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Accounting Tax Chapters 1-4
Mcgraw-Hill
56
Accounting
Undergraduate 1
12/01/2011

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Term
Who cares about taxes?
Definition
Businesses, Politicians,individuals
Term
A payment required by a government agency that is unrelated to any specific benefit or service received from the government agency
Definition
Tax
Term
level of taxes imposed on the tax base and is usually expressed as a percentage
Definition
Tax Rate
Term
defines what is actually taxed and is usually expressed in monetary terms
Definition
Tax Base
Term
Formula for calculating tax
Definition
Tax= Tax Base X Tax rate
Term
3 different ways to measure tax rates
Definition
Marginal Tax Rate, Average Tax Rate, Effective Tax Rate
Term
the tax rate that applies to the next additional increment of a taxpayers taxable income
Definition
marginal tax rate
Term
the taxpayers average level of taxation on each dollar of taxable income
Definition
average tax rate
Term
the taxpayers average rate of taxation on each dollar of total income (both taxable and non-taxable)
Definition
effective tax rate
Term
average tax rate =
Definition
total tax / taxable income
Term
effective tax rate =
Definition
total tax / total income
Term
the base is divided into a serious of monetary accounts, or brackets, a portion of the tax base is subject to a specific tax rate
Definition
graduated taxes
Term
3 tax rate structures
Definition
flat tax, progressive tax, regressive tax
Term
imposes a constant tax rate throughout the tax base
Definition
flat tax rate (proportional tax rate)
Term
imposes an increasing marginal tax rate as the tax base increases
Definition
progressive tax rate
Term
imposes a decreasing marginal tax rate as the tax base increases
Definition
regressive tax rate
Term
types of federal taxes
Definition
income taxes, employment and unemployment taxes, excise taxes, and transfer taxes
Term
federal tax used to cover government programs
Definition
income tax
Term
federal tax used to fund social security, medicare, and unemployment payments
Definition
employment and unemployment tax
Term
federal tax that is the quantity of product sold (alcohol, gasoline)
Definition
excise tax
Term
federal tax against transfers of wealth (estate taxes, gift taxes)
Definition
transfer tax
Term
types of state and local taxes
Definition
sales and use, property, income
Term
state and local tax used for retail sales made in and out of the state
Definition
sales and use tax
Term
state and local tax on real and personal property
Definition
property tax
Term
state and local tax used to fund state govt programs
Definition
income tax
Term
a tax not paid directly to the government
Definition
indirect tax (implicit tax)
Term
indirect taxes that result from a tax advantage the govt grants to certain transactions to satisfy social, economic , or other objectives
Definition
implicit tax
Term
income never included in taxable income
Definition
excluded income
Term
income included in a subsequent tax year
Definition
deferred income
Term
tax exempt =
Definition
no tax
Term
tax deferred =
Definition
no tax in current year
Term
generally all assets
Definition
capital assets
Term
the US uses what type of tax rate schedule
Definition
progressive
Term
payments already made towards tax liability
Definition
tax prepayments
Term
prepayments include-
Definition
income taxes withheld from wages by employer, estimated tax payments made during the year, taxes over payed in prior year and applied toward current year
Term
personal exemption is
Definition
for taxpayer and spouse if married filing jointly
Term
dependency exemption is
Definition
for those who qualify as the taxpayers dependents
Term
dependency requirements are
Definition
citizen of the US or resident of the US, Canada or mexico. Must be qualifying child or qualifying relative of taxpayer
Term
Test to determine if qualifying child
Definition
Relationship test, age test, residence test, support test
Term
taxpayers son, daughter, stepchild, eligible foster child, brother, sister, half brother, half sister, step brother, step sister, or a descendant of any of these relatives is used to determine what qualifying child test
Definition
relationship test
Term
child must be under younger than the individual claiming the child to qualify for what test
Definition
age test
Term
child must share the same residence as taxpayer for more than half the year. qualifying test-
Definition
residence test
Term
child must not provide more than half or his or her own support. qualifying test-
Definition
support test
Term
qualifying relative must pass what tests
Definition
relationship test, support test, and grow income test
Term
5 different filing statuses
Definition
married filing jointly, married filing separately, qualifying widow or widower, single, head of household
Term
to file and married filing jointly you must be married on the last day of the year true or false
Definition
true
Term
If one spouse dies within the year how do you file
Definition
married
Term
if taxpayers are married but file separate returns they are called
Definition
married filing separately
Term
Jeremy and Annie are married. During the year Jeremy dies. When Annie files her tax return for the year, she may file under the married filing jointly filing status.
true or false
Definition
true
Term
An individual may meet the relationship test to be a taxpayer's qualifying relative even if the individual is unrelated to the taxpayer.
true or false
Definition
true
Term
To be considered a qualifying child of a taxpayer, the individual must be the son or daughter of the taxpayer.
true or false
Definition
false
Term
Horizontal equity is:
Definition
When two taxpayers in similar situations pay the same tax.
Term
When taxpayers use existing tax law to minimize their tax liability.
Definition
Avoidance
Term
When taxpayers deliberately misrepresent or conceal the true state of their affairs to a tax authority to reduce their tax liability.
Definition
Evasion
Term
AGI- Deducted in determining adjusted gross income
Definition
“above the line”
Term
AGI- Deducted from adjusted gross income to determine taxable income
Definition
“below the line”
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