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What are the characteristics of a tax?
Required to pay, imposed by governmental agency, and not tied to the benefit of an individual
What are the components of the tax calculation?
Tax base x tax rate = amt of tax
Understand progressive, regressive, and proportional tax rate structures
income increase = tax increases
understand regressive tax rate structures
stopping or going back
understand proportional tax rate structures
flat tax on corporations
Know how to calculate federal tax liability based on taxable income.
Filing status income bracket
Know how to calculate marginal tax rate, average tax rate for what’s going to happen to their marginal tax rate if we add 50,000
figure out two taxes based on inceome of each one then Change in tax/change in income
what is this couple’s current marginal rate
you find what bracket they are on the tax bracket
What are the criteria for federal taxation when it comes to sufficiency
generate needed rev
What are the criteria for federal taxation when it comes to equity
All the taxes need to be fair to everyone
What are the criteria for federal taxation when it comes to certainly
when and where the taxes are due
What are the criteria for federal taxation when it comes to convenience
the fact that your job sends in the withholding
what are the criteria for federal taxation when it comes to economy
tax situation is part of the economy and try not to spend a lot of money collecting the taxes
Understand filing minimum requirements.
Depend on filing status, age, and gross income
 list all the standard deductions
 What are the rules for the statute of limitations on tax returns
Typical is 3 years and is begins the later of the filing date or original due date
if you underestimate your gross income by 25% then your statute of limitations extends to
6 Years
what if you neglect to include a large portion of your self-employed taxes then how long do you have to file your tax
indefinitely
What are the three types of IRS examinations?
Correspondence, Office, & Field
what is the irs Correspondence examination
letters or notices that the irs sends to you about your federal tax (most common and easy)
what is the irs correspondence examination - Office
come into the irs office and send you a list of things you need to bring in
what is the irs examination - Field
they visit someone’s house
What are some of the tools that the IRS uses for selecting returns for audits?
Document Perfect program, Information, & DIF discrimination
Document Perfect program
a program under which all tax returns are checked for mathematical and tax calculation errors.
What can help a tax preparer avoid IRS penalty on a tax return position?
As long as you have a substantial authority, you’ll be fine (One of the main authorities)
Information
a program that compares the taxpayer’s tax return to information submitted to the IRS from other taxpayers (e.g., banks, employers, mutual funds, brokerage companies, mortgage companies). Information matched includes items such as wages
DIF discrimination
looks at returns of similar income levels to set up a norm for that level
What are “for” AGI deductions?
any deduction that went above the line on a 1040 that went above adjusted gross income
EX: property taxes on a real estate
what are the “from” AGI deductions?
below the line (from AGI deductions or deductions subtracted from AGI to calculate taxable income.
EX: standard deduction
What is the first different character of income?
Ordinary income
ordinary income
earned through wages and taxed on the tax tables
what is the second different character form of income
Capital income
Capital income
gain on loss when sales of investments of assets and qualified dividends
what are the four requirements a qualifying child must meet
relationship test, Age test, Residency, Support, and the tie breaker is agi for claiming child
what are the four requirements a qualifying relative must meet
Relative – relationship
Support – more than 6 months if realitive and more than yr if child
Gross income – less than 5,500
Support for qualifying child must meet
provide more than half than what the child supports for themselves
Residency for qualifying child must meet
same principal residence as tax filer for more than HALF the year
age test for qualifying child must meet
under 19 or under 24 as a full-time student
relationship test for qualifying child must meet
Child, nieces’ nephews, adopted children, grandchild
what are the three requirements a qualifying relative must meet
A qualifying relative is a person who is not a qualifying child and satisfies (1) a relationship test, (2) a support test, and (3) a gross income test
relationship test for qualifying relative must meet
related to you
support test for qualifying relative must meet
more than 6 months if relative and more than yr. if a member of the household
Gross income test for qualifying relative must meet
less than 5,500
What is the treatment of long term and short-term gains and losses?
Gains can be offset by loss and deduct 3,000
EX: 6000 in gains and 10,000 in loss so net out the 6000 of loss and add 3000 to make 9000 in loss and then carry the 1000 for next year
Understand the requirements for each of the filing statuses.
Single
Head of house
Married filing joint
Married filing sep
Qualified widower