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

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

4. 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?

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

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

7. 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! 1065 1120

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

9. 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

10. 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

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

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

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

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

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

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

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

19. 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: http://economics.about.com/cs/economicsglossary/g/marginal_cost.htm Source: http://en.wikipedia.org/wiki/Marginal_cost –“In economics and finance, marginal cost is the increase in total cost that arises when the quantity produced (or purchased) increases by one unit.”

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

21. Copyright © 2013 by M. Ray Gregg. All rights reserved. 21 U.S. Tax Rates 1909 - 1999

22. Copyright © 2013 by M. Ray Gregg. All rights reserved. 22 U.S. Tax Rates 1909 - 1999 WW I

23. Copyright © 2013 by M. Ray Gregg. All rights reserved. 23 U.S. Tax Rates 1909 - 1999 Great Depression Stock Market Crash

24. Copyright © 2013 by M. Ray Gregg. All rights reserved. 24 U.S. Tax Rates 1909 - 1999 WW II

25. Copyright © 2013 by M. Ray Gregg. All rights reserved. 25 U.S. Tax Rates 1909 - 1999 Korean War

26. Copyright © 2013 by M. Ray Gregg. All rights reserved. 26 U.S. Tax Rates 1909 - 1999 Kennedy Tax Cut

27. Copyright © 2013 by M. Ray Gregg. All rights reserved. 27 U.S. Tax Rates 1909 - 1999 Vietnam War

28. Copyright © 2013 by M. Ray Gregg. All rights reserved. 28 U.S. Tax Rates 1909 - 1999 Regan Tax Cut

29. Copyright © 2013 by M. Ray Gregg. All rights reserved. 29 http://www.truthandpolitics.org/top-rates.php#graph U.S. Marginal Tax Rates 1909 - 2003

30. Copyright © 2013 by M. Ray Gregg. All rights reserved. 30 Marginal Rates 1913 - 2008 http://www.fivethirtyeight.com/2009/03/missing-1000000-tax-bracket.html

31. Copyright © 2013 by M. Ray Gregg. All rights reserved. 31 Marginal Rates 1913 - 2008 http://www.fivethirtyeight.com/2009/03/missing-1000000-tax-bracket.html Regan Tax Cut

32. Copyright © 2013 by M. Ray Gregg. All rights reserved. 32 Marginal Rates 1913 - 2008 http://www.fivethirtyeight.com/2009/03/missing-1000000-tax-bracket.html Regan Tax Cut

33. Copyright © 2013 by M. Ray Gregg. All rights reserved. 33 Marginal Rates 1913 - 2008 http://www.fivethirtyeight.com/2009/03/missing-1000000-tax-bracket.html Bush Tax Increase

34. Copyright © 2013 by M. Ray Gregg. All rights reserved. 34 Marginal Rates 1913 - 2008 http://www.fivethirtyeight.com/2009/03/missing-1000000-tax-bracket.html Bush Tax Cut

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

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

37. 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

38. 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%

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

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

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

42. 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%

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

44. 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

45. Copyright © 2013 by M. Ray Gregg. All rights reserved. 45 28%

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

47. 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%

48. Copyright © 2013 by M. Ray Gregg. All rights reserved. 48 21.6%

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

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

51. 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%

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

53. 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%

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

55. 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