20111.4 Income Tax Formula - Emphasis on Individuals...

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Emphasis on Individuals
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Taxable Entities Individuals: Citizens and resident aliens of US use tax tables Foreign taxpayers (nonresident aliens) that receive income from US sources taxed at a flat rate of 30% Includes sole proprietorship income Based on worldwide income, with credits for foreign taxes paid File Form 1040 Corporations: Taxed as a separate "person" File Form 1120 "S" Corporations - each shareholder taxed on his/her share of earnings - corporation itself not taxed; must have 100 or fewer shareholders to elect "S" status; file 1120S Fiduciaries: Distributions to beneficiaries is generally taxed to the beneficiary, if income to fiduciary File Form 1041 Partnerships: LLCs, LLPs - often treated as partnerships for tax purposes, but may be treated as corporations Pay no taxes – taxes flow through to partners at partners’ rate File Form 1065
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Which one of the following tax entities does not pay Federal income tax? a) Trust b) Partnership c) Individual d) Corporation e) Estate
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Individuals: Who Must File? Gross income > (exemption + std. deduction) unless SE or MFS or taxpayer claimed as a dependent on another’s return If claimed as a dependent, must file if: Earned income only source of income and > std. deduction Unearned income only and gross income > ($950 + std. deduction) Both earned and unearned income total> (earned income + $300) OR ($850 + std. deduction) MFS must file if gross income > exemption IF SE, has >$400 in net earnings
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Those Ineligible for Std. Deduction: MFS, and spouse itemizes Nonresident alien Short-period filer where there has been a change in accounting period.
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What to File? 1040EZ (shortest form): t/p <65, not blind, income under $100,000, only W-2 income, taxable scholarships, unemployment & less than $1,500 interest income, does not itemize, single or MFJ 1040A (short form) 1040
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Tax Formula Income from whatever source derived Less: exclusions (tax-exempt interest, gift) = Gross Income - Less: deductions FOR Adjusted Gross Income = AGI - Less: greater of std. or itemized deductions - Less: exemptions = Taxable Income X tax rate(s) = Tentative tax liability - Less: credits and prepayments = Amount due to/from IRS
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This note was uploaded on 03/27/2012 for the course ACCT 3321 taught by Professor Chambers during the Spring '09 term at Texas A&M University, Corpus Christi.

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20111.4 Income Tax Formula - Emphasis on Individuals...

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