1. ACC 331 INTRODUCTORY FEDERAL INCOME TAXATION

2. 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

3. 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

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

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

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

7. Property Sales/Use Estate Inheritances Gift Income Employment (FICA pp1-15-17), etc.

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

9. ECONOMY Low Cost to Collect

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

11. CERTAINTY (Easily?) Predictable Results

12. HORIZONTAL EQUITY Equally situated persons pay equal taxes

13. 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.

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

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

16. HISTORY OF U.S. INCOME TAX Civil War - Springer 1898 - Pollock 1909 - Excise on being incorporated (1%) 1913 - 16th amendment

17. 16th Amendment Congress may tax all income from whatever source derived without apportionment.

18. HISTORY OF U.S. INCOME TAX March 1913 - Individual income tax low rates / high base 1941 - 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)

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

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

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

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

23. 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.

24. THE END - Day One Happy Homework!