...Chapter 7 Individual Income Tax Computation and Tax Credits INSTRUCTOR’S MANUAL Learning Objectives 1. Determine a taxpayer’s regular tax liability and identify tax issues associated with the process. 2. Compute a taxpayer’s alternative minimum tax liability and describe the tax characteristics of taxpayers most likely to owe the alternative minimum tax. 3. Calculate a taxpayer’s employment and self-employment taxes payable and explain tax considerations relating to whether a taxpayer is considered to be an employee or a self-employed independent contractor. 4. Describe the different general types of tax credits, identify specific tax credits, and compute a taxpayer’s allowable child tax credit, child and dependent care credit, American opportunity credit, lifetime learning credit, and earned income credit. 5. Explain taxpayer filing and tax payment requirements and describe in general terms how to compute a taxpayer’s underpayment, late filing, and late payment penalties. Lecture Notes 1) Regular Federal income Tax Computation a) Tax Rate Schedules i) Schedule depends on filing status. ii) Each separate range of income subject to a different tax rate is referred to as a tax bracket. iii) Each filing status has its own tax rate schedules which consists of tax brackets taxed at 10 percent, 15 percent, 25 percent, 28 percent, 33 percent, 35 percent, and 39.6 percent. iv) The IRS provides tax tables that present...
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...Chapter 8 Individual Income Tax Computation and Tax Credits SOLUTIONS MANUAL Discussion Questions 1. [LO 1] What is a tax bracket? What is the relationship between filing status and the width of the tax brackets in the tax rate schedule? A tax bracket is a range of taxable income that is taxed at a specified tax rate. Because only the income in the particular range is taxed at the specified rate, tax brackets are often referred to as marginal tax brackets or marginal tax rates. The level and width of the brackets depend on the taxpayer’s filing status. The tax rate schedules include seven tax rate brackets. The rates for these brackets are 10%, 15%, 25%, 28%, 33%, 35%, and 39.6%. In general, the tax brackets are widest for Married filing jointly (for example, more income is taxed at 10%), followed by Head of household, Single, and then Married filing separately (the brackets for Married filing separately are exactly one-half the width of the brackets for Married filing jointly, and the width of the 10% and 15% brackets for Single and Married filing separately are the same). 2. [LO 1] In 2014, for a taxpayer with $50,000 of taxable income, without doing any actual computations, which filing status do you expect to provide the lowest tax liability? Which filing status provides the highest tax liability? For a taxpayer with $50,000, the married filing jointly filing status should provide the lowest tax liability in 2014 because the MFJ tax rate schedule taxes...
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...1 Tax Credits / Alternative Minimum Tax Federal Tax I Fall 2012 OVERVIEW: This handout summarizes the Tax Credits and Alternative Minimum Tax topics in chapter 7 of your textbook. These are the last topics we will be covering this semester, and as previously discussed I am providing this handout supplementing the material contained in your text due to the time we lost because of Storm Sandy. The material on Tax Credits is contained on pages 7-23 – 7-34 (11 pages) of your textbook. The material on AMT (Alternative Minimum Tax) is covered on pages 7-8 – 7-14 (7 pages). So this is only 18 pages of chapter 7. We covered the rest of chapter 7 earlier this semester prior to exam 2. Tax Credits: As you will recall from very early in the semester, tax credits are a direct dollar for dollar reduction of our income tax liability. We looked at the value of a tax credit compared to the value of a tax deduction. Tax credits can either be nonrefundable or refundable. A nonrefundable credit will reduce a taxpayer’s tax liability, but never below zero. A refundable credit, on the other hand, will go even further. If the credit is large enough to reduce a taxpayer’s tax liability to zero, the excess credit will be refunded to the taxpayer (i.e. treated as additional tax paid in. Example 1: Tom has a tax liability of $ 3,000, a nonrefundable credit of $ 4,000, and federal tax withheld of $ 1,500. Calculate Tom’s refund: Tax Liability Less: credit Net tax Less Withholding Refund $ 3,000 ( 3...
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... Revenues are realizable when assets received in exchange are readily convertible to known amounts of cash or claims to cash. Revenues are earned when the entity has substantially accomplished what it must do to be entitled to the benefits represented by the revenues, that is, when the earnings process is complete or virtually complete. Revenue Recognition Issues Usually revenue is recognized at the point of sale because most of the uncertainties related to the earning process are removed and the exchange price is known. But, the earning process itself is not defined precisely anywhere in the authoritative literature. More importantly, an entity's earnings process(es) is (are) determined by its business model(s) and the number of business models can grow without limit. Ex: Walt Disney Co. As a result, more than 200 pieces of guidance on revenue recognition are in effect in US, each one intended to address the two issues of culmination of an earnings process and realized/realizable revenues. Some examples of the US GAAP and SEC guidance applicable to revenue-recognition accounting include: • SAB 104 – “Revenue Recognition” (an amendment...
