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Why does income tax penalize savers but consumption tax would not?
Consumption tax differs from income tax in that it allows taxpayers to deduct any savings they may have from their overall income prior to calculating their taxes (p.644). This type of taxation has become increasingly advocated due to widespread low savings among people in the United States and long-term negative effects this may have on the economy (p.644). With a consumption tax, both savers and non-savers are taxed based on the figures associated with their labor income alone (p.649). However, with the consumption tax, those who have saved money are not required to pay any sort of tax on income earned from accrued interest in their accounts, which is different from requirements with regard to income tax (p.649). This illustrates how savers are penalized with income tax because they are taxed on interest accrued. Overall, the consumption tax…
However, a related New York Times article on the story reported: "In court papers, the I.R.S. said that First Data had actively marketed and sold offshore services to American merchants, typically investment and Internet-commerce advisory shops, who in turn used the service to help their clients hide taxable income…In 2002, the unit [Cardservice International and now called First Data Independent Sales] which works with 3,200 independent sales offices and agents to sell and provide financial processing services, began marketing offshore processing services with First Atlantic Commerce, an e-commerce company in Bermuda, according to court documents" (Browning 2009). The IRS states that First Data, "clearly markets offshore merchant account services to U.S. merchants as a means of tax avoidance by advertising its services on the eb sites of foreign promoters of abusive offshore tax schemes and products" (Browning 2009).
The pressure placed upon First Data is emblematic of the greater scrutiny…
100 billion the country could use. (2009, March 14). Editorial. The New York Times.
Retrieved April 18, 2009 at http://www.nytimes.com/2009/03/14/opinion/14sat1.html
Browning, L. (2009, April 15). Credit card processor asked for offshore data. The New York
Times. Retrieved April 18, 2009 at http://www.nytimes.com/2009/04/16/business/16tax.html?_r=1&partner=rss&emc=rss
S. domestic law, a U.S. citizen or resident (Non U.S. person) who is a beneficiary of a foreign retirement plan would be subjected to the existing U.S. income taxation on all of the income that is accrued in their foreign investment plans even though their income is never currently distributed per se to the beneficiary. This should be the case unless the foreign retirement plan accounts as the employee's trust as described in section 402(b) of the U.S. Internal evenue Code and the said individual is not one of the highly compensated workers who is subjected to the meaning of the section 402(b)(4)(a) Internal evenue Code.
Therefore, as long as a given foreign retirement plan accounts as an employee's trusts with the person not being one of the highly compensated workers, then there is never an inclusion that is required by law. On the contrary, if the given foreign retirement…
Augustyn, FM (1985) "A Primer for Incorporating Under the Income Tax Laws of France, Germany, or the United Kingdom," 7 J. International. L. BUS. 267
Ault, Hugh J., and David F. Bradford, "Taxing International Income: An Analysis of the U.S. System and Its Economic Premises," in Assaf Razin and Joel Slemrod, eds., Taxation in the Global Economy, Chicago, IL: University of Chicago Press, 1990, pp. 11-52; reprinted in Robert Z. Aliber and Reid W. Click, eds., Readings in International Business: A Decision Approach, Cambridge, MA: The MIT Press, 1993, pp. 365-406.
Doggart, C (1987) Tax havens and their use, 6-7
Drucker, J. (2008) "Corporate Tax Reporting Draws GAO Scrutiny." The Wall Street Journal, A2
The state of Pennsylvania also levies additional taxes on its citizens.
Taxes are levied not only for individuals, but also for businesses. Taxes are levied differently for incorporated and non-incorporated businesses. Incorproated businesses are considered an independent entity and is therefor taxed independent of its owners. This is commonly referred to as double taxation meaning the owner of the corporation must pay taxes twice, once on the salary derived from the business and once on the busisiness's total income. Non-incorporated businesses are viewed as being an extension of the individual tax payer, so the payer must only file one form and pay one total amount (571).
State taxes are linked to Federal Income Taxes in that Federal Taxes deduct the amount owed in state taxes from the tax payer's gross income. This is meant to ensure that tax payers are not taxed twice for money that was already paid to…
Later, however Democratic leaders approved a bipartisan plan, minus the homestead tax increase. ("State income tax unthinkable," 2007)
Income Tax Proponents, Opponents and Components Income tax proponents argue that even with Florida's exemptions for food and medicine, poorer people pay a higher percentage of their income in the form of sales tax than wealthier citizens. They argue that an income tax would prove to be fairer as sales tax is regressive. These individuals to support Florida adopting an income tax insist that this method of taxation, unlike the sales tax, could be adjusted to shift the burden to individuals who can afford to pay more than those who are poorer. ("State income tax unthinkable," 2007) Iris Lav, the center's deputy director, nevertheless insists that the probability of anyone persuading Floridians that they need to adopt an income tax, equates to: "a little bit of 'If fishes could fly'."
Achenbaum, W.A. (2006). Land of Sunshine, State of Dreams: A Social History of Modem Florida. Journal of Social History, 40(1), 262+. Retrieved October 10, 2008, from Questia database: http://www.questia.com/PM.qst?a=o&d=5017547397 .
Archibald, R.B., & Feldman, DH (2006). State Higher Education Spending and the Tax Revolt. Journal of Higher Education, 77(4), 618+. Retrieved October 10, 2008, from Questia database: http://www.questia.com/PM.qst?a=o&d=5016653967 .
