by a board of governors that oversees 12 regional federal reserve banks | |
what is inflation targeting | inflation targeting is a central banking policy that adjusts monetary policy to achieve a specified annual inflation rate the principle of inflation targeting is based on the belief that long term economic growth is best achieved by maintaining price stability and price stability is achieved by controlling inflation the bottom linethe wage price spiral is a perpetual cycle where rising wages create rising prices and vice versa to target inflation central banks use monetary policy the interest rate reserve requirements and open market operations to curb the wage price spiral | |
what is wage push inflation | wage push inflation is an overall rise in the cost of goods and services that results from a rise in wages employers must increase the prices they charge for goods and services to maintain corporate profits after an increase in employee pay the overall increased cost of goods and services has a circular effect on the wage increase higher wages will eventually have to compensate for the increased prices of consumer goods as goods and services in the market overall increase wages and salaries in the u s increased by 0 8 during one year ending in september 2023 according to the u s bureau of labor statistics 1understanding wage push inflationcompanies can increase wages for several reasons the most common is an increase in the minimum wage the federal and state governments have the power to increase the minimum wage consumer goods companies are also known for making incremental wage increases for their workers these minimum wage increases are a leading factor for wage push inflation it s highly prevalent with consumer goods companies especially its effect is a function of the percentage increase in wages industry factorsindustry factors also play a part in driving wage increases companies might raise wages to attract talent or provide higher compensation for their workers as an incentive to help business growth if a specific industry were to grow rapidly all such factors have a wage push inflation effect on the goods and services the company provides economists track wages closely because of their wage push inflation effects wage push inflation has an inflationary spiral effect that occurs when wages are increased and businesses must charge more for their products or services to pay the higher wages any wage increase that occurs will also increase the money supply of consumers consumers have more spending power with a higher money supply so the demand for goods increases an increase in demand then increases the price of goods in the broader market companies charge more for their goods to pay higher wages and the higher wages also increase the price of goods in the broader market the wage increase is not as helpful to employees as the cost of goods and services rises at the companies that are paying higher wages and in the broader market overall because the cost of goods in the market has also risen workers eventually require another wage increase to compensate for the cost of living increase if prices remain high the percentage increase in wages and prices and their overall effect on the market are key factors driving inflation in the economy example of wage push inflationa company must pay its employees 20 if a state raises the minimum wage from 15 to 20 as occurred in 2024 when 22 states increased their minimum wages in january 2 now its cost of producing its goods and services has gone up because its cost of labor is now more expensive the district of columbia has the top minimum wage of 17 an hour as of jan 1 2024 3the company must increase the prices of its products on the market to compensate for the increase in costs but the initial 5 raise in wages isn t enough to propel a consumer s purchasing power because goods and services have become more expensive the wage must therefore be raised again causing an inflationary spiral | |
why do wage increases cause inflation | wage increases cause inflation because the cost of producing goods and services goes up as companies pay their employees more companies must charge more for their goods and services to maintain the same level of profitability to make up for the increase in cost the increase in the prices of goods and services is inflation | |
what is an inflation target | governments typically set an inflation target which is approximately 2 a year in the u s an inflation target allows businesses and individuals to budget for the future it provides an indicator for companies on how much to pay their employees and how much to charge for their goods and services it indicates to individuals how much they can expect in wages as well as how much goods and services will cost 4 | |
how does inflation impact the value of money | inflation reduces the future value of current money the value of a dollar today is worth less than it will be in the future because prices go up the same dollar today will be able to buy fewer goods and services in future years money is always worth more now than it is in the future particularly due to the investment capability of money the bottom lineemployers are forced to respond when governments order wage increases for their workers they require more income to comfortably accommodate those extra wages so they tend to increase the pricing of their products and services this isn t just the result of legislation companies can voluntarily decide to pay their employers more for several reasons the result is wage push inflation | |
what is a waiting period | a waiting period is the amount of time an insured must wait before some or all of their coverage comes into effect the insured may not receive benefits for claims filed during the waiting period waiting periods may also be known as elimination periods and qualifying periods | |
