BUSN380 Week 2 TCO 2 Notes - Taxes

BUSN380 Week 2 TCO 2 Notes - Taxes - IMPORTANCE OF TAXES...

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IMPORTANCE OF TAXES FOR PERSONAL FINANCIAL PLANNING - Know all the taxes you pay in order to understand tax planning, and make good decisions about spending, saving, borrowing, and investing decisions. - Take advantage of appropriate tax benefits by knowing tax laws and keeping accurate tax records. TYPES OF TAXES Income Sales Excise Property Estate Inheritance Gift Social Security TO REDUCE QUESTIONS BY IRS - - IDENTIFY TAX ASSISTANCE SOURCES: - IRS Services & Publications - Other tax publications - Internet - Computer Software - Professional Tax Preparers e.g., commercial tax services, enrolled agents, accountants REDUCE TAX BURDEN: - Learn new tax info - Plan financial decisions related to Consumer Purchasing, Debt, Investments, and Retirement Planning CALCULATE TAXABLE INCOME AND AMT OWED FOR FEDERAL INCOME TAX. - Organize tax records to find info easily - Subtract Adjustments to Income deductions, and Allowances for Exemption from Gross Income
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Total Tax Liability based on published tax tables or schedules less any tax credits PREPARE FEDERAL INCOME TAX RETURN -
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BUSN380 Week 2 Notes - On time each year - Understand major sections of Form 1040: - Filing Status - Exemptions - Income from all sources - Adjustments to Income - Standard Deductions or itemized deductions - Tax Credits you qualify for - Other taxes owed - Amounts withheld (Withholding) or paid in advance - Refund or additional amount owed KEY CONCEPTS and skills from Week 2: - Provide an overview of how the federal tax system works. - Explain the trade- off between risk and return as this trade-off pertains to common investment instruments. - Explain the difference between income and cash flow. KEY SKILLS TO MASTER from Week 2: 1. Computin g Taxable Income. 2. Calculatin g Average Tax Rate. 3. Comparin g Taxes on Investmen ts. 4. Analyzing Tax Preparatio n Software 5. Researchi ng Tax Questions. 6. Comparin g Tax Services. KEY TERMS Average Tax Rate is based on Total Tax Due/Taxable Income - is less than marginal tax rate except for people in 10% bracket. Self- employed have higher ATC because of self-employment taxes including payments toward future Social Security benefits. - If Taxable income - $40,000 Total tax bill - $4,200 = Then ATC = 4200/40,000 =10.5% Marginal Tax Rates are the 10, 15, 25, 28, 33, & 35% rates. - used to calculate tax on the last and next dollar of taxable income - After deductions, exemptions a person in 28% bracket pays 28 cents in taxes for every dollar of taxable income in that bracket. DETERMINING ADJUSTED GROSS INCOME (AGI) &
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BUSN380 Week 2 Notes COMPUTING TAXABLE INCOME ( Net amt of income after allowable deductions on which income tax is computed) – STEP 1 Gross Income less Adjustments to Income = AGI AGI less Standard Deductions & Exemptions OR AGI less Itemized Deductions & Exemptions = Taxable Income (Tax based on tax tables or schedules) Taxes Owed: Taxable Income less Tax Credits + Other Taxes = Total Tax Due STEP 2 Deductions - Amt subtracted from adjusted gross income to get
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This note was uploaded on 05/27/2011 for the course BUSN 380 taught by Professor Bloch during the Fall '10 term at DeVry NY.

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BUSN380 Week 2 TCO 2 Notes - Taxes - IMPORTANCE OF TAXES...

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