Bell, Michael, Brunori, David, Green, Richard, Wolman, Hal, Cordes, Joe, and Qadir, Tanya. (2005, August). "GWIPP WORKING PAPER SERIES State and Local Fiscal Policy and Economic Growth and Development." Working Paper Number 26. The George Washington University. Retrieved October 10, 2008, at http://www.gwu.edu/~gwipp/papers/wp026 .
UK Government estore the 50% Additional ate of Income Tax?
The United Kingdom has developed to become one the highest taxed nations across the globe despite impaired competitiveness and stifled economic growth. Unlike most OECD countries that have lessened their tax burdens since 1997, UK taxation has increased, which has resulted in reduced competitiveness of the country's position as a low tax regime. The other characteristics of UK taxation include forcing taxpayers into higher rate tax bands, which enforces higher tax rates for more people. However, in the past few years, there have been debates and controversies on whether the United Kingdom government should restore the 50% additional rate of income tax. This debate or controversy has been characterized with arguments and counter-arguments in favor and against such a move respectively.
ecent History of the Additional ate of Income Tax
As previously mentioned, the United Kingdom is ranked among the…
Goodley, S. 2014. Labour's 50p tax rate: what you need to know. The Guardian. [Online]. 26th
January 2014. Available at: http://www.theguardian.com/money/2014/jan/26/labour-50p-tax-rate-what-you-need-to-know Accessed 4th December 2014.
Merrick, J. 2014. 'Labour will bring back 50p income tax for earners' says Ed Balls. The Independent. [Online]. 25th January 2014. Available at: http://www.independent.co.uk/news/uk/politics/labour-will-bring-back-50p-income-tax-for-top-earners-says-ed-balls-9084983.html Accessed 4th December 2014.
Nelson, F. 2014. Why Ed Balls is deceiving us about his plans, and the 50p tax. The Spectator.
Finally, a 1998 Center on udget and Policy Priorities report, examined research, data and findings on the EITC found that when this research was summarized to its substantiate bits, several positive themes over the benefits of the EITC emerged. They include (Greenstein & Shapiro, 1998):
Substantial positive effects on inducing single parents to work. A study by Northwestern University economists ruce Meyer and Dan Rosenbaum. Meyer and Rosenbaum found that more than half of the substantial increase in employment rates among single mothers over the 1984 to 1996 period was due to EITC expansions; a larger effect on single mother employment than all other factors combined (Greenstein & Shapiro, 1998).
EITC offsets between one-fourth and one-third of the decline during the past 20 years in the share of national income received by the poorest fifth of households with children (Greenstein & Shapiro, 1998).
Among working families, particularly in the south…
ACORN Financial Justice Center. (2004). Increasing Incomes & Reducing Rapid Refund Rip Off. Washington, DC.
Cancian, M., & Levinson, a. (2005). Labor Supply Effects of the Earned Income Tax Credit: Evidence from Wisconsin's Supplemental Benefit for Families With Three Children. Journal of Economic Literature .
Center on Budget and Policy Priorities. (2009, December 4). Policy Basics: The Earned Income Tax Credit . Retrieved March 20, 2010, from Center on Budget and Policy Priorities: http://www.cbpp.org/cms/index.cfm?fa=view&id=2505
Cordes, J.J., Ebel, R.D., & Gravelle, J.G. (2005). The Encyclopedia of Taxation and Tax Policy, Second Edition. Baltimore: Urban Institute Press.
This generous act not only saves the taxpayer some extra cash come pril, but it also helps a number of charities across the country. Charities can either use donated vehicles for their own use or they can auction them off in order to use the cash to help those in need. Either way, the charity is getting great use out of the old bucket which was just a nuisance to someone else.
Rules regarding donations have changed drastically over the years. In previous years, all one would need to do in order to donate a vehicle was to claim the market worth of the vehicle to the charity receiving the donation. They would then give you the paperwork necessary in order to claim the donation in one's tax returns for that year. However, in more recent years, this system has changed thanks to people who had been abusing the chartable…
A prime example of how charitable donations work and save the taxpayer money is the act of donating one's vehicle to a charitable organization. This generous act not only saves the taxpayer some extra cash come April, but it also helps a number of charities across the country. Charities can either use donated vehicles for their own use or they can auction them off in order to use the cash to help those in need. Either way, the charity is getting great use out of the old bucket which was just a nuisance to someone else.
Rules regarding donations have changed drastically over the years. In previous years, all one would need to do in order to donate a vehicle was to claim the market worth of the vehicle to the charity receiving the donation. They would then give you the paperwork necessary in order to claim the donation in one's tax returns for that year. However, in more recent years, this system has changed thanks to people who had been abusing the chartable donation tax breaks. People wanting to cheat on their taxes had been claiming their cars to be worth more than market value; this then ended up costing the government millions of dollars. New restrictions limit not only the owner, but also the charities receiving the donations as well. The actual deductible amount now depends on the worth of the vehicle, along with how the receiving charity uses that said vehicle. All vehicles, including not only cars but also used panes and oats, are more limited as tax deductions when they exceed the amount of $500. Today, if one's vehicle is worth more than $500, the actual tax deduction is based on how much the charity actually sold the vehicle for. However, there are some loop holes which allows tax payers to receive the full value for the vehicle. Kay Bell explains that is one's vehicle is used in a progressive way by the charity; donors can file for the original value of the car. If one donates one's vehicle, notice of the eventual fate of that vehicle must be received by the charity which received it within thirty days. One must also include proof of the donation with one's tax returns, when "previously, such receipts were generally only kept by the taxpayer in case the IRS questioned the claim deduction," (Bell 2007).
