Chapter 1 key terms - Federal Tax notes Chapters 1 Ad...

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Federal Tax notes Chapters 1 Ad valorem tax : A tax imposed on the value of property. The most common ad valorem tax is that imposed by states, counties, and cities on real estate. Ad valorem taxes can be imposed on personal property as well Correspondence Audit: An audit conducted by the IRS by the U.S. mail. Typically, the IRS writes to the taxpayer requesting the verification of a particular deduction or exemption. The remittance of copies of records or other support is requested of the taxpayer Employment taxes: Taxes that an employer must pay on account of its employees. Employment taxes include FICA (federal insurance contributions act) and FUTA (federal unemployment tax act) taxes. Employment taxes are paid to the IRS in addition to income tax withholdings at specified intervals. Such taxes can be levied on the employees, the employer, or both Estate tax: a tax imposed on the right to transfer property by death. Thus, an estate tax is levied on the decedent’s estate and not on the heir receiving the property Excise tax: a tax on the manufacture, sale, or use of goods; on the carrying on of an occupation or activity; or on the transfer of property. Thus, the federal estate and gift taxes are theoretically, excise taxes FICA tax: an abbreviation for Federal Insurance Contributions Act, commonly referred to as Social Security tax. The FICA tax is comprised of the social security tax and the medicare tax and is imposed on both employers and employees. The employer is responsible for withholding from the employee’s wages the social security tax at a rate of 6.2 percent on a maximum wage base and the medicare tax at a rate of
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