how a waiting period works | the waiting period or elimination period before the insured may make claims varies by insurer policy and type of insurance for more extended waiting periods before coverage is active the cost of a premium may reduce slightly in health insurance there are several types of waiting periods an employer waiting period requires an employee to wait a specified period such as three months before they may receive company subsidized health services often a provision like this will be in place for a company that expects a high turnover rate in employees once an employee enrolls they may have an additional waiting period before they may claim on the coverage health maintenance organizations hmo have affiliation waiting periods the health insurance portability and accountability act hipaa regulates affiliation wait periods and does not allow them to exceed two months three months for late enrollees 1a pre existing condition exclusion period varies from one to 18 months these wait times refer to specific health conditions an individual may have in the six months before enrolling in a health insurance plan coverage may be limited or excluded for the pre existing condition 2 however if the insured can prove uninterrupted insurance previous to changing policies that coverage can count towards the pre existing condition exclusion exemptions allow those who have at least one year of group health coverage at one job and a span of no more than 63 days to avoid this provision 1some private health insurance plans come with long mandatory waiting periods for certain types of coverage policyholders need to consider their ability to pay for expenses when choosing the length of the waiting period for a policy types of waiting periodshomeowner insurance wait periods will usually span 30 to 90 days before coverage is in effect after the waiting period expires policyholders may file claims against the policy wait periods will vary by the insurance provider also in some regions such as coastal zones when a named storm is in the area new policies will not go into effect until after the storm passes some states may impose wait periods on other insurance products as an example texas will place a 60 day wait on new auto insurance policies this period gives the provider a chance to decide if the driver fits within their risk profiles during the 60 day period the company may cancel the auto policy if they have concerns about the risk profile or undisclosed issues 3short term disability coverage can have wait periods as short as a few weeks but these policies will have higher premiums most short term policies wait 30 to 90 days for coverage long term disability wait periods can be between 90 days and a full year 4 as with other insurance products during the probationary period no benefits are payable for social security disability payments will also have a waiting period of five months 5 | |
what is a waiver | a waiver is a legally binding provision where either party in a contract agrees to voluntarily forfeit a claim without the other party being liable waivers are commonly seen during settlement talks when one party may be willing to pay out a slightly higher award as long as the other person often a claimant agrees to sign a waiver relinquishing their right to further legal action understanding waiversa waiver is a demonstration usually in written form of a party s intent to relinquish a legal right or claim the key point to note is that the relinquishment is voluntary and can apply to a variety of legal situations essentially a waiver removes a real or potential liability for the other party in the agreement for example in a settlement between two parties one party might by means of a waiver relinquish its right to pursue any further legal action once the settlement is finalized since the party signing the waiver is surrendering a claim that they are entitled to it stands to reason that they will usually only do so if they are receiving some added benefit waivers can either be in written form or some form of action a waiver carried out by an action might be based on whether a party in an agreement acts on a right such as the right to terminate the deal in the first year of the contract if it does not terminate the deal which would be the act of absence of action before the first year that party waives its right to do so in the future examples of waiversadvantages and disadvantages of waiversdepending on which side of the waiver you are on the advantages and disadvantages are usually quite clear if someone is the claimant in say a car accident an insurance company would have the claimant sign a waiver as part of their settlement offer this means that although the insurance company is paying a settlement to the claimant the claimant can no longer pursue legal action against the insurance company the advantage for the claimant in this example would be that they are given a settlement package the advantage to the insurance company is that once the claimant signs the waiver their responsibility to the claimant as well as the exposure to a future lawsuit is waived the disadvantages in this example for the claimant are the same as the advantages for the insurance company they would be unable to pursue a future claim the insurance company will usually pay an inflated settlement offer especially if they feel the claimant may have a legitimate claim in the future and the company is attempting to mitigate that risk before it materializes due to the nature of waivers they can be either advantageous or disadvantageous depending on which side you are on and the circumstances surrounding the event finalizes the arrangementcan lower insurance requirements for certain businesses that require waiversremoves possibility of future legal actionsometimes things require additional attention but a waiver forbids necessary action | |