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...PAPER WORK WEEK SEVEN (AC553) Solution: (A) ADJUSTED GROSS INCOME: This is a measure of income and it used to establish eligibility for financial benefits. It is calculated as gross income from taxable sources minus allowable deductions. Adjusted gross income is important to individual income taxation because it controls individual qualification for numerous deductions and credits. Besides, it can affect individual eligibility for retirement plans. (B) How does ADJUSTED GROSS INCOME AFFECT: (1) Medical Deduction on Form 1040, Schedule A Only the part of medical expenses that exceed 7.5% of the amount on Form 1040, line 38 is deductible. To the extent you were not reimbursed, you can deduct the amount you paid for: Prescription medicines or insulin, Medical examination, diagnostic test etc. (2) Miscellaneous Itemized Deduction on Form 1040, Schedule A This is subject to expense that is more than 2 % of your adjusted gross income. This 2% limit can only be applied after you apply any other deduction limit. For example, unreimbursed employee expenses, Tax preparation fee, and all other expenses that will appear on line 11 of Form 1040. (3) The Deduction for Charity on Form 1040, Schedule A Donations to charity are tax deductible expenses but subject to limitation.1) you must make an assessment of the fair market value of the property you contribute. 2) You must attach IRS Form 8283 if your total non-cash contribution exceeds $500. 3) If you contribute a car...
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...Financial Restatement Paper Financial Restatement Paper University of Phoenix ACC/537 After the introduction of the Sarbanes Oxley Act lots of companies have had to submit financial restatements in their financials. This paper is to examine the financial restatements that have been done by Kodiak Energy Inc. over the past several years due to incorrect reporting on the value of their stocks. Kodiak Energy entered into an agreement with to purchase land from Thunder River Energy in exchange for shares of stock in the Kodiak Energy Company. Kodiak Energy issued seven million shares reported to be worth $2.00 per share. The SEC decided to look into this arrangement and soon discovered that the shares offered by Kodiak Energy were worth $2.50 at the time of the purchase. Upon the findings by the SEC, Kodiak Energy offered to file a misstatement in order to acknowledge the misrepresentation of the worth of the shares. Kodiak Energy had filed their financials incorrectly 3 separate times each time with the incorrect values reported on their 10-K and 10-Q, and in response the SEC was not satisfied to allow a simple misstatement to be done to correct these errors. With the SEC continuing the investigation into the financial records of Kodiak Energy because they felt that they offered to file the restatement too quickly and were trying to hide that this was more than just an error on their part but was in...
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...a proposal for an online business expansion in which you do the following: 1. Discuss how the business or service that the business offers will be viable in an online environment. The business is a residential care group home for seniors. The Fisher House provides lodging, meals, medications, assistance with daily living, 24 hour staff supervision, and medical services. They are currently listed on the internet under the Family Services Association incorrectly as a United Methodist Home and as a licensed facility with a Place for Mom. The demand for residential care facilities for senior has increased because of the strict requirements that a senior must meet the standards so they can get approval from Medicaid. Medicaid will pay for residential health care facility which is also called a nursing home. They will not pay for residential care group homes, also known as a Class “C” boarding home. Seniors are living longer and is segment of the population is called “baby boomers” and they are starting to enter the senior housing market. The baby boomers are a large population and will be receiving social security and pensions in large numbers. This group will need caregivers. Because of the strict Medicaid regulations and the cost of other living arrangements for seniors the boomers will be looking for affordable high quality supervised housing. The Fisher House is an excellent alternative for affordable living with great services. The business will do very well by advertising...
