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Construction Accounting and Financial Management

Construction Accounting and Financial Management. Chapter 13 Projecting Income Tax. Corporate Income Tax . Pays tax at: Corporate level and Personal level on dividends Paid by: C corporations Some partnerships. Personal Income Tax . Income tax passes through the company to the individual

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Construction Accounting and Financial Management

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  1. Construction Accounting and Financial Management Chapter 13Projecting Income Tax

  2. Corporate Income Tax Pays tax at: Corporate level and Personal level on dividends Paid by: C corporations Some partnerships

  3. Personal Income Tax Income tax passes through the company to the individual Paid by: Sole proprietorships Some partnerships S corporations Limited liability companies

  4. Taxable Income Taxable Income = Income – Tax Deductions Not all cost are tax deductable Only 50% of meals and entertainment are tax deductable Limits on charitable donations Passive losses cannot offset non-passive gains Unused (unallowed) losses may be carried forward

  5. Payments of Income Tax Payment of income taxes is due quarterly

  6. Corporate Income Tax Rates IRS, Instruction for From 1120, 2010, p. 18

  7. Personal Income Tax Rates—Single IRS, Tax Withholding and Estimated Tax, Publication 505, 2011, p. 34

  8. Personal Income Tax Rate—Married IRS, Tax Withholding and Estimated Tax, Publication 505, 2011, p. 34

  9. Marginal or Incremental Tax Rate Tax rate paid on last dollar of income

  10. Capital Gains or Losses Gain or loss on the sale of capital assets May be taxed at a different rate than standard income

  11. Tax Consequences of Depreciation Spreads tax savings out over more years

  12. Difference Between Cash Flow and Deductibility of Depreciation

  13. Tax Credits Reduce taxes not taxable income Some credits cannot be used to reduce both taxable income and taxes

  14. Alternate Minimum Tax Alternate method of calculating income tax for those who have a lot of tax deductions Renders some deductions useless

  15. Projecting Income Tax Use when projecting cash flow for the company Companies who pass their income tax through to their investors need to disburse cash so their investors can pay the income tax

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