what is a waiver of subrogation | a waiver of subrogation is a waiver that prevents either a person or company from pursuing damage collection from a third party waivers of subrogation are commonly seen in construction contracts leases and property insurance contracts insurance companies will commonly add causes that prevent a party from being awarded an insurance claim settlement if they waived subrogation | |
what is a lien waiver | a lien waiver is a waiver that forfeits a counterparty s right to place a lien on a payer s property or goods these are common in the construction business during various stages of construction a lien waiver is similar to a receipt and can prevent a mechanics lien from being filed | |
what is a medicaid waiver | a medicaid waiver is a waiver that is signed by the state that can waive certain medicaid eligibility requirements this would result in care being offered to people who may not have otherwise been eligible for medicaid the waivers can be limited in certain ways and could be limited to certain medical diagnoses or enact geographic limitations 2 | |
what is a fee waiver | a fee waiver is a waiver that is signed in order to reduce the fee amount either partially or fully of someone who is typically enduring a period of financial hardship they can also be used to entice a buyer or servicer when the fee might be a deterrent and mean the difference between closing the sale or losing it | |
what is a gap waiver | a gap waiver which stands for guaranteed asset protection waiver is a waiver that absolves a person of the remaining payments on an asset that has been destroyed typically a car this means that if someone owed money on a car and the car was damaged beyond salvaging they are not responsible for the remaining payments a gap waiver could also be considered a cancellation of debt the bottom linea waiver can be a great way to finalize an agreement between two parties ending their relationship and mitigating future risk however there are significant drawbacks to waivers especially if there are legitimate legal claims that may arise in the future waivers can be commonplace such as when negotiating construction contracts and usually exist for the protection of each individual party whether a waiver is advantageous or even necessary depends on the unique circumstances of each event | |
what is a waiver of demand | a waiver of demand is a legal agreement given by a party who has endorsed a check or a bank draft it states that should the original issuer of the check or draft default the endorser will take responsibility for honoring that check or draft on the issuer s behalf waivers of demand can either be expressed or implied and can come in both written and verbal forms in the event of default the affected bank reserves the right to charge any applicable penalties or fees to the endorser | |
how waivers of demand work | typically there are three parties involved when a check or bank draft is written the drawer the payee and the drawee the drawer is the original writer of the check or daft the payee is the party to whom the check or draft is written and the drawee is the party from whose account the funds will be withdrawn if a particular check or draft carries a waiver of demand then this means that the endorser has accepted legal responsibility for its fulfillment should the drawer of the check or draft default then the endorser will take responsibility for honoring the check and paying any fees or penalties that may have been incurred in the context of banking the term waiver of demand can also refer to a bank s waiver of its right to formal notification when it presents short term negotiable debt instruments such as drafts or banker s acceptances to a federal reserve bank for rediscounting in such instances the federal reserve considers the bank s endorsement as a waiver of demand notice and protest if the original issuer defaults on its debt obligation real world example of a waiver of demandto illustrate suppose john writes a check to pay for goods purchased from kevin in this situation john is the drawer kevin is the payee and john s bank is the drawee if another party provides an endorsement to john by signing the back of his check then that party is executing a waiver of demand accordingly the endorser would be responsible for honoring john s check if it bounces due to insufficient funds or any other reason similarly the waiver of demand would cause the endorser to become responsible for any fees or penalties triggered by the bounced check in that scenario the bank would send john a bad check notice indicating that the check bounced and informing him of any applicable penalties | |
what is a waiver of coinsurance clause | a waiver of coinsurance clause is a provision in an insurance contract stating that the insurer will not require the policyholder to pay coinsurance or a percentage of the total claim under certain conditions these clauses are most commonly found in property insurance but can also apply to health insurance and in fairly rare cases other types of insurance | |