Donations do save you money on your taxes. However, they are in the form of small deductions in relation to one's gross income and don't do much on the scale of everyday life for the taxpayer. These breaks are more for encouragement. The idea is not only to encourage donations, but to also give small rewards to those who do make the decision to donate items in order to help charities around the country.
consumption tax alternatives: retail sales tax, flat tax and personal consumption tax. Justifications for tax reform range from the need to simplify the current system to raising revenues to modifying social policy. In the face of growing demands by politicians and taxpayers alike, the topic of tax reform has produced alternate federal income tax proposals. This essay compares income tax to consumption tax, and also reviews the retail sales tax, flat tax and personal consumption tax systems. The comparisons include discussion of differences between proposals, relative degree of effectiveness, as well as ease of implementation. Each of the major categories proposed accomplish tax reform with varying degrees of success, which must be considered along with their associated trade-offs. This essay examines some specifics of those approaches.
Reasons for Tax Reform
Growing support for tax reform comes from both politicians and taxpayers alike. Surveys conducted during the 2009 tax filing season…
AICPA. (2009). Tax reform alternatives for the 21st century. New York: American Institute of Certified Public Accountants, Inc.
Citizens for Tax Justice. (2011). Analysis: 12 corporations pay effective tax rate of negative 1.5% on $171 billion in profits. Retrieved August 18, 2011 from: http://www.ctj.org/pdf/12corps060111.pdf
Fichtner, J.J. (2005). Reforming the U.S. corporate tax system to increase tax competitiveness. Joint Economic Committee U.S. Congress. Retrieved August 18, 2011 from: http://www.house.gov/jec/CorporateTaxReform.pdf
Graetz, M.J. (2006). 100 million unnecessary returns: A fresh start for the U.S. tax system. Retrieved August 18, 2011 from: http://www.nasi.org/usr_doc/Michael_Graetz_Background_VAT_Paper_09_19_06.pdf
UK Government estore the 50% Additional ate of Income Tax
The ecent History of the Additional ate of Income Tax
It is important to note, from the onset, that income tax remains the government's largest revenue source -- effectively raking in an average of 30% of the total tax collected. In essence, every individual has what is referred to as personal allowance on income tax, whereby every tax year, all incomes that do not exceed the set allowance are not taxed. All other income is subject to the various tax rates captured in several bands. In the year 2009 budget, it was announced that beginning April 2010, individuals raking in incomes exceeding £150,000 would be subject to a new 50% tax rate (HM evenue & Customs, 2014). The previous rate, prior to the introduction of the top rate by the Labor government had been 45p. However, the incoming government reduced…
Fleming, L., 2004. Excel HSC Business Studies. Glebe NSW: Pascal Press.
HM Revenue & Customs, 2014. Guidance -- Rates and Allowances: Income Tax. [online] Available at: < https://www.gov.uk/government/publications/rates-and-allowances-income-tax/rates-and-allowances-income-tax> [Accessed 2nd Dec 2014].
Parenti, M., 2010. Democracy for the Few. 9th ed. Mason, OH: Cengage Learning
The Economist, 2009. Resenting the Rich. [online] Available at: < http://www.economist.com/debate/days/view/293 > [Accessed 2nd Dec 2014].
As mentioned above, several organizations are making efforts for advertising this measure. Even so, the IS expects that a higher number of first-time applicants intend to use the EITC benefits. The factors that led to this situation are represented by the high turnover rates determined by the crisis.
In addition to this, several studies in the field have observed the fact that the level of EITC influences wages and the proportion of the workforce. In other words, EITC has been observed to lead to reduced wages. This result of the EITC affects eligible and non-eligible workers, which are disadvantages by the EITC introduction. EITC also leads to increased workforce, which determines improved sustainment of the economic situation.
1. Qualifying Child ules (2010). Internal evenues Service. etrieved February 15, 2011 from http://www.irs.gov/individuals/article/0,,id=218779,00.html.
2. Program Areas (2008). The Piton Foundation. etrieved February 15, 2011 from http://www.piton.org/index.cfm?fuseaction=Content.article1&CFID=14333438&CFTOKEN=22349543.
3. Dougherty, C. (2011).…
1. Qualifying Child Rules (2010). Internal Revenues Service. Retrieved February 15, 2011 from http://www.irs.gov/individuals/article/0,,id=218779,00.html .
2. Program Areas (2008). The Piton Foundation. Retrieved February 15, 2011 from http://www.piton.org/index.cfm?fuseaction=Content.article1&CFID=14333438&CFTOKEN=22349543 .
3. Dougherty, C. (2011). Alternate Measure Says Poverty Didn't Rise. The Wall Street Journal. Retrieved February 15, 2011 from http://blogs.wsj.com/economics/2011/01/06/alternate-measure-says-poverty-didnt-rise-in-2009/?KEYWORDS=earned+income+credit .
