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Flashcards in Tax Deck (291)
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1

ATRA 2012

  • Top marginal tax rate from 39.6% to 35%
  • Top marginal rate of dividends taxed at the cap gains rate of 20%

2

Excise Tax

Taxed at the Federal, State or Local Level

Restricted to a specific item (tobacco, alcohol, etc)

3

Severance Tax

Tax on natural resources

4

FUTA

  • Federal Unemployment Tax 
  • Tax only paid by employer.

5

Not subject to FICA

  • Child under 18 working for parents
  • Must be sole proprietorship or general partnership where parent is proprietor or partner.

6

Wages not subject to FUTA

  • Child under 21 working for parents
  • Parents working for child

7

Statutory source of tax law

  • Internal Revenue Code
  • new legislation originates in the House Ways and Means Committee

8

Administrative Source of Tax Law

Internal Revenue Service

Execution of the tax code.

Regulations: official interpretation of the tax code:

  • proposed regulations - not binding
  • temporary regulations - binding until a final regulation is issued
  • final regulation - full force and effect of the code itseld

9

Revenue Rulings

  • Revenue rulings: used to give taxpayers insight into how IRS will handle transaction

10

Private Letter Rulings

  • Issued for PROPOSED transaction
  • Issued to a specific individual to know how to treat a specific situation.
  • Only applicable to the specific taxpayer, but can be used to see precedents.

11

Determination letter

  • Issued for a COMPLETED transaction
  • Requested from the district director when the taxpayer has engaged in a transaction and would like to know how to handle it.

12

Sources of tax law

  • Statutory
  • Administrative
  • Judicial

13

Revenue Procedures

Detail internal practices and procedures in the IRS

14

Judicial sources of tax law

  • The body of decisions from US courts
  • case law.

15

General statute of limitations on collection of taxes

  • 3 years for audits and refunds
  • 10 years for IRS to collect the funds

16

Significant underestimated of income statute of limitations

>25% understatement

6 years

17

Fraud statute of limitations and penalty

  • No statute of limitations
  • Penalty: 15% per month up to 75% of underpayment

18

Collection of deficiency by IRS

10 years

19

Refund claim by taxpayer statute of limitations

3 years

20

Failure to file penalty

5% per month or part thereof (full amt if only late by 1 day) up to 25% max

If also fail to pay, this penalty is reduced by .5%/month

File - Five percent

21

Failure to pay penalty

  • .5% per month or part thereof (full amt if only late by 1 day) up to 25% maximum.
  • Cannot be waived. .5% = interest on the money
  • Can be in addition to the failure to file penalty.
  • Pay - Point 5 percent

22

Accuracy-related penalty

20% of underpayment to 30%

23

Audits

  • Can represent a client during an audit: ACE - Attorney, CPA, Enrolled Angent
  • Can be random, based on document-matching (w2, etc), or based on related transactions.
  • Can be by mail or in-person
  • concluded in 3 ways:
    • No change
    • Agreed
    • Disagreed

24

Courts

  • Tax Court
  • US District Court
  • US Court of Federal Claims

25

Required to pay the tax to access court

  • US District Court
  • US Court of Federal Claims
  • Must pay first and then sue to get a refund.

26

Tax Court

  • Tax only
  • Don't have to pay tax first
  • No max claim
  • No jury
  • Throughout US
  • Appeals to : US Court of Appeals

27

Tax Court - Small Claims

  • only tax cases
  • Don't have to pay tax first
  • Max claim: $50,000
  • No jury
  • Courts throughout US
  • No appeals

28

US District Court

  • Hears all types of cases
  • Required to pay tax first and then sue for refund
  • No max claim
  • Jury trial
  • Throughout US
  • Appeals to US court of appeals

29

US Court of Federal Claims

  • Hears claims against the US gov't
  • Required to pay tax first and then sue for refund
  • no max claim
  • no jury trial
  • Only heard in DC
  • Appeals to US Court of Appeals - Federal Circuit

30

Taxable Income

Income - deductions