how a waiver of coinsurance clause works | an individual or business with property insurance may receive only 80 coverage meaning they are required to pay the remaining 20 in coinsurance should something happen to their property and they qualify to make a valid claim for compensation a waiver of coinsurance clause relinquishes this requirement for the policyholder to share the burden and pay some of the expenses incurred out of their own pocket generally insurance companies tend to waive coinsurance only for fairly small claims that said in some cases policies may also include a waiver of coinsurance in the event of a total loss the specific language insurance companies use in writing waiver of coinsurance clauses can vary although they all are similar in theory typically consumers can expect to pay higher insurance premiums for policies with a waiver of coinsurance clause as it puts greater liability on the insurance company insurance companies generally only waive coinsurance in the event of fairly small claims example of a waiver of coinsurance clausea waiver of coinsurance clause is particularly valuable to a policyholder in the event of a total loss say a coinsurance clause requires a policyholder to insure a minimum of 80 of the property s actual value thus if a building is worth 200 000 the property owner should purchase at least 160 000 worth of insurance in the event of a total loss the policy would pay out the 160 000 and the building owner would be responsible for the remaining 40 000 that would of course change if the policy included a waiver of coinsurance clause in which case the insurance company would pick up the bill for the entire 200 000 special considerationsas previously mentioned a waiver of coinsurance clause can sometimes be applied to health insurance as well as on the odd occasion to other types of insurance products some health insurance policies are 80 20 plans meaning that the insured is responsible for 20 of medical costs while the insurance company coughs up the remaining 80 provided the client paid the deductible in the rare scenario that a waiver of coinsurance clause is applied it would eliminate the required 20 payment by the insured in specific situations in other words should a patient require an 80 000 surgery a waiver of coinsurance covering that procedure would save the patient from shelling out 16 000 on coinsurance as is the case with property insurance however a waiver of coinsurance in healthcare often covers far smaller amounts they typically come into play when patients pay in advance for specific relatively inexpensive services at the time of their delivery | |
what is a waiver of exemption | a waiver of exemption was a provision in a consumer credit contract or loan agreement that allowed creditors to seize or threaten the seizure of specific personal possessions or property the property attached to the loan could include a borrower s primary place of residence lenders could enact this clause even if state law held the property exempt from seizure the federal trade commission ftc banned these practices under the credit practices rule of 1985 1understanding a waiver of exemptionbefore 1985 waivers of exemption were common in credit contracts their inclusion was a way for creditors to secure a loan that may not have been available without the waiver clause in case of a default the provision provided the lender an avenue to recoup expenses by selling the property listed as securing the loan every u s state exempts some personal property from seizure in a civil judgment generally property considered necessities of life such as an individual s primary home car and necessary household goods like a refrigerator or clothing are exempt from seizure any borrower who signed a waiver of exemption made such exempt property available to a creditor who obtained a judgment to satisfy a debt one exemption to the ban on property seizure is a home mortgage state personal property laws do not apply to mortgage loans as a creditor always retains the right to foreclose on the property in the event of a default 1 instead these laws are meant to prohibit smaller lenders such as those in the furniture appliance auto dealership or department store businesses from attaching a lien against the debtor s home ftc regulation of wavier of exemption practicesthe ftc offers the following example of a typical waiver clause the ftc deemed such waivers of exemption unfair to consumers in addition to being difficult to understand the 1985 prohibition did not specifically ban any forms of collateral instead mandating that creditors may not contravene or go against the order of state law that governs property exemptions 1further the credit practices rule of 1985 separately prohibited creditors from attaching liens to household goods considered necessary including appliances clothing and linens and items deemed of more personal than monetary value such as family photos and wedding rings the rule does not include household goods purchased explicitly with a loan in which case the creditor who made the loan has the right to repossess after a default 2as an example imagine you bought a new bedroom suite of furniture from a local furniture store using a store financing option the store may repossess the furniture purchased with the loan however if you stop paying the loan the store may not seize your car or clothing while the ftc outlawing waivers of exemption means some of your personal property is safe for seizure the other potential repercussions of defaulting on a loan are still best avoided if you re struggling with your debt payments a debt relief company or credit counseling agency may be able to help | |
when did the ftc ban waivers of exemption | waivers of exemption have been illegal since 1985 as stated in the credit practices rule 1 | |
what can a lender repossess to satisfy a loan | a lender may only repossess items agreed upon at the time of the loan for example if you use your house as collateral for your home mortgage the house is susceptible to repossession however your car is not eligible to be repossessed unless it was offered as additional collateral at the time of the loan signing | |
what are common forms of collateral | collateral can take many forms but some of the most common are real estate art jewelry stocks bank accounts and letters of credit the bottom linewaivers of exemption were deemed unlawful in 1985 however any contracts signed before that date are still enforceable even if you didn t notify them of the waiver of exemption waivers of exemption are not an issue for any borrowers signing a modern contract | |
