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Taxation 1 > Taxation 1 > Flashcards

Taxation 1 Flashcards

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1
Q

Tax

A

Payment required by a government that is unrelated to any specific benefit or service

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2
Q

Sin taxes

A

Taxes imposed on the purchase of goods that are considered less socially acceptable (alcohol/tobacco)

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3
Q

What qualifies as a tax?

A

Payment must be:

  1. Required
  2. Imposed by a government agency
  3. Not tied directly to the benefit received by the taxpayer
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4
Q

Earmarked tax

A

Tax that is assessed for a specific purpose (education)

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5
Q

Tax base

A

The item that is being taxed

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6
Q

Tax rate

A

The level of taxes imposed on the tax base - usually as a %

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7
Q

Flat tax

A

A tax un which a single tax rate is applied throughout the tax base

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8
Q

Graduated taxes

A

Taxes in which the tax base is divided into a series of amounts (brackets) where each bracket is taxed at a different %

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9
Q

Brackets

A

A subset of the tax base that is subject to a specific tax rate

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10
Q

Marginal tax rate

A

The incremental tax paid on an incremental amount of additional income or deductions

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11
Q

Marginal tax rate equation

A

Change in tax / change in taxable income = (new total tax - old total tax) / (new total - old total)

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12
Q

“Old” tax

A

Current tax

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13
Q

“New” tax

A

Revised tax after incorporating additional income or deductions

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14
Q

Average tax rate

A

Taxpayers average level of taxation on each dollar of taxable income

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15
Q

Effective tax rate

A

Taxpayers average rate of taxation on each dollar of total income including taxable and non-taxable

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16
Q

Proportional tax rate structure

A

AKA flat tax - imposes a constant rate of tax rate throughout the tax base.

As tax base increases, so for the taxes paid

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17
Q

Progressive tax rate structure

A

Imposes an increasing marginal tax rate as the tax base increases

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18
Q

Regressive tax rate structure

A

Imposes a decreasing marginal tax rate as the tax base increases

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19
Q

Value-added tax

A

Imposed on the producer of goods based on the value added at each stage of production - common in Europe

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20
Q

Income tax

A

Tax base is income - imposed by fed govt and most states

Most significant tax assessed

Levied on individuals, corps, estates, and trusts

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21
Q

Employment taxes

A

Consist of Old Age, Survivors, and Disability Insurance (SSN tax) and Medical Health Insurance (Medicare tax)

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22
Q

SSN tax

A

Intended to provide basic pension coverage for the retired and disabled at a rate of 6.2% on the wage base

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23
Q

Medicare tax

A

Intended to help pay medical costs for qualifying individuals

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24
Q

Self-employment tax

A

SSN and Medicare taxes paid by the self-employed on a taxpayer’s net earnings (FICA taxes)

