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ACCT 355 Exam 1 Study Guide With complete solution 2024/25
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ACCT 355 Exam 1 Study Guide With complete solution 2024/25
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ACCT 355 Exam 1 Study Guide Withcomplete solution 2024/25
Who cares about taxes? - 1. Businesses
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2. Politicians
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3. Individuals
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What qualifies as a tax? - A tax is a payment required by a government agency that is
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unrelated to any specific benefit or service received from the government agency
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ii Entities in Federal Income Tax System - Govt, individuals, businesses
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Why taxes? - constitutional purpose: main way govt makes money, pays debts, provides
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for common defense, provide for general welfare
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proportional tax rate structure - also known as a flat tax, this tax rate structure imposes a
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constant tax rate throughout the tax base. As the tax base increases, the taxes paid
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increase proportionally.
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progressive tax rate structure - imposes an increasing marginal tax rate as the tax base
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increases
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regressive tax rate structure - imposes a decreasing marginal tax rate as the tax base
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increases
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ii Gross Income - the total amount of income from wages before any payroll deductions
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adjustments for agi - "Above-the-line" IRS allowed reductions to your gross income that
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are used to calculate adjusted gross income
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Adjusted Gross Income (AGI) - the amount of income remaining after subtracting all
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allowable adjustments to income from gross income
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ii Adjustments from AGI - Below the line from AGI ii ii ii ii ii ii ii ii ii ii
taxable income - income on which tax must be paid; total income minus exemptions and
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deductions
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ii Taxable Income Formula - Taxable Income= gross income - tax deductions
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ii Tax Determination - amount of taxes owed on taxable income
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tax credits - deductions from a taxpayer's tax liability that directly reduce his or her taxes
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due (rather than reducing taxable income)
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