what is a waiver of notice | a waiver of notice is a document individuals sign that legally waives their rights to receive formal notices regarding certain probate issues for example let s assume a family patriarch passes away and that their estate is meant to be distributed among their three children who are the sole heirs under normal circumstances the probate court must issue a public notice regarding proceedings pertaining to the probate of the patriarch s will however if the named heirs all of whom have deeply vested interests in the assets consent to waivers of notice an appointed administrator or executor may attend in their places by sending such representatives in their stead courts can accelerate the the probate process thus benefitting the heirs by ultimately allowing them to receive their inheritances faster as a result simply put a waiver of notice can be a massive timesaver for all relevant interested parties but it should be made clear that a wavier of notice does not affect an individual s right to information rather it simply means they may be excluded from prior notices about certain iterative steps in the probate process breaking down waiver of noticeprobate courts mainly deal with vital and sensitive issues such as wills estates and trusts for this reason generally speaking interested parties are entitled to receive adequate notice about any probate hearings but waivers of notice allow a representative to attend which can save both time and money in proceedings that would normally subject heirs to lengthy waits and high legal fees there are potential downsides to waivers of notice namely by signing one it will be difficult for an heir to later contest the estate by challenging the validity of a will or choice of executor in the probate process a hearing is required to make these challenges for heirs who wish to keep a close watch on the probate process a waiver of notice may work against them and they should opt against signing one waiver of notice for corporate purposeswaivers of notice don t solely apply to the process of probating a will these legal documents can also be useful when a corporate board of directors or similar governing group needs to hold an emergency meeting the notice allows them to do so even if every board member isn t available to attend at a moment s notice but more importantly a notice provides an assurance that the proceedings of a meeting where notice is waived will be considered legal and valid if it is later challenged in these cases corporate attorneys recommend all directors sign a waiver of notice ahead of the meeting or a waiver of notice for future meetings copies of the signed waivers should be attached as evidence to the minutes of the meeting in question | |
what is a waiver of premium disability | waiver of premium for disability is a provision in an insurance policy that states the insurance company will not require the insured to pay the premium if they are seriously injured insurance companies can vary in their definition of a disability and policies can vary on when and for how long they will waive a premium in the event of a disability it is important to note that insurance companies may charge a higher premium to include this waiver in the policy | |
how a waiver of premium for disability works | two types of insurance policies that commonly include a waiver of premium for disability are life insurance and disability insurance the waiver can mean the difference between the insured being able to keep the policy or having to give it up if they become disabled is unable to work and no longer has an income this waiver is particularly important for disability insurance because if the insured had to pay premiums after becoming disabled they would not be protected against the peril they were trying to insure against usually this waiver applies retroactively to the beginning of the disability if the insured made premium payments while the waiver was in effect those premiums are usually refunded to the insured in full many insureds choose to have this rider attached to their policy because in the event of a disability it allows the policy to continue functioning normally on all fronts including the death benefit dividends and cash values when the disability ends the policy owner starts making premium payments again issues can arise if an insurance company denies a life or disability insurance claim based on non payment of premiums because the insured thought that the waiver of premiums was in effect how the provision functions vary by contract and every insurance policy defines totally disabled differently 1experts advise that an insured person contact an attorney if a claim is denied based on non payment of premiums or the insurance company declared the decedent not disabled as defined in the policy example of a waiver of premium disabilityusually a person is considered totally disabled if they can t perform the duties of an occupation for which they are qualified by education training or experience an injury or sickness must cause the disability in question for example if alex sells cars their duties include speaking with customers about buying cars if an injury or illness prevents them from being able to handle this and other related duties they will usually be considered disabled if alex has a waiver of premium disability and the insurance company defines them as totally disabled they will be able to utilize the waiver | |
what is a waiver of premium disability | waiver of premium for disability is a provision in an insurance policy that states the insurance company will not require the insured to pay the premium if they are seriously injured insurance companies can vary in their definition of a disability and policies can vary on when and for how long they will waive a premium in the event of a disability it is important to note that insurance companies may charge a higher premium to include this waiver in the policy | |
