Class notes
TAX 3300 Chapter 1-5 Notes
- Course
- Federal Taxation 3300
- Institution
- Baruch College
This is a comprehensive and detailed note on Chapter 1-5 for Tax 3300.
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Chapter 1: Taxes are what we pay for civilized society.1. Types of taxes:
a. Income: Levied by the fed government. Imposed on Individuals, Corporations,
and certain estates and trusts (Fiduciaries)
i. Pay-As-You go procedures with withholding requirements
b. Sales Tax: Multitude transactions.
c. Employment Taxes: Imposed on employers and employees.
i. FICA:
1. Social Security 6.2
2. Medicare Tax 1.45
ii. FUTA: Paid entirely by employer
1. Federal
2. Unemployment
d. Use Tax: Owed on property purchased outside the state but used in state.
e. Property Taxes: Ad Valorem Taxes:
i. Based on value, capital. Estate Taxes. Realty
f. Excise: Tobacco, fuel, gasoline, air travel, Alcohol.
i. Gift Tax: taxed over the fair market value of a gift.
g. Transaction Taxes: Imposed at manufacturer, wholesaler, retailer levels
h. Severance Taxes: transaction taxes based on the notion that the state has an
interest in its natural resources (oil, gas, coal iron ore) imposed when extracted.
i. Estate Tax: Levied on the estate of the decedent (tax on the right to pass
property at death)
i. To prevent large concentrations of wealth from being kept in a family for
many generations.
j. Inheritance Tax: Levied on the person receiving the property. Right to receive
property from a decedent.
k. Franchise Tax: Right to do business in state
l. Occupational Fees: on various trades or business like liquor license, taxicab
permit, practice professions.
2. Who writes the laws: Nothing is certain, except death and taxes.
a. Congress
3. Who enforces and interpret laws
a. IRS and part of the Department of Treasury
4. Statute of limitations: Starts when you file (or april 15): only .6% is audited
individuals….9% of corporations and increases for higher-income taxpayers.
a. 3 years
b. 7 years
c. Ongoing if no return is filed or if a fraudulent return is filed.
5. Compliance: Ensure business files all tax returns and make all tax payments on time.
6. Planning: Help business apply favorable tax rules, income tax deferral and credits.
Minimizing tax liability. Time value of money concept is important, coordinating tax
planning to maximize earnings per share.
7. Financial reporting: Financial statements include a variety of tax information, found on
footnotes reporting various tax details including effective tax rate.
8. Controversy: interaction a taxpayer may have with a tax agency (IRS) who regularly
audit tax returns to verify taxes were properly computed and paid
, 9. Cash Management: taxes must be paid on time to avoid penalties and interests.
Self-employment taxes must be estimated and paid quarterly.
10. Data Analysis
11. Tax is used to:
a. Control the economy
b. Encourage certain activities
c. Encourage certain industries
d. Encourage small business
Chapter 3
1. Tax formula: Tax Base * Tax Rate = Tax Liability
a. Income
b. Less: Exclusions
c. Equals: Gross Income
d. Less Deductions for AGI
e. Equals Adjusted Gross income
f. Less The greater between Standard or Itemized Deductions
g. Equals Taxable Income
2. Gross: total receipts
3. Medical exp%: Must exceed 7.5% of AGI (2020)
4. State, Local, etc maximum
a. Single (married filing separately): 5,000
b. Combined: 10,000
5. Contributions: Limit of 6,000
6. Mortgage: Limit of 750,000
7. Deductions
a.
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