4. Rothstein, J. (2009). Is the EITC as Good as an NIT? Princeton University. Retrieved February 15, 2011.
countries that do not have an income tax. The first are small tax-shelter countries that seek to attract high net worth individuals. Their economies of tiny, and based on the value of transactions that such individuals bring to the country. Monaco, for example, requires substantial amounts of money to be deposited into its banks, which allow those banks to lend the money out (Maverick, 2016). Such countries succeed because they are tiny, and have minimal local populations and infrastructure needs. Another type of tax-free country is the failed state. A place like Somalia lacks the infrastructure for collecting taxes, and therefore lacks them. But such countries also provide zero services for their people, and are entirely unattractive places in which to live, despite on paper being the libertarian paradise of zero government intervention in daily life. The third category are countries that generate sufficient revenues in other ways that income…
Bouyamoum, A. (2016). Get ready for taxes, Christine Lagarde tells UAE and other Gulf nations. The National. Retrieved May 13, 2016 from http://www.thenational.ae/business/economy/get-ready-for-taxes-christine-lagarde-tells-uae-and-other-gulf-nations
CIA World Factbook (2016). United Arab Emirates. Central Intelligence Agency. Retrieved May 13, 2016 from https://www.cia.gov/library/publications/the-world-factbook/geos/ae.html
Maverick, J. (2016). Five countries without income taxes. Investopedia. Retrieved May 13, 2016 from http://www.investopedia.com/articles/personal-finance/100215/5-countries-without-income-taxes.asp
Reuters (2016). U.S. retail sales rose 1.3% in April versus 0.8 increase expected. CNBC. Retrieved May 13, 2016 from http://www.cnbc.com/2016/05/13/us-retail-sales-rose-13-percent-in-april-vs.-08-increase-expected.html
Dropping or Lowering Corporate Taxes
This is a paper with two charts concerning corporate taxes. Corporations are taxed under a tax rate structure depending on the income. There has been talk about dropping the corporate tax. This paper will discuss the pros and cons of this. hat methods can be used to drop or lower corporate taxes and why?
HO CORPORATE TAXES HELP OUR ECONOMY
here did the corporate income tax begin? How does it affect our economy? hat is the future of the corporate income tax? ill deleting corporate income tax be the answer for the economy? hat about cutting part of this tax? How does the corporate income tax help the economy? These are questions that will be answered in this paper as well as how the corporate tax is affecting our economy now.
The Beginning of Corporate Income Tax
How the corporate tax began is an example…
Bonura, Chris; Finn, Kathy; Kamerick, Megan; McNulty, Ian; and Stuart, Stephen. "Tax-free Corporations" New Orleans City Business. 12/25/2000. Vol. 21. Issue 27. p.11
Business Tax Cuts a Logical Component of Economic Stimulas Package" New Report on Corporate Income Taxes Shows Rising Collections. Federal Tax Burdens and Expenditures by State. http://www.taxfoundation.org/corporatetaxes.html
Current Corporate Income Tax Developments (Part II). Tax Advisor. April 2002. Vol. 33 Issue 4. p.234
Edwards, Chris. "Reducing Business Tax Penalties to Spur Growth" February 13, 2002 http://www.cato.org /cgi-bin/scripts/printech.cgi/dailys/02-13-02-2.html
Tariffs were used to fund the United States government prior to the imposition of the permanent income tax mainly because it did not cost so much to run the federal government: there were fewer expenses in terms of funding social services, such as Medicare, Social Security or other unemployment. Tariffs brought in sufficient funds for what was required of the government and the government had even maintained a balanced budget for a time. This was the case under President Andrew Jackson, who proclaimed:
Through the favor of an overruling and indulgent Providence our country is blessed with a general prosperity and our citizens exempted from the pressure of taxation, which other less favored portions of the human family are obliged to bear.... How gratifying the effect of presenting to the world the sublime spectacle of a Republic of more than 12,000,000 happy people, in the fifty-fourth year of her…
Eddlem, Thomas. “Before the Income Tax.” New American, 2013. https://www.thenewamerican.com/culture/history/item/14268-before-the-income-tax
Table of Contents (optional)
Louise is aged 50 and single. Since 1994 she has carried on a retail business as a sole trader. Her trading profits as adjusted for tax purposes and after capital allowances, for the year ended 30th April 2009 were $150,000.
The business is carried out from a number of valuable retail outlets, all of which are owned by Louise personally. These units have been acquired over a number of years since 1994 and their market values have increased considerably in recent years.
Apart from her single personal allowance tax credit, Louise is entitled to income tax relief in respect of $10,000, which she pays annually to a evenue approved pension scheme.
Louise's personal living expenses and other financial commitments total $50,000 per annum (including the contribution of $10,000 to the evenue approved pension scheme referred to above).
Louise is considering transferring her business to…
Maertin, James CPA. U.S. Tax Preparation Worldwide. [
http://www.hmrc.gov.uk/menus/aboutmenu.htm "HM Revenue and Customs: About Us." Hmrc.gov.uk. Crown Copyright. 2005-04-18.
Tax Efficient Financial Strategies
Company Name Here
MACOBUTTON AcceptAllChangesShown [name]
Tax Efficient Financial Planning
Astute financial planning in the current economic climate is critical. While we cannot control the ebbs and flows of either the market or the decisions of the government that affect one's personal finances, we can attempt to grow and preserve wealth through tax efficient financial planning. There are solid vehicles available, if utilized correctly, can successfully minimize income, capital gains and estate taxes for our clients. Below provides detailed information on vehicles available to provide minimal tax exposure.