how a waiver of premium for disability works | two types of insurance policies that commonly include a waiver of premium for disability are life insurance and disability insurance the waiver can mean the difference between the insured being able to keep the policy or having to give it up if they become disabled is unable to work and no longer has an income this waiver is particularly important for disability insurance because if the insured had to pay premiums after becoming disabled they would not be protected against the peril they were trying to insure against usually this waiver applies retroactively to the beginning of the disability if the insured made premium payments while the waiver was in effect those premiums are usually refunded to the insured in full many insureds choose to have this rider attached to their policy because in the event of a disability it allows the policy to continue functioning normally on all fronts including the death benefit dividends and cash values when the disability ends the policy owner starts making premium payments again issues can arise if an insurance company denies a life or disability insurance claim based on non payment of premiums because the insured thought that the waiver of premiums was in effect how the provision functions vary by contract and every insurance policy defines totally disabled differently 1experts advise that an insured person contact an attorney if a claim is denied based on non payment of premiums or the insurance company declared the decedent not disabled as defined in the policy example of a waiver of premium disabilityusually a person is considered totally disabled if they can t perform the duties of an occupation for which they are qualified by education training or experience an injury or sickness must cause the disability in question for example if alex sells cars their duties include speaking with customers about buying cars if an injury or illness prevents them from being able to handle this and other related duties they will usually be considered disabled if alex has a waiver of premium disability and the insurance company defines them as totally disabled they will be able to utilize the waiver | |
what is a waiver of premium rider | a waiver of premium rider is an insurance policy clause that waives premium payments if the policyholder becomes critically ill seriously injured or physically impaired other stipulations may apply such as meeting specific health and age requirements policyholders may want to purchase a waiver for their life insurance premium if they are concerned about staying in financial health if they are injured on the job for example 1 | |
how a waiver of premium rider works | policyholders often add the rider as an optional or supplemental benefit to a life insurance policy it s available only when a policy is issued and costs vary per insurer and applicant insurance companies typically add the rider fee to the premium or charge an upfront fee this fee raises the cost of a life insurance policy 2most waiver of premium riders contain a waiting period during which you cannot claim of benefits if you are physically impaired or hurt during the waiting period you may receive a full refund of paid premiums without a waiting period the insurer company assumes much more risk losses 1applicants with pre existing disabilities can t qualify for benefits from a waiver of premium rider placing a pre existing limitation avoids the possibility of writing a policy that would not yield premium payments from the high risk applicants 3waivers can be added if available to term whole and universal life insurance policies waiver of premium rider benefitsphysical impairment critical illness and severe injury are the most common qualifying conditions under the waiver of premium rider terms conditions and benefits vary by insurance product and issuing company a policyholder must be disabled for a specific period e g six consecutive months before the premiums waiver goes into effect 1the waiver is also useful if an injury or illness prevents the policyholder from working in a traditional capacity the most commonly considered diseases are those that require significant hospital stays resulting in the policyholder being unable to work some riders stipulate that the condition need only adversely affect the policyholder s occupation 4waiver of premium riders may not be available in all states waiver of premium claim requirementsrequirements for filing a claim vary but they typically include a physician s statement and notice from the social security administration ssa confirming the physical impairment or disability the applicant could then submit a completed claim form the waiver of premiums allows the redirection of limited personal funds to palliative care personal finances and living expenses however the most signficant benefit is the continued protection of the insurance policy 4 | |
how much does a waiver of premium rider cost | a waiver of premium rider s cost will depend on several factors including your age health and amount of coverage for example you might pay about 3 a month if you re a 35 year old man with a 20 year 500 000 term life insurance policy for 21 05 a month 5 | |
what are some restrictions | waiver of premium riders may contain several restrictions such as you may not have any pre existing conditions or physical impairments you may also face health and age restrictions finally a waiver of premium rider may not be available in your state | |
what are the claim requirements | typically to file a claim a holder must submit a physician s statement and notice from the social security administration ssa confirming the disability the waiver of premiums allows the redirection of limited personal funds to palliative care personal finances and living expenses the bottom linea waiver of premium policy maintains your life insurance policy if you become unable to work so that you can use your cash flow for critical needs with whole life insurance policies it will allow you cash component to continue to grow in these ways waiver of premium riders can provide an important financial asset for many people consider consulting with a financial advisor to determine whether a waiver of premium policy is right for your situation | |
