Exam (elaborations)
TAX 4001 Exam 1 (1)
Exam of 5 pages for the course ree 3433 at ree 3433 (TAX 4001 Exam 1 (1))
[Show more]
Seller
Follow
Content preview
TAX 4001 Exam 1Proportional Tax - ANS--applies the same rate on all income, ex: Sales Tax
-Also known as a flat tax rate
= Tax Base X Tax Rate
Regressive Tax - ANS--applies a decreasing rate as the tax base increases, ex: Social
Security Taxes (Payroll Taxes)
-as the tax base increases, the taxes paid increase, but the marginal tax rate decreases
(not common)
Progressive Tax - ANS--imposes an increasing marginal rate as the tax base increases,
ex: Federal & State Income Taxes
-as the tax base increases, both the marginal tax rate & the taxes paid increase
Average Tax Rate - ANS--the total taxes calculated divided by the taxable income
-represents a taxpayer's average level of tradition on each dollar of taxable income
=Total Tax/Taxable Income
-used in budgeting tax expense as a portion of income, determining what percent of
taxable income earned is paid in tax
Marginal Tax Rate - ANS--the rate of tax on the next dollar earned
-the tax rate that applies to the next additional increment of a taxpayer's taxable
income(or deduction)
(New Total Tax-Old Total Tax)/
(New Taxable Income-Old Taxable Income)
Who Pays the greatest % of Taxes? - ANS--Individual taxpayers with income taxes and
payroll taxes
-Corporations pay a very small % compared to individuals
Objectives of US Tax Payer - ANS--Raising Revenues (IRS)
-Socials Objects (limit or encourage having children)
-Economic Reasons
Explicit Taxes - ANS--include most direct taxes, Ex: income, property, and sales taxes
-a tax directly imposed by the government
, Implicit Taxes - ANS--indirect taxes generally resulting from making certain expenses
deductible to others
-Ex: tax free municipal bond interest is not taxable, and thus are favored for those
taxpayers who own them
Statute of Limitations - ANS--limitations for IRS to audit a tax return
-For both amended tax returns filed by a taxpayer and proposed tax assessments by
the IRS, the statute of limitations generally 3 years from the later of
1) the date the tax return was filed
-or-
2) the tax return's original due date
-If unintentional failure to include more than 25% of the AGI on the filed tax return, the
statute of of limitations is extended to 6 years
-If intentionally failed to include any income, or did not file a return at all, the Statute of
Limitations never starts, and the IRS can audit any time in the future
Correspondence Audit - ANS-- most common audit
- conducted by mail and generally are limited to one or two items on the taxpayer's
return
- generally the narrowest in scope and least complex
- typically the IRS requests supporting documentation for one or more items
Office Examinations - ANS-- 2nd most common audit
- conducted at an IRS local office
- typically broader in scope and more complex than correspondence examinations
- more likely for small businesses, sole proprietorship, and middle-to-high income
individual taxpayers are more likely if audited
- taxpayers may attend the examinations alone, with representation, or let their
representation attend for them
Field Examinations - ANS-- least common audit
- conducted @ taxpayers place of business
- can last months or even years
DIF (Discriminant Function) - ANS-- assigns a score to each tax return that represents
the probability the tax liability on the report has been under reported
(higher report = higher likelihood of under reporting)
Post Audit - ANS-- 30 day letter issued and taxpayer can use the IRS Appeals Process
- If not, 90 day letter is issued and taxpayer may appeal to the Tax Court
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller topgradesdr. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for £6.20. You're not tied to anything after your purchase.
Can Stuvia be trusted?
4.6 stars on Google & Trustpilot (+1000 reviews)
73243 documents were sold in the last 30 days
Founded in 2010, the go-to place to buy revision notes and other study material for 14 years now