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...I:14-1 Chapter I:14 Special Tax Computation Methods, Tax Credits and Payment of Tax Discussion Questions I:14-1 Most taxpayers are not subject to the alternative minimum tax (AMT) because they do not have substantial tax preferences and AMT adjustments and because there is a liberal exemption amount to reduce the tax base on which the AMT is calculated. However, more and more taxpayers in recent years are being subjected to the AMT. p. I:14-2. I:14-2 No, the alternative minimum tax does not apply if an individual's tentative minimum tax under the AMT rules is less than his regular tax liability. It applies only if the tentative minimum tax exceeds the regular tax liability. p. I:14-3. I:14-3 b. only. Only excess depreciation for real property placed in service before 1987 is a tax preference item. For tax years prior to 1987, net long-term capital gains were a tax preference item (i.e., the 60% long-term capital gain deduction) and for taxable years prior to 1993 the appreciated element related to charitable contributions of capital gain real property was a tax preference item. p. I:14-4. I:14-4 a, b, c only. Itemized deductions that are not allowed in computing AMTI, excess depreciation on real property placed in service after 1986, and excess MACRS depreciation for personal property placed in service after 1986, are all AMT adjustments. Tax-exempt interest is not an AMT adjustment but may be a tax preference item if the bonds are private activity bonds. pp...
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...SEC Staff Accounting Bulletin: No. 101 – Revenue Recognition in Financial Statements Securities and Exchange Commission 17 CFR Part 211 [Release No. SAB 101] Staff Accounting Bulletin No. 101 Agency: Securities and Exchange Commission Action: Publication of Staff Accounting Bulletin Summary: This staff accounting bulletin summarizes certain of the staff's views in applying generally accepted accounting principles to revenue recognition in financial statements. The staff is providing this guidance due, in part, to the large number of revenue recognition issues that registrants encounter. For example, a March 1999 report entitled Fraudulent Financial Reporting: 1987-1997 An Analysis of U. S. Public Companies, sponsored by the Committee of Sponsoring Organizations (COSO) of the Treadway Commission, indicated that over half of financial reporting frauds in the study involved overstating revenue. Date: December 3, 1999 For Further Information Contact: Richard Rodgers, Scott Taub, or Eric Jacobsen, Professional Accounting Fellows (202/942-4400) or Robert Bayless, Division of Corporation Finance (202/942-2960), Securities and Exchange Commission, 450 Fifth Street, NW, Washington, DC 20549; electronic addresses: RodgersR@sec.gov; TaubS@sec.gov; JacobsenE@sec.gov; BaylessR@sec.gov. Supplementary Information: The statements in the staff accounting bulletins are not rules or interpretations of the Commission, nor are they published as bearing the Commission's official...
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...Ethics & Plagiarism Self-Plagiarism is the reuse of significant identical or nearly portions of one’s own work without acknowledging that one is doing so without citing the original work. As Robert Barbato of E. Philip Sounders College of Business states “I can’t plagiarize myself-those are my own words”. I feel that there are no ethical implications for “self-plagiarism”. I believe this is an unavoidable situation for people to re-use portions of their own text. In my understanding of “self-plagiarism” this is just a reuse of “one’s own words” without acknowledging the prior work that it was originally used in. If this is your own word to begin with then there should be no plagiarism just not given credit to your prior work that had these ideas in it. There is no ethical issues along with self-plagiarism because it is your own words and thoughts. However plagiarism is a huge “no-no” and ethical issue. As Aristotle states in his Virtue Ethics, “What kind of person do you want to be? To knowingly cheat or plagiarize is to diminish the moral character of oneself.” This was a wonderful state, plagiarism is a type of stealing and we all know that’s a wrong act to do. Which brings me to Kautian Ethics, which compares plagiarism to stealing. Ethically, self-plagiarism and plagiarism are two different ideas and ethical issues. I believe there should be no ethical implications toward self-plagiarism since this is your own words and thoughts to begin with. However plagiarism...
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...Project 1. BUSINESS FORMATION a. What form would be required to form a Limited Liability Company? Articles of Organization b. What form would be required to form a Corporation? Articles of Incorporation c. Does an attorney need to sign the organization documents for an LLC? No but it may be in the best interest for the organization d. Does an attorney need to sign the organization documents for a Corporation? No, but it may be in the best interest for the organization e. What are the filing fees associated with filing an LLC and a Corporation? $110 for both and the CL-1 is $25 f. Are there annual fees to be paid to the state for an LLC or Corporation? Both LLC and Corporation have to pay $10 fees g. Does a Corporation doing business in SC but formed in another state have to register with the State of South Carolina? Yes, they are required to register every location that their business resides in h. Does a General Partnership have to file anything with the Secretary of State? No. 2. BUSINESS LICENSES AND TAX REGISTRATION For this portion- I chose to run an S CORP for my liquor store which sells tobacco, wine, and liquor. My three employees are my cashier, stocker, and manager. a. In Charleston, all businesses are required to have an annual business license for each location. There is a five step process for obtaining this business license. First- Zoning Compliance. The city encourages every business to confirm the...