what is a waiver of restoration premium | in the insurance industry a waiver of restoration premium is a legal clause stating that the policyholder will not be charged an additional fee or restoration premium if their coverage continues after paying out a claim waivers of this kind are generally found in liability policies such as automotive or health insurance policies | |
how waivers of restoration premium work | under a standard insurance policy the policyholder will pay a series of insurance premiums usually once per month in order to receive coverage from a set of specific risks if any of these risks materialize the policyholder can file a claim with their insurance company and receive compensation for the damages they sustained from the insurance company s perspective these types of policies are profitable if claims are relatively rare and if the insurance company can earn an adequate return from investing the premiums that they receive from their customers of course once a policyholder has filed a claim against their policy that insurance contract is likely to be much less profitable for the insurer to mitigate this risk insurance companies often increase the monthly premiums charged to the policyholder once that policyholder has filed one or more claims these additional fees or restoration premiums help restore the previous level of profitability of the insurance contract when seen from the perspective of the insurer the policyholder then has the choice of whether to continue with their current insurance provider or else seek coverage from a competitor willing to accept lower premiums if a policyholder has negotiated an insurance contract that contains a waiver of restoration premium clause then that policyholder would not be required to pay higher premiums after filing one or more claims instead coverage would continue to be provided at the same rate as before the claim was filed although this waiver is to the benefit of the policyholder it may ironically require the base insurance premiums of the contract to be higher than they otherwise would be if the waiver of restoration premium was not included therefore depending on the circumstances including a waiver of restoration premium clause may or may not be the best option financially in order to avoid paying restoration premiums some policyholders choose to pay for their expenses out of pocket rather than filing an insurance claim particularly if the expense in question is relatively small real world example of a waiver of restoration premiumwendy recently purchased automobile insurance and was charged an insurance premium of 120 per month shortly after purchasing the insurance however her car was damaged in an accident prompting her to file a costly insurance claim although her insurance was able to cover the damages her insurer notified her that she would be required to pay a restoration premium bringing her new monthly premium to 200 surprised by this increase wendy decided to shop for alternative car insurance providers after explaining her situation to one of her insurance company s competitors she is told that she could purchase an automobile insurance contract with a waiver of restoration premium meaning that she would not be required to pay any restoration premiums in the future if she files any additional claims however wendy was also told that because this waiver benefits her and is a cost to the insurance company including it would increase her starting insurance premium to over 200 per month therefore she decided to stay with her existing insurance policy | |
what is a waiver of subrogation | a waiver of subrogation is a contractual provision whereby an insured waives the right of their insurance carrier to seek redress or seek compensation for losses from a negligent third party typically insurers charge an additional fee for a waiver of subrogation endorsement many construction contracts and leases include a waiver of subrogation clause such provisions prevent one party s insurance carrier from pursuing a claim against the other contractual party in an attempt to recover money paid by the insurance company to the insured or to a third party to resolve a covered claim understanding a waiver of subrogationa right of subrogation allows an insurer to stand in proxy for its insured after satisfying a claim paid to the insured per the company s duties under the insurance policy the insurance company may pursue a claim against other parties to cover its costs for that same loss even when the loss involves a resolution of claims brought against the insured in other words if subrogation is waived the insurance company cannot step into the client s shoes once a claim has been settled and sue the other party to recoup their losses thus if subrogation is waived the insurer is exposed to greater risk insurance companies frequently charge an additional fee on top of the premium to include a waiver of subrogation clause parties to the contract avoid litigation and the insurance company bears the loss types of waiver of subrogationa waiver of subrogation is a provision that prohibits an insurer from pursuing a third party to recover damages for covered losses waivers of subrogation are found in various contracts including construction contracts leases auto insurance policies and more sometimes construction contracts contain a waiver of subrogation clause in these clauses the owner waives all rights to sue third parties such as contractors and subcontractors for damages caused by perils covered in the owner s insurance