Copyright © 2013 by M. Ray Gregg. All rights reserved. 2 Introduction to Federal Income Tax.

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Presentation transcript:

Copyright © 2013 by M. Ray Gregg. All rights reserved. 2 Introduction to Federal Income Tax

Copyright © 2013 by M. Ray Gregg. All rights reserved. 3 Tally your results.

Copyright © 2013 by M. Ray Gregg. All rights reserved. 4 Consider the Alternative How would you like to NOT pay tax? What situation would you likely be in if you did not have to pay tax?

Copyright © 2013 by M. Ray Gregg. All rights reserved. 5

6 Who Pays Tax? Individuals Corporations Estates Trusts Any Surprises?

Copyright © 2013 by M. Ray Gregg. All rights reserved. 7 Taxpaying Entities Files a Tax return? Entity PaysTax? Income Taxed? ProprietorshipNo Yes! PartnershipYesNoYes! CorporationYes Yes!

Copyright © 2013 by M. Ray Gregg. All rights reserved. 8 Name as many as you can.

Copyright © 2013 by M. Ray Gregg. All rights reserved. 9 Types of Taxes Sales Excise Income –Federal –State –Local Estate Gift Social Security Unemployment Personal property Real property

Copyright © 2013 by M. Ray Gregg. All rights reserved. 10 Types of Taxes Sales Excise Income –Federal –State –Local Estate Gift Social security Unemployment Personal property Real property This course

Copyright © 2013 by M. Ray Gregg. All rights reserved. 11

Copyright © 2013 by M. Ray Gregg. All rights reserved. 12 Who Levys Tax? Federal State County City Others?

Copyright © 2013 by M. Ray Gregg. All rights reserved. 14 Proportional Progressive Regressive

Copyright © 2013 by M. Ray Gregg. All rights reserved. 15 Tax Base

Copyright © 2013 by M. Ray Gregg. All rights reserved. 16 Tax Base

Copyright © 2013 by M. Ray Gregg. All rights reserved. 17 Tax Base

Copyright © 2013 by M. Ray Gregg. All rights reserved. 18

Copyright © 2013 by M. Ray Gregg. All rights reserved. 19 Marginal Costs Define from Economics –“Marginal costs are the costs a company incurs in producing one additional unit of a good.” Source: Source: –“In economics and finance, marginal cost is the increase in total cost that arises when the quantity produced (or purchased) increases by one unit.”

Copyright © 2013 by M. Ray Gregg. All rights reserved. 20 History of Marginal Rates For individuals For corporations

Copyright © 2013 by M. Ray Gregg. All rights reserved. 21 U.S. Tax Rates

Copyright © 2013 by M. Ray Gregg. All rights reserved. 22 U.S. Tax Rates WW I

Copyright © 2013 by M. Ray Gregg. All rights reserved. 23 U.S. Tax Rates Great Depression Stock Market Crash

Copyright © 2013 by M. Ray Gregg. All rights reserved. 24 U.S. Tax Rates WW II

Copyright © 2013 by M. Ray Gregg. All rights reserved. 25 U.S. Tax Rates Korean War

Copyright © 2013 by M. Ray Gregg. All rights reserved. 26 U.S. Tax Rates Kennedy Tax Cut

Copyright © 2013 by M. Ray Gregg. All rights reserved. 27 U.S. Tax Rates Vietnam War

Copyright © 2013 by M. Ray Gregg. All rights reserved. 28 U.S. Tax Rates Regan Tax Cut

Copyright © 2013 by M. Ray Gregg. All rights reserved U.S. Marginal Tax Rates

Copyright © 2013 by M. Ray Gregg. All rights reserved. 30 Marginal Rates

Copyright © 2013 by M. Ray Gregg. All rights reserved. 31 Marginal Rates Regan Tax Cut

Copyright © 2013 by M. Ray Gregg. All rights reserved. 32 Marginal Rates Regan Tax Cut

Copyright © 2013 by M. Ray Gregg. All rights reserved. 33 Marginal Rates Bush Tax Increase

Copyright © 2013 by M. Ray Gregg. All rights reserved. 34 Marginal Rates Bush Tax Cut

