Tax study guide ch 1&7

tax is imposed by

federal, state and local laws

congress can tax, stated in…

article 1, section 8

when was income tax legalized

16th amendment, 1913

tax base =

amount subject to tax

tax rate =

applied to base

types of tax: progressive =

higher income, higher rate

types of tax: Proportional =

flat rate, sales tax

types of tax: Regressive =

rate decreases with higher base, social security

tax rate concepts: marginal rate

tax on the next dollar earned

tax rate concepts: average rate

total tax divided by taxable income

tax rate concepts: effective rate

total tax divided by total income

types of taxes: federal

income, unemployment, excise

types of taxes: state/local

sales, property, inheritance

social security

6.2 employee plus 6.2 employer, 12.4 for self employed

medicare

1.45 employee plus 1.45 employer, 2.9 for self employed

total self employment

15.3

raises enough revenue?

sufficiency

FAIR distribution

equity

clear rules & deadlines

certainty

easy to comply

convenience

low cost of compliance

economy

deadlines for individuals:

april 15

deadline, c corps

15th day of 4th month

deadline, s corps/partnership

15th day of 3rd month

individual, full liability

sole proprietor

flow through, shared liability

partnership

flow through, limited liability

s corp

not flow through, double tax

c corp

what is the only business entity that is not a flow through?

c corp

irc

legislative

treasury regulations

executive

court decisions

judicial

secondary sources

testbooks, articles

What tax is the most useful in tax planning?

Marginal tax

Why does the effective tax rate provide a better depiction of a taxpayers tax burden than the average tax rate?

effective tax rate is for all income, while average is only taxable income

A use tax is imposed on purchases made…

outside of the state