Tax- Intro & Federal Tax Law And Tax Ethics

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1861

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used to finance civil war

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1894

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individual income tax/ Pollock decision (us supreme court 1895)

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1909

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corporate income tax/ flint decision (us supreme court 1911)

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16th amendment

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proposed july 12th 1909

ratified by states feb. 29 1913

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revenue acts

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first legal income tax 1913

codified 1939 (internal revenue code of 1939)

internal rev codes of 1954 and 1986

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why create tax law to begin with?

(objectives of federal tax law)

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1. raise revenue

2. regulate economy

3. further social political objectives

4. further political aims

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tax structure criteria

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1.certainty- clearly specify when, how much, to whom and how the tax is collected

2. convenience- due at a time and manner convenient to tax payer

3. economy- min. costs for tax payer and gov to collect

4. equality- similar situated tax payers should be taxed similarly

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1.who gets taxed?

2.what gets taxed?

3.when does it get taxed?

4.how is tax collected?

5.how much tax is collected?

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1. everyone

2. income, property, personal property, franchise etc.

3. on paycheck, when you buy something, bills, 2 times a year etc.

4. automated, quarterly, withheld

5. progressive, proportional, and regressive

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progressive tax rate

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more $ more tax

less $ less tax

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regressive

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more $, less tax

less $ more tax

(social security)

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proportional

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flat tax (sales)

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Tax ethics

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- there are guidelines for conduct (AICPA statements on standards for tax services, treasury department circular No.230)

-tax preparer penalties ($50 fail to sign)

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two components to structure of tax

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1. tax rate

2.tax base

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tax liability

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tax rate x tax base

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tax bases

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-transactions

-property or wealth

-privileges or wealth

-income on gross or net expenses basis

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2 types of transaction taxes

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-sales

-employment

-transfer of wealth taxes

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federal excise taxes

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firearms, trucks, trailers, liquor ( usually quarterly)

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state excise taxes

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gas, liquor, tobacco * varies on state

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local excise taxes

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hotel occupancy tax, rental car surcharges

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general sales tax

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major source of revenue for most state and local governments (proportional tax rate)

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Use taxes

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prevent one from avoiding state and local tax

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value added taxes

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variation of sales tax

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FICA taxes

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1/3 of revenue in federal budget

* social security

*medicare

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FUTA taxes

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imposes tax on employers and provides funds to state unemployment benefit programs

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self employment taxes

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required to pay both the employer and employee portion of FICA

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unemployment taxes

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FUTA differs from FICA

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Taxes at death

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estate tax- tax on transformer

inheritance- taxes recipient

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Gift tax

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applies to transferred amounts that are not supported by full and adequate consideration

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property taxes

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value based- ad valorem taxes

taxes on realty

taxes on personalty

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income taxes

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by fed gov. most states and some local

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tax avoidance

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minimizing taxes legally

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tax evasion

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attempting to evade taxes illegally