ACC 331 INTRODUCTORY FEDERAL INCOME TAXATION. WHAT IS THIS COURSE ABOUT? Intelligent Consumer of Tax Services Make You Relatively Knowledgeable About.

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Presentation transcript:

ACC 331 INTRODUCTORY FEDERAL INCOME TAXATION

WHAT IS THIS COURSE ABOUT? Intelligent Consumer of Tax Services Make You Relatively Knowledgeable About Taxes Personal and Business Taxes What a CPA is Expected to Know Give a Base for a Tax Specialty

COMMENT ON BOOK Good Problems Tax Laws Change Not in Book Watch for Changes in Notes and Handouts Focus on New Law!!!! Tax Software for Cumulative Problems

ACC 331 Secondary Goals Apply Knowledge to Client Situations Communication Use Technology Stand on Your Own Two Feet

WHY DO WE HAVE TAXES? To Raise Money for Public Purposes The Alternative is: No Government or Inflation

Name Some Taxes (There are a lot of them!)

Property Sales/Use Estate Inheritances Gift Income Employment (FICA pp ), etc.

How Do You Choose a Tax? Economy Convenience Certainty Equity: Horizontal Vertical

ECONOMY Low Cost to Collect

CONVENIENCE Ease of Extraction (The goose doesn’t squawk much!)

CERTAINTY (Easily?) Predictable Results

HORIZONTAL EQUITY Equally situated persons pay equal taxes

Vertical Equity Persons with different amounts of income pay different amounts of tax. The extraction of the different amounts of tax cause equal amounts of pain for the different taxpayers.

EVALUATE DIFFERENT TAXES King with sword Sales tax Income tax Other taxes?

WHY STUDY THE INCOME TAX? Major revenue Source (See p. 1-4) Can change results by planning

HISTORY OF U.S. INCOME TAX Civil War - Springer Pollock Excise on being incorporated (1%) th amendment

16th Amendment Congress may tax all income from whatever source derived without apportionment.

HISTORY OF U.S. INCOME TAX March Individual income tax low rates / high base High rates, low base, withholding 1950’s - Relative quiet 1960’s-70’s - Equity and complication 1980’s-90’s - Revenue needs & complication 2000’s Budget surplus & ???? Bush & Republicans (Split senate)

WHY SO COMPLICATED? EQUITY Vertical - graduated rates Horizontal - exemptions, joint returns Property v Labor Income Capital gains v Wages

ADMINIATRATION Return filed Math checked and DIF scored Select for audit/accepted

ADMINISTRATION - Audit Office, field or correspondence - RAR Appeal inside service Go to court!

ADMINISTRATION – Courts Courts of first impression Tax Court District Courts Court of Federal Claims Appellate Courts Supreme Court

STATUTE OF LIMITATIONS Federal 3 years - regular 6 years - omit > 25% of Gross Income None - fraud! States May be different Michigan - Regular is 4 years.

THE END - Day One Happy Homework!