Income Tax Minimization
Deferred Variable Annuities
Using this method clients not only are able to minimize their incomes taxes, but they this vehicle also provides asset protection.
401K or other Qualified etirement Plan
Contributions to a 401k or a similar retirement plan are tax-deferred and not-taxable until withdrawal. Contributions help to lower an individual's AGI thereby…
Baldwin, W. (2010, July 30). Six Ways To Avoid Capital Gains Tax Page 2 of 3 - Forbes.com. Information for the World's Business Leaders - Forbes.com. Retrieved July 26, 2011, from http://www.forbes.com /2010/07/30/avoid-capital-gains-tax-anschutz-personal-finance-baldwin-tax-strategy_2.html
Botkin, S. (2010). Lower Your Taxes - Big Time 2011-2012. New York: McGraw-Hill.
Tax Returns for C Corporation and Partnerships
Tasty Treats and Beverages is a registered company in the United States. The company was incorporated in 2004, and operates under the C Corporation for the tax purpose. A C-corporation refers as a business entity subject to the federal income tax. A company operating under the C Corporation can enjoy host of tax credit that can assist it to enjoy a tax reduction that the company has to pay to the federal government. This paper uses the excerpt from the Tasty Treats & Beverages, Inc. annual income statement to prepare the tax return for the company.(See Appendix 1).
Tasty Treats & Beverages, Inc.
Income Statement ($)
For year ended December 31, 2013
Revenue from sales
Income before taxes
Federal income tax expense
Net income after taxes
As being revealed in the company statement of income data,…
This is designed to help support individuals who are dealing with financial challenges. The problem is that select amounts of recipients will use as a way to live off of the government. (Wolf, 2005)
How might a socialist and a capitalist government differ in its treatment of the problem of unemployment?
Socialists want to see massive amounts of government spending to create new jobs, training programs and provide unemployment benefits. A capitalist is opposed to these kinds of programs and believes that charities / private enterprises can address these issues.
In your opinion, should the government have the responsibility of providing health care for every citizen? Why or why not?
Yes, the government should provide health care. The reason why is because prices are increasing exponentially and the number of uninsured is rising. These factors are a sign that there is very little competition inside the sector. To address these…
2012 Puerto Rico Statehood Amendment. (2012). Boards. Retrieved from: http://www.boards.ie/vbulletin/showthread.php?p=77582334
Commerce Clause. (2012). Britannica. Retrieved from: http://www.britannica.com/EBchecked/topic/127865/commerce-clause
Principles of Constitutional Construction. (2010). Constitution.org. Retrieved from: http://constitution.org/cons/prin_cons.htm
Sin Taxes. (2005). Six Taxes. Connecticut Voices for Children. Retrieved from: http://www.ctkidslink.org/publications/bud05sintax02.pdf
tax system of one country with that of another is an exercise fraught with dificulties and ultimately doomed to failure . tax system will never be much more than a reflection of strongly national cultures and forces. discuss this statement in the light of your knowledge of comparative tax system in developing and/or developed countries i
The following pages focus on analyzing the factors of influence on different countries' taxation systems. The paper begins with an introductory section that allows readers understand the point-of-view used in this paper. The following section refers to describing the taxes pand taxation systems used by most countries and their objectives, in order to understand the similarities and differences between these taxation systems. The paper continues with the analysis of several factors that influence countries' tax system design, like cultural factors, technological developments, and natural resources. In order to exemplify this, the taxation…
1. Pasekova, M. et al. (2011). Comparative Analysis of Tax Systems: Some Evidence from CEE Countries. World Academy of Science, Engineering, and Technology. Retrieved February 27, 2012.
2. Greenhouse, S. (2011). Tiny Tax on Financial Trades Gains Advocates. The New York Times. Retrieved February 28, 2012 from http://www.nytimes.com/2011/12/07/business/global/micro-tax-on-financial-trades-gains-advocates.html?_r=1&pagewanted=all .
3. Ross, M. (2004). Does Taxation lead to Representation? Cambridge University Press. Retrieved February 28, 2012.
4. Seto, T. (2008). Four Core Principles of Tax Design System: Introduced and Applied to the Taxation of Multinationals. Loyola Law School. Retrieved February 28, 2012.
When considering your case for qualification for Innocent Spouse Relief, the facts are blatantly clear. Under certain circumstances, a spouse can qualify for relief from the IRS. Unfortunately, as detailed below, you do not qualify for any of these relief efforts. Your actions appear to be in strict opposition of the relevant tax code and can be considered fraudulent. Below is a brief explanation of the relevant facts pertaining to your case, the specific issues of your case, and our conclusion.
To begin, married couples who file joint returns are jointly liable for their federal income tax liability. In addition, married couples who live in community property states are jointly liable for community income regardless of how they file their returns. Innocent spouse relief takes three forms under Sec. 6015. The three instances are outlined below. Unfortunately, Mrs. Hapless you do not qualify for relief under any of…
Foreign Work eimbursement
When it comes to job situations that involved a lot of travel or otherwise involve being away from home, working a foreign assignment would surely have to be near or at the top when it comes to the complexity and considerations that are involved. There are some massive legal and lifestyle implications involved including paying for lodging/food while working abroad, the tax implications and so forth. The assignment for this paper asks the author to offer an opinion on the most "essential" reimbursement types when it comes to working abroad. While some may point to cost of living, rent or food, the real issue would be taxes due to the complexity and variance of the tax codes and treaties that exist between the United States and other modernized countries of the world.
