Chapter 1 Overview Federal Income Taxation
Chapter 1 overview
Definition tax: enforced, involuntary contribution, required and determined by law, providing revenue for public and governmental purposes, no specific benefits
Purpose: revenue, social changes, economic changes, equity, not a penalty.
Good tax by Adam smith: 1. equality: ability to pay’ vertical: differently situated taxpayers are taxed differently but fairly; horizontal: two similarly taxed similarly. Progressive: higher income person pays higher % rate. Proportional: everyone pays the same rate. Regressive: higher person pays lower % rate. 2. Certainty: should know when, how, and how much to be paid. 3. Convenience: how easy to pay withholdings/quarterly estimates. 4. Economy: minimum compliance and administrative costs.
2014 AICPA: equity & fairness, certainty, simplicity, economic growth & efficiency, transparency & visibility.
Major types tax: employment, corporate income, property, sales, individual income.
U.S. tax: income, employment (social security and unemployment), sales, property, excise (gift, inheritance), wealth transfer and health care related.
Sources of federal income taxes: legislative (law: irc, house: way & means, senate: finance), regulatory (administrative): treasury and IRS Pronouncements), judicial (courts), happened based on fact: tax court (for strong case), district court (no strong case), claims court (any person against federal gov.) after decision made, either side can go to appeal. 12 appeal court->Supreme Court, legislative (congress) make the final decision, they can rewrite the Supreme Court. Appeals court and Supreme Court based on law.
Deduction types: for deduction: trade, business, rent or royalty expense; from deduction: personal expense: itemized, or standard amt (changes with filing status)
AGI=gross income-for deduction AGI-from deduction and exemptions=taxable income
Tax planning: goal is to maximize after-tax wealth, considers the time value of money and marginal tax rate (recognize higher,
Definition tax: enforced, involuntary contribution, required and determined by law, providing revenue for public and governmental purposes, no specific benefits
Purpose: revenue, social changes, economic changes, equity, not a penalty.
Good tax by Adam smith: 1. equality: ability to pay’ vertical: differently situated taxpayers are taxed differently but fairly; horizontal: two similarly taxed similarly. Progressive: higher income person pays higher % rate. Proportional: everyone pays the same rate. Regressive: higher person pays lower % rate. 2. Certainty: should know when, how, and how much to be paid. 3. Convenience: how easy to pay withholdings/quarterly estimates. 4. Economy: minimum compliance and administrative costs.
2014 AICPA: equity & fairness, certainty, simplicity, economic growth & efficiency, transparency & visibility.
Major types tax: employment, corporate income, property, sales, individual income.
U.S. tax: income, employment (social security and unemployment), sales, property, excise (gift, inheritance), wealth transfer and health care related.
Sources of federal income taxes: legislative (law: irc, house: way & means, senate: finance), regulatory (administrative): treasury and IRS Pronouncements), judicial (courts), happened based on fact: tax court (for strong case), district court (no strong case), claims court (any person against federal gov.) after decision made, either side can go to appeal. 12 appeal court->Supreme Court, legislative (congress) make the final decision, they can rewrite the Supreme Court. Appeals court and Supreme Court based on law.
Deduction types: for deduction: trade, business, rent or royalty expense; from deduction: personal expense: itemized, or standard amt (changes with filing status)
AGI=gross income-for deduction AGI-from deduction and exemptions=taxable income
Tax planning: goal is to maximize after-tax wealth, considers the time value of money and marginal tax rate (recognize higher,