Copyright © 2013 by M. Ray Gregg. All rights reserved. 35

Copyright © 2013 by M. Ray Gregg. All rights reserved. 36

Copyright © 2013 by M. Ray Gregg. All rights reserved. 37 Consider these facts… For current year All Income140,000 Exempt Income 25,000 Determine: Marginal Rate Average Rate Effective Rate

Copyright © 2013 by M. Ray Gregg. All rights reserved. 38 All Income140,000 Less: Exempt Income25,000 Sub-total115,000 Exemption3,900 Std Deduction6,10010,000 Taxable Income105,000 Tax Calculation: TI105,000 -Base87,85017,150 xMar Rate0.28 Sub-Total4,802 +Tax on Base17,891 Total Tax22,693 Marginal Rate28.0% Average Rate21.6% Effective Rate16.2%

Copyright © 2013 by M. Ray Gregg. All rights reserved. 39

Copyright © 2013 by M. Ray Gregg. All rights reserved. 40

Copyright © 2013 by M. Ray Gregg. All rights reserved. 41

Copyright © 2013 by M. Ray Gregg. All rights reserved. 42 All Income140,000 Less: Exempt Income25,000 Sub-total115,000 Exemption3,900 Std Deduction6,10010,000 Taxable Income105,000 Tax Calculation: TI105,000 -Base87,85017,150 xMar Rate0.28 Sub-Total4,802 +Tax on Base17,891 Total Tax22,693 Marginal Rate28.0% Average Rate21.6% Effective Rate16.2%

Copyright © 2013 by M. Ray Gregg. All rights reserved. 43

Copyright © 2013 by M. Ray Gregg. All rights reserved. 44 All Income140,000 Less: Exempt Income25,000 Sub-total115,000 Exemption3,900 Std Deduction6,10010,000 Taxable Income105,000 Tax Calculation: TI105,000 -Base87,85017,150 xMar Rate0.28 Sub-Total4,802 +Tax on Base17,891 Total Tax22,693 Marginal Rate28.0% Average Rate21.6% Effective Rate16.2% Marginal Rate

Copyright © 2013 by M. Ray Gregg. All rights reserved %

Copyright © 2013 by M. Ray Gregg. All rights reserved. 46 Tax Taxable Income

Copyright © 2013 by M. Ray Gregg. All rights reserved. 47 All Income140,000 Less: Exempt Income25,000 Sub-total115,000 Exemption3,900 Std Deduction6,10010,000 Taxable Income105,000 Tax Calculation: TI105,000 -Base87,85017,150 xMar Rate0.28 Sub-Total4,802 +Tax on Base17,891 Total Tax22,693 Marginal Rate28.0% Average Rate21.6% Effective Rate16.2%

Copyright © 2013 by M. Ray Gregg. All rights reserved %

Copyright © 2013 by M. Ray Gregg. All rights reserved. 49

Copyright © 2013 by M. Ray Gregg. All rights reserved. 50 Tax All Income

Copyright © 2013 by M. Ray Gregg. All rights reserved. 51 All Income140,000 Less: Exempt Income25,000 Sub-total115,000 Exemption3,900 Std Deduction6,10010,000 Taxable Income105,000 Tax Calculation: TI105,000 -Base87,85017,150 xMar Rate0.28 Sub-Total4,802 +Tax on Base17,891 Total Tax22,693 Marginal Rate28.0% Average Rate21.6% Effective Rate16.2%

Copyright © 2013 by M. Ray Gregg. All rights reserved. 52 $22,693 $140,000

Copyright © 2013 by M. Ray Gregg. All rights reserved. 53 All Income140,000 Less: Exempt Income25,000 Sub-total115,000 Exemption3,900 Std Deduction6,10010,000 Taxable Income105,000 Tax Calculation: TI105,000 -Base87,85017,150 xMar Rate0.28 Sub-Total4,802 +Tax on Base17,891 Total Tax22,693 Marginal Rate28.0% Average Rate21.6% Effective Rate16.2%

Copyright © 2013 by M. Ray Gregg. All rights reserved. 54

Copyright © 2013 by M. Ray Gregg. All rights reserved. 55 Mother-in-law –Turned down raise Employees appeal to boss –Boss agrees to raise costing $100,000 Doctor bills patients near end of yr You contribute $1,000 to church assume 30% tax rate