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...Final Exam Review- Hitzig parts 1-3 1. Revenue Recognition: General: 25-1 The recognition of revenue and gains of an entity during a period involves consideration of the following two factors, with sometimes one and sometimes the other being the more important consideration: ← a. Being realized or realizable. Revenue and gains generally are not recognized until realized or realizable. Paragraph 83(a) of FASB Concepts Statement No. 5, Recognition and Measurement in Financial Statements of Business Enterprises , states that revenue and gains are realized when products (goods or services), merchandise, or other assets are exchanged for cash or claims to cash. That paragraph states that revenue and gains are realizable when related assets received or held are readily convertible to known amounts of cash or claims to cash. ← b. Being earned. Paragraph 83(b) of FASB Concepts Statement No. 5, Recognition and Measurement in Financial Statements of Business Enterprises , states that revenue is not recognized until earned. That paragraph states that an entity's revenue-earning activities involve delivering or producing goods, rendering services, or other activities that constitute its ongoing major or central operations, and revenues are considered to have been earned when the entity has substantially accomplished what it must do to be entitled to the benefits represented by the revenues. That paragraph states that gains commonly result from transactions and other events...
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...Banking Academy | City University of Seattle | TAXATION PERSONAL INCOME TAX IN THE UNITED STATE Group’s member:Nguyễn Như Nam (C)Phan Thu AnNguyễn Thùy DungHoàng Bá SơnNgô Thị Ánh TuyếtDate: 15/12/2014 | Table of Contents PART 1. The review on the tax system in the United States 2 1. The tax administration system in United States 2 2. The tax policy system in United States 3 PART 2. The review of the main content of the tax laws 5 I. The scope of application 5 1. Taxable incomes 5 2. Non-taxable 7 3. Payers. 7 II. The taxation bases 9 III. The tax calculation method 10 1. Gross Income 10 2. Adjusted gross income 17 3. Tax Credits 17 4. Tax Rates 20 5. Deductions and exemptions 22 IV. Tax declaration, submission and refund 32 1. Declaration 32 2. Submission 33 3. Refund 34 REFERENCES 36 PART 1. The review on the tax system in the United States Taxation is an important for each country. Taxation provides a material to distribute economic resources towards those with low incomes or special needs. Taxes provide the revenue needed for critical public services such as social security, health care, national defense, and education. 1. The tax administration system in United States The U.S. system of tax administration is based on the principle of self-assessment. In a self-assessment system, taxpayers calculate and pay their own taxes without the intervention of a tax official. If this is not done appropriately...
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...[pic] 37-08 Main Street ( Suite C8 ( Flushing ( New York 11354 E-Mail: WingsofAsiaInc@gmail.com Direct Dial: (718)554-5466 Toll Free: (800) 940-1102 (718)554-5468 Facsimile: (206) 338-2846 Credit Card Authorization Form Your completion of this authorization form helps us to protect you, our valued customers, from credit card fraud. All information filled on this form will be keep strictly confidential. The Form Filling Directions: 1) Fill out and electronic signature on the form, or print the blank form and complete the entire form legibly with black pen, the card holder must sign on the signature line indicated. We reserved the right to verify the provided information with your Credit Card issuing Bank. 2) Include a photocopy of the both front and back of the signed credit card. 3) Fax the completed form and the photocopies of the credit card to (206)338-2846 or scan and email to WingsofAsiaInc@gmail.com to complete your order. ATTEN: B.Q. |Ticket Booking Details: | |1 | |(First Name) ...
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...Albers School of Business and Economics APPlIcAtIon 2011– 2012 The GraduaTe ProGrams of seaTTle universiTy Application Instructions and Procedures Thank you for applying to Seattle University. This packet contains copies of the required admission documents for the graduate programs of the Albers School of Business and Economics. All application materials must be received by the application deadline to receive full consideration. Priority deadlines are listed below. Later applicants will be considered on a space available basis. International applicants should refer to deadlines listed below and additional information on page 2. If applying for any of the Executive programs in the Albers School, please use their specific application packet. The following documents should be sent directly to Graduate Admissions using the address noted on the top of the application form: • Complete graduate application form and a $55 nonrefundable application fee. The fee is waived for Seattle University alumni. • Submit an official, degree-posted transcript in the original sealed envelope from the last 90 quarter/60 semester credits of your bachelor’s degree, including any transfer institution credit earned during this time period. Official transcripts from any post-baccalaureate institution will also be required. Exceptions to the policy are noted with the degree requirements. Priority Application Deadlines for Terms of Entry 2011-2012 • Evidence of the minimum of an earned four-year...
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