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25
Unemployment taxes
Tax that pays for temporary unemployment benefits for individuals terminated from their jobs without cause
26
Excise taxes
Levied on the retail sale of particular goods - tax base depends on QUANTITY rather than monetary amount
27
Transfer taxes
Taxes in transfer of wealth from one taxpayer to another
28
Estate tax
Tax paid for an estate
29
Sales tax
Tax imposed on the retail price of goods
30
Use tax
imposed on the retail price of goods owned, possessed, or consumed within a state that were not purchased within the state
31
Real property taxes
Tax on the FMV of land and structures permanently attached to land
32
Ad volaren taxes
Taxes based on the value of property
33
Explicit taxes
Taxes directly imposed by a government
34
Implicit taxes
indirect taxes that result from a tax advantage the government grants to certain transactions to satisfy social, economic, or other objectives. Reduced before-tax return that a tax favored asset produces
35
Sufficiency
Assessing the aggregate size of the tax revenues that must be generated and ensuring that the tax system provides these revenues
36
Static forecasting
Process of forecasting tax revenues based on the existing state of transactions while ignoring how taxpayers alter their activities in response to tax law change
37
Dynamic forecasting
Process of forecasting tax revenues that incorporates into the forecast how taxpayers may alter activities in response to tax law change
38
Income effect
Predicts when taxpayers are taxed more that they will work harder to generate the same after-tax dollars
39
Substitution effect
Predicts that hen taxpayers are paid more, rather than working more, they will substitute non taxable activities like leisure
40
Equity
One criteria used to evaluate a tax system
41
Horizontal equity
Two taxpayers in similar situations pay the same tax
42
Vertical equity
When taxpayers with greater ability to pay tax, will pay more tax than those with less ability to pay tax
43
Certainty
Taxpayers should be able to determine when, where, and how to pay the tax.
44
Convenience
Suggests that a tax system should be designed to facilitate the collection of tax revenues without undue hardship on the taxpayer or govt
45
Economy
Requires that a good tax system should minimize the compliance and administration costs associated with the tax system
46
30 day letter
IRS letter received after an audit that instructs the taxpayer they have 30 days to request a conference or agree to the adjustment
47
Acquiescence
Letter stating that IRS will no longer litigate the issue after losing a trial case
48
Action on decisions
IRS pronouncement that explains the background reasoning behind an IRS acquiescence or nonacquiescence
49
Circular 230
Regulations issued by IRS that govern tax practice and apply to all person practicing before the IRS
50
Citator
Research tool allowing one to check the status of several types of tax authorities
51
Civil penalties
Monetary penalties imposed when tax practitioners or payers violate tax statues without reasonable cause
52
Correspondence examination
IRS audit conducted by mail and generally limited to one or two items - most common
53
DIF Discriminant function system
Assigns a score to each tax return that represents the probability that the tax liability on the return has been underreported
54
Document perfection program
Program where all tax returns are checked for mathematical and tax calculation errors
55
Field examinations
IRS conducted audit at the taxpayers place of business - least common
56
Final regulations
Regulations that have been issued in final form - represents the treasury’s interpretation of the cod
57
Golsen tule
Rule that states that the US tax court will abide by the rulings of the circuit court that has appellate jurisdiction for a case
58
Information matching program
Program that compares the taxpayers tax return to info submitted to the IRS from other taxpayers
59
Internal Revenue Code of 1986
Codified tax laws of the USA
60
Interpretive regulations
Most common regulations- represent the Treasury’s interpretation of the code and are issued under the treasury’s general authority
61
Legislative regulations
Rarest type of regulation - issued when Congress specifically directs the treasury to create regulations to address an in issue in an area of law
62
Office examinations
Second most common - IRS conducts audit at local IRS office
63
Primary authorities
Official sources of the tax law generated by the branches of govt
64
Private letter rulings
IRS pronouncements issued in response to a taxpayer request for a ruling on specific issues for the taxpayer
65
Procedural regulations
Regulations that e Solon the treasury dept procedures as they relate to administering the code
66
Revenue procedures
Second in administrative weight- explain in greater detail IRS practice and procedures
67
Regulations
Highest authority issued by the IRS
68
Secondary authorities
Unofficial tax authorities that interpret and e split the primary authorities
69
State decisis
A doctrine that a court will rule consistently with its previous rulings, and the rulings of higher courts with appellate jurisdiction
70
Statements on Standards for Tax Services (SSTS)
standards if practice for tax professionals
71
Statue of limitations
Defines the period in which a taxpayer can file an amended return or the IRS can assess a tax deficiency
72
Substantial authority
Standard used to determine whether a tax practitioner may recommend and a taxpayer make take a tax return position without being subject to IRS penalty
73
Tax treaties
Agreements negotiated between countries that describe the tax treatment of entities subject to tax in both countries
74
Technical advice memorandums
Rulings issued by the IRS generates for completed transactions
75
Topical tax service
Tax service arranged by subject
76
US circuit courts of appeals
First level of appeals courts after the trial-level courts
77
US Court if Federal Claims
one of theee trial-level courts
78
US district court
One of three trial-level courts - the only court that allows a jury trial
79
Writ of certiorari
Document filed to request the US Supreme Court to hear a case

Taxation 1 (2 decks)

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