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Mastering Federal Income Taxation: Essential Guide for Tax Knowledge

Understand personal and business taxes, the role of CPAs, and tax laws changes. Learn to apply tax knowledge in client situations and stay updated on new tax laws. Explore the history of U.S. income tax and administration processes. Discover the importance and complexities of different tax types. Start your journey to becoming an intelligent consumer of tax services!

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Mastering Federal Income Taxation: Essential Guide for Tax Knowledge

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

  8. ECONOMY Low Cost to Collect

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

  10. CERTAINTY • (Easily?) Predictable Results

  11. HORIZONTAL EQUITY • Equally situated persons pay equal taxes

  12. 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.

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

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

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

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

  17. 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)

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

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

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

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

  22. 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.

  23. THE END - Day One Happy Homework!

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