Many employers operate and exist in multiple countries and this sometimes necessitates having domestic…
IRS. (2015). Moving Expenses to and from the United States. Irs.gov. Retrieved 11 November 2015, from https://www.irs.gov/Individuals/International-Taxpayers/Moving-Expenses-to-and-from-the-United-States
IRS. (2015). Publication 15-B (2014), Employer's Tax Guide to Fringe Benefits. Irs.gov. Retrieved 11 November 2015, from https://www.irs.gov/publications/p15b/ar02.html
IRS. (2015). Social Security Tax Consequences of Working Abroad. Irs.gov. Retrieved 11 November 2015, from https://www.irs.gov/Individuals/International-Taxpayers/Social-Security-Tax-Consequences-of-Working-Abroad
IRS. (2015). Tax Topics - Topic 514 Employee Business Expenses. Irs.gov. Retrieved 11 November 2015, from https://www.irs.gov/taxtopics/tc514.html
Income Tax Deduction
Taxes have existed in the United States for all of its existence but they took on many forms prior to the modern income tax. The income tax was not finalized and permanently ensconced in the United States law until the 1910's. The tax rates, at its normal levels, have been adjusted upwards and downwards depending on the economic cycles with the most recently developments being the "Bush Tax Cuts" of the 2000's and the recent tax spikes under the Obama Administration. While income taxes affect some more than others, nearly all people are affected based on the assets/income they possess and earn as well as the familial structure they maintain.
Common Tax Deductions
As noted in the introduction, familial status and assets/income are far and away the biggest determinants on how much tax is paid, if any. Indeed, some people actually get money from the government and…
IRS. (2014, February 28). Internal Revenue Service. 401(k) Plans. Retrieved February 28, 2014, from http://www.irs.gov/Retirement-Plans/401 (k)-Plans
IRS. (2014, February 28). The Health Insurance Marketplace. The Health Insurance Marketplace. Retrieved February 28, 2014, from http://www.irs.gov/uac/Newsroom/The-Health-Insurance-Marketplace
IRS. (2014, February 28). SOI Tax Stats - S Corporation Statistics. SOI Tax Stats - S Corporation Statistics. Retrieved February 28, 2014, from http://www.irs.gov/uac/SOI-Tax-Stats-S-Corporation-Statistics
IRS. (2014, February 28). EP Abusive Tax Transactions - S Corporation ESOP Abuse of Delayed Effective Date for Section 409(p). EP Abusive Tax Transactions - S Corporation ESOP Abuse of Delayed Effective Date for Section 409(p). Retrieved February 28, 2014, from http://www.irs.gov/Retirement-Plans/EP-Abusive-Tax-Transactions-S-Corporation-ESOP-Abuse-of-Delayed-Effective-Date-for-Section-409 (p)
What are the pro's and con's of the Bush Administration's proposal to convert the ection 8 voucher program into an aggregated block grant to the state?"
This is a paper that outlines the arguments of why Bush Administration's proposal to convert ection 8 voucher program to block grant is not feasible.
The ection 8 voucher program, which was started in 1976, helps approximately 2 million low-income families and people with special needs, such as the elderly and disabled, pay for rented housing. The program can also be used by these people to save up for down payments when purchasing housing. The program is administered by the Department of Housing and Urban Development, which currently distributes the funds to low-income families through public housing agencies.
Typically, citizens contribute a maximum of 30% of their monthly income in rent, and the Government pays the rest. Families who make less than…
1) "About the federal Section 8 housing voucher program," The Associated Press State & Local Wire, May 20, 2003.
2) Koff, Stephen, "Section 8 program gets money but won't expand," Plain Dealer, July 26, 2003.
3) "Two demanding jobs to fill," Plain Dealer (Cleveland, Ohio), May 15, 2003
4) "Fiscal Year 2004 HUD Budget Executive Summary," U.S. Department of Housing and Urban Development, Oct 15, 2003, http://www.hud.gov/about/budget/fy04/execsummary.cfm
Tax Planning -- Employer (II of II)
Tax Planning - Employer
The marketplace that businesses operate in has become more and more globalized and international in nature, not to mention extremely competitive. This particular report will focus on the employer and their tax implications when it comes to operating and/or headquartering in one or more countries around the world. The prior report focused on the employee. While the implications for the employee are complicated and diverse enough, they become even more complicated when speaking of the employer, and for a number of reasons.
Just as there were a number of considerations relevant to the employee and their tax treatment, there are a number of tax considerations that USCo will need to consider for themselves and they are as follows:
The actual headquarters location (nation, state/province and county/city)
The actual locations outside of that home country (or state and city)…
Bachmann, H. (2009, August 20). Can Swiss Banks Thrive After the UBS-U.S. Deal?
Retrieved December 3, 2014, from http://content.time.com/time/business/article/0,8599,1917648,00.html
Canada. (2014, December 3). Income Tax Act (R.S.C., 1985, c. 1 (5th Supp.)).