policy under this provision the owner s insurer also agrees that they will pay covered losses and will not seek to recoup these losses from the negligent party the waiver of subrogation clauses has exceptions if the owner s property insurance does not insure against a specific risk the owner may seek recovery from the responsible party also if the loss exceeds the insurance policy s limit the owner may pursue the responsible party 1waiver of subrogation clauses in lease contracts function similarly the insurer cannot stand in proxy for the owner to recover damages if the injured party s insurance covers the claim it must be paid and no further action against the third party may occur these clauses protect the landlord and tenant from expensive litigation costs and interruptions to the terms of the contract subrogation of waiver clauses can also help preserve amicable relationships between landlords and tenants | |
when a landlord includes a waiver of subrogation clause in a lease the company issuing the tenant s renter s insurance policy usually requires an additional premium for coverage of losses paid by the insurer as a result of acts or omissions by the landlord | this extra cost is applied because the waiver of subrogation clause prevents the insurer from asserting a claim against the landlord for the amount paid to the insured or on behalf of the insured in resolution of a covered claim for example if the tenant s guest sustains injuries incurred when a lighting fixture unexpectedly falls from the ceiling of the leased premises the tenant s insurance carrier is unable to assert a claim against the landlord for the amount paid in resolution of a claim by the guest against the tenant similarly if the lighting fixture fell on the tenant s expensive antique table the waiver of subrogation prevents the tenant s insurance company from asserting a claim against the landlord for the amount paid to the insured for the damage to the table some leases contain mutual waivers of subrogation where both the landlord and the tenant waive recovery rights against each other for any claimed loss covered by insurance in some states existing statutory law may override a waiver of subrogation and permit claims to be brought however in most states limitations of liability may absolve negligent defendants of responsibility 2 | |
when auto accidents arise most injured parties go through the at fault party s insurer to seek payment for losses sometimes the at fault party seeks to settle such claims without involving insurers one of the most common ways to do this is to present a waiver of subrogation to the injured party | if accepted and signed the injured party and their insurer have no rights to pursue the at fault for damages beyond the settlement agreement 3 future claims are forfeited preventing recovery from the at fault party or their insurer agreeing to this provision should be done with careful consideration often after discussing the details with the insurer or an attorney 4reasons for a waiver of subrogationparties may want to include a waiver of subrogation in order to cut down on the possibility of drawn out and costly legal disputes that can arise from contractual obligations clients may want this provision to avoid being sued for or held responsible for a loss and to speed up the claims process in the event of such a loss for some settling is quicker than claim processing accidents can adversely affect premiums or terminate coverage for at fault parties therefore settling could prevent negative activity from being recorded on their insurance profile waiver of subrogation clauses in construction contracts also prevent delays in construction caused by disputes and litigation resulting from losses when these provisions are absent investigations ensue to determine fault as with many cases this process can take time more time than what the owner has allowed to complete construction as a result costs surmount compromising the integrity of the project some insurance companies do not allow their insureds to participate in waiver of subrogation agreements as it compromises what they can recover 4 | |
what are the benefits of a waiver of subrogation | one of the most common benefits of a waiver of subrogation is the avoidance of lengthy litigation and negotiation as well as the costs to pursue them these provisions can also prevent conflict between parties to a contract such as between a landlord and tenant they also prevent certain parties from being held responsible for losses for which they did not cause | |
should i agree to a waiver of subrogation | waivers of subrogation vary per contract or agreement as well as their benefits and risks therefore it is best to consult the advice of an attorney or your insurer regarding a waiver of subrogation some insurers prohibit their insureds from signing waivers of subrogation as they put them more at risk understanding the associated risks will help you make an informed decision | |
how does the waiver of subrogation process work | upon a loss an insurer pays a claim to the insured for covered losses if the loss was caused by a third party the insurer may subrogate the claim or recover damages from the party that caused the loss with a waiver of subrogation the insurer cannot pursue or sue the responsible third party for recovery these provisions can be found in contracts or included as addendums to existing contracts as with any contract there must be an agreement by the parties to the contract to be valid the bottom linea waiver of subrogation is a legal endorsement that prevents an insurer from recovering the money they ve paid out on a claim from a negligent third party this avoids lengthy and costly legal disputes that could arise in the course of contracted activities like letting a property or subcontracting construction work |
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