· Install the software and click on the "UPDATE" - Good for the Tax Return Problem
· Print lecture notes online and bring them to the class
· Take Home Quizzes
· Assignments are not turned in - reinforce lectures; solutions are online
· Tax is the exaction for the support of the government;
· Tax laws: to help economy; social considerations (old people get credits; blind people; etc.)
· four characteristics of the tax:
no direct relationship between the tax you pay and the benefits you get. e.g. think about income tax and sales tax, you pay them but it does not mean you get direct benefit from it.
taxes are levied on the basis of predetermined ...view middle of the document...
g. Physical Injuries Rewards; Emotional Distress would be taxable; Gifts received (The giver of the gift may have to give a gift tax)
· Deductions - Expenditures
· Generally, personal expenditures are not deductible
· Meals are not deductible; but if you have a meal with a client, it would be deductible because it is now a business expenditure; property tax and medical expenses under a certain amount
If your Income is 10,000; AGI = 6,100; Exemptions = 3,900 Then your taxable income is Zero.
· 2013 Tax Rate Schedule - Single
· it is a progressive tax rate structure; your tax rate increases as your taxable income increases
· e.g. Single, 2013, TI = 100,000, what is the gross tax?
· 17,891.25 + 28% * (100,000 - 89,850) = 21,293.25
· 28% is your marginal tax rate, which is the rate that we use for tax planning; it is the last dollar of tax rate. You are in the 28% of tax bracket.
· Average Tax Rate = Gross Tax / TI = 21,293.25 / 100,000 = 21.3% < 28% marginal tax rate because of those lower tax rates
· Effective Rate = Tax / Total Income; Total Income = 150,000; deductions etc. = 50,000. Effective Tax Rate = 21,293.25 / 150,000 = 14.2%
· Proportional Tax Structure = Flat Tax. The idea is that everyone should pay at the same rate. Rich people pay more. The progressive structure is on the basis of letting people who have more ability to pay tax pay additional parts at a higher rate
· Tax Credit: expenditure items; credit is a reduction of tax liability; while deduction is the reduction of your taxable income. Education Credits for college tuition.
· Tax payments are quarterly payments you are making.
· Refund: a refund is likely to be your own money because it comes from the extra of your tax payments. Credits are not refundable. Additional Child credits are refundable (from the government, not their own money)
Major Types of Taxes
· Income Taxes
· State: Florida, Levada, Alaska, Washington, South Decoda, Wilming - No State Income Tax on Individuals. States income tax is lower than federal income tax (5%). All states have income taxes on corporations
· Estate and Gift Taxes: The tax is on the gift giver
· Employment Taxes
· FICA Taxes:
· Employee and employer pay at the same rate = equal contribution
· See Examples on notes
· FUTA & SUTA Taxes - Employer Contribution Only
· Excise Tax
· Other Taxes: Sales & Use Taxes, Property Taxes, Franchise Taxes
Goals of Taxes
· Social - help out those are more in need
· Administrative - administrative simplicity (takes a long time to achieve)
· Political - political process
Tax Planning Perspective - Exhibit 1-6