Retrieved December 3, 2014, from http://laws.justice.gc.ca/eng/acts/I-3.3/
Tax Avoidance & Firm Growth
What follows in the next few pages is a review of whether there is a correlation between tax avoidance with corporations and firm growth. Indeed, looking at the literature reveals that the evidence is mixed but that the overall answer is a condition "yes," that there can indeed be a link between tax avoidance and firm growth. To explain the conditional nature of the answer garnered, one can look to the work of Desai, Foley and Hines (2006) when they assert that "firms with sizable foreign operations benefit the most from using tax havens, an effect that can be evaluated by using foreign economic growth rates as instruments for firm-level growth of foreign investment outside of tax havens" (Desai, Foley & Hines, 2006). They further state that "one percent greater sales and investment growth in nearby non-haven countries is associated with a 1.5 to 2%…
Chang, S. (2012). The Great Debt Controversy in the U.S. And Beyond. SERI
Quarterly, 5(2), 50-62.
Desai, M.A., & Dharmapala, D. (2006). Corporate tax avoidance and high-powered incentives. Journal Of Financial Economics, 79(1), 145-179.
Tax laws affect taxpayers because they create the taxpayer and govern all aspects of the taxpayer's obligation to the state. Without tax law, there would be no taxpayer; it is the tax laws that create the obligation to pay taxes, and the punishments for non-payment. Tax laws establish who pays taxes, at what rate they pay taxes, the punishments for late or non-payment, and the establish the tax collection body (IRS) and grant that body the authority to run the tax system. Taxation is one of the major ways in which the state can influence behavior in a democratic country. States have long reserved the right to taxation, and the exclusivity of this right has been a feature of government for centuries. Today, there are usually specific rules regarding what layer of government can levy taxes for what purpose. Taxes have different names, too, including excise taxes, income taxes,…
In the meantime, you have a normal, functioning economy. Keynes's theory impelled a host of interventionist economic policies during the Great Depression and formed the essence of Roosevelt's New Deal which influenced Britain and other countries in dealing with their own related depressions. The Great Depression in all countries had compelled people to hoard their money causing the economy to stop at a standstill. Keynes's theory urged governments to step in and to encourage public spending, which the government did by both increasing the money supply and buy buying things itself. In this way, government spending is more effective than taxes since raise in taxes will only serve to dissuade people from buying. An attitude which leads to reduced consumerism, more businesses closing, less employment, firing of current workers, and reluctance to engage in discretionary spending.
2. Division of Government Functions
Our federal system divides responsibilities between the various levels…
Tax Memo: Pension Payments
From, Tax Accountant, CPA
You are the president of a corporation owned by yourself and other family members. Your salary from this corporation during the year in question was $48,000. During this same year, $12,000 was also contributed by the corporation to a pension plan held on your behalf. You believe that this contribution should not be considered a part of your taxable income for the year in question. The IRS agent conducting an audit of the year in question believes the pension plan amount should be considered when making a determination of reasonable compensation.
The issues in this case are (1) whether it is proper to include the pension plan in a determination of compensation, and (2) if such inclusion would affect the determination of the compensation amount of any tax liabilities for the corporation or Mr. Jones during the year in question.…
Sugary sodas contain corn syrup, but the American Agricultural Department subsidizes American farmers for growing corn, and this is one of the reasons that high-fructose corn syrup is so ubiquitous in the food supply. e are taxing corn syrup and subsidizing it at the same time, in other words. "The bigger issue, which the industry neither can nor particularly cares to rebut, is that the product [corn syrup] exists at all. e pump absurd quantities of cash into subsidizing corn (we also have a huge tariff on Brazilian sugar cane, incidentally). Over the past 10 years alone, Congress has appropriated more than $50 billion to encourage farmers to grow the stuff. But people don't want to eat $50 billion in subsidized corn. And if the cobs just sat around developing mold, Congress would cut off the spigot. Enter high fructose corn syrup, which sucks up the subsidies and created a…
Adamy, Jane. "Soda Tax Weighed to Pay for Health Care." The Wall Street Journal. May 12,
Klein, Ezra. "The Problem with Corn Syrup. The American Prospect. 2008.
A preview of capital structure issues
In regards to the overall business environment, capital structure has profound implications of the business, irrespective of its industry. For one, a firm's capital structure is then the composition or 'structure' of its liabilities. For example, a firm that sells $40 billion in equity and $160 billion in debt is said to be 20% equity-financed and 80% debt-financed. The firm's ratio of debt to total financing, 80% in this example is referred to as the firm's leverage. This leverage has implications on the entire firm. For example, leverage in many respects is a double edges sword. On one hand, leverage can amplify gains for firms. However, if used incorrectly, leverage can also amplify loses. As such, firms must be cognizant of its capital structure as complacency can hinder overall business performance. Debt and equity financing, can have a profound implications on the…
1) Myers, Stewart C.; Majluf, Nicholas S. (1984). "Corporate financing and investment decisions when firms have information that investors do not have." Journal of Financial Economics 13 (2): 187 -- 221
2) Baker, Malcolm P; Wurgler, Jeffrey (2002). "Market Timing and Capital Structure." Journal of Finance 57 (1): 1 -- 32.
3) Lyandres, Evgeny and Zhdanov, Alexei, Investment Opportunities and Bankruptcy Prediction (February 2007) Available at SSRN: http://ssrn.com/abstract=946240
4) Timmer, Jan (2011). Understanding the Fed Model, Capital Structure, and then Some.
