T12S-Chp-01-1A-Fed-Tax-An-Overview-2012

T12S-Chp-01-1A-Fed-Tax-An-Overview-2012 - Chapter 1....

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Chapter 1. Federal Income Taxation— An Overview Instructor PowerPoint Slides This file contains illustrative problems that will be used in the lecture to illustrate important concepts and procedures. Updated January 7, 2012 Howard Godfrey, Ph.D., CPA Professor of Accounting ©Howard Godfrey-2012
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Part-1. Definition and evaluation of a tax. Rate Structures. Part-2. Major Types of Taxes. Part-3. Sources of Federal Income Tax Law. Part-4. Federal taxation terminology. Part-5. IRS audit and appeals. Part-6. Individual tax calculations.
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Definition and Evaluation of a Tax Tax Return Selection Definition of a Tax Types of Examinations Stds for Evaluating a Tax Settlement Procedures Administrative Appeals Major Types of U.S. Taxes Income Tax Calculation Income Taxes Deductions for Employment Taxes Adjust. Gross Income Sales Tax Deductions from Property Taxes Adjust. Gross Income Other Taxes Sources of Federal Tax Law Exemptions Tax Terms, Steps Tax Planning Income vs. Exclusion Tax Planning Tax Evasion and Income Tax Rates Tax Avoidance Prepayments and Credits Ethics in Filing Returns Tax Practice
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Chapter 1. Introduction Definition and Evaluation of a Tax Definition of a Tax Stds for Evaluating a Tax Tax Rates & Structures
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Definition of a Tax An enforced , involuntary contribution Required and determined by law Providing revenue for public and governmental purposes For which no specific benefits
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Purpose of a Tax Revenue Penalty Social changes Economic changes Equity
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Standards of a Good Tax System Adam Smith’s Four Criteria Equity Tax should be based on the taxpayer’s ability to pay Horizontal Equity: Two similarly situated taxpayers are taxed the same Vertical Equity: Differently situated taxpayers are taxed differently but
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Standards of a Good Tax System Adam Smith’s Four Criteria Equity Certainty When and how a tax is to be paid should be known to the taxpayer The taxpayer should be able to determine the amount of the
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Standards of a Good Tax System Adam Smith’s Four Criteria Equity Certainty Convenience Tax should be levied when the taxpayer has funds available to pay
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Standards of a Good Tax System Adam Smith’s Four Criteria Equity Certainty Convenience Economy The costs of complying with the tax system should be minimal
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Tax Rates for Income Tax Marginal Tax Rate is the rate of tax on the next dollar of taxable income Average Tax Rate is the rate equal to the total tax divided by the tax base. Effective Tax Rate is the rate equal to the total tax divided by economic income (taxable income
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Progressive Tax Rate System Tax rates increase as income increases In 1913 rates ranged from 1% to 7% To finance World War I, top rate was increased to 77% In 1985, 15 tax brackets ranged from 11% to 50% 2003 Tax Act reduced top rate from 38.6% to 35% (rates now 10%, 15%, 25%, 28%, 33%, and 35%). Low rates
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T12S-Chp-01-1A-Fed-Tax-An-Overview-2012 - Chapter 1....

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