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ACC 331

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

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ACC 331

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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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