If the decision is made to remain affiliated with the taxpayer, the member should ensure that the error is neither repeated nor perpetuated.
The rules and regulations implemented for tax service providers and other officials working with taxpayer clients are established in order to ensure the stability and ethical values of the position. Taxpayers are very important, as they uphold the economics and financial health of their community and their country. In this regard, it is the obligation of the tax service official to respect both the system and the client by upholding a high level of ethics.
In turn, the taxpayer should assist the preparer in the mission to provide accurate information that is free of errors. In the case of errors, it is important to emphasize that the system does provide for human error. If either the tax preparer or the taxpayer can be shown not to…
Pennsylvania, on the other hand, does not create its budget using this framework; though there are certainly credits, deductions, etc., that are similar to the items listed as tax expenditures in the other states' budgets, this is not the perspective the State of Pennsylvania applies to its budget (Pennsylvania Office of the Budget, 2012). This is perhaps reflective of the increasing criticism the tax expenditure framework or model has received from primarily conservative policy makers and analysts, that see the practice as less straightforward in its appraisal of revenues and expenditures than could be accomplished (Burman, 2003).
Connecticut General Assembly. (2010). Connecticut Tax Expenditure eport. Accessed 7 April 2012. http://www.ctmirror.org/sites/default/files/documents/TaxExpenditureeportMarch2010.pdf
Minnesota Department of evenue. (2012). Tax Expenditure Budget. Accessed 7 April 2012. http://taxes.state.mn.us/legal_policy/Documents/2012_tax_expenditure_links.pdf
Oregon Department of evenue. (2012). A Summary of Oregon Taxes. Accessed 7 April 2012. http://www.oregon.gov/dor/STATS/docs/oregon-taxes-summary-150-800-401.pdf
Pennsylvania Office of the Budget. (2012). Governor's Executive Budget. Accessed 7…
Connecticut General Assembly. (2010). Connecticut Tax Expenditure Report. Accessed 7 April 2012. http://www.ctmirror.org/sites/default/files/documents/TaxExpenditureReportMarch2010.pdf
Minnesota Department of Revenue. (2012). Tax Expenditure Budget. Accessed 7 April 2012. http://taxes.state.mn.us/legal_policy/Documents/2012_tax_expenditure_links.pdf
Oregon Department of Revenue. (2012). A Summary of Oregon Taxes. Accessed 7 April 2012. http://www.oregon.gov/dor/STATS/docs/oregon-taxes-summary-150-800-401.pdf
Pennsylvania Office of the Budget. (2012). Governor's Executive Budget. Accessed 7 April 2012. http://www.portal.state.pa.us/portal/server.pt/community/current_and_proposed_commonwealth_budgets/4566
Income disparity does not allow those living in poverty to climb out and join the middle class, and keeps the most wealth, power, and privilege in the hands of a select few.
Topic Sentences to introduce references
Census Income Data
Worsening American Income Inequality: Is World Trade to Blame?
Income and Wealth Inequality in the United States
A Tool for Measuring Income Inequality
The Two Nations
This paper analyzes income levels in the United States. Specifically, it discusses how there are two distinct nations in the United States, one with people who have income levels in the top 20%, and those with income levels in the bottom 20%.
As the disparity grows between rich and poor in America, so does the inequality in our country, which threatens the very fabric of our lives. Income disparity does not allow those living in poverty to climb out and join the…
Author not Available. "Income and Wealth Inequality in the United States." Americans for Democratic Action. 2002. 27 April 2004. http://www.adaction.org/pubs/304inequality.html
Blank, Rebecca M. "Selecting among Anti-Poverty Policies: Can an Economist Be Both Critical and Caring?" Review of Social Economy 61.4 (2003): 447+.
Burtless, Gary. "Worsening American Income Inequality: Is World Trade to Blame?" Brookings Review Spring 1996: 26+.
DeNavas-Walt, Carmen, Robert W. Cleveland, and Bruce H. Webster, Jr. "Income in the United States: 2002." Census.gov. Sept. 2003. 27 April 2004. http://www.census.gov/prod/2003pubs/p60-221.pdf
eaton also adds that low and moderate income people tend to spend money on goods and services that are more likely to result directly in jobs and incomes in the community (the spending continues multiplying on a secondary or tertiary basis). Higher income people spend in a way that contributes to "leakage" to their local economy by taking trips to buying non-local goods and services.
The implication of eaton's article is that tax cuts should be directed at low and moderate income people to stimulate the economy. Perhaps, from a strictly MPC point-of-view, this is correct. but, high income people also invest which stimulates the economy and this should have been explored as well.
51% Say Cut Everybody's Taxes to Stimulate the Economy (2009, June 11). Rasmussen Reports. http://www.rasmussenreports.com/public_content/business/economic_stimulus_package/june_2009/51_say_cut_everybody_s_taxes_to_stimulate_the_economy
eaton, R. (2003) the Idolatry of ideology Alternatives Magazine. http://www.alternativesmagazine.com/25/beaton.html
51% Say Cut Everybody's Taxes to Stimulate the Economy (2009, June 11). Rasmussen Reports. http://www.rasmussenreports.com/public_content/business/economic_stimulus_package/june_2009/51_say_cut_everybody_s_taxes_to_stimulate_the_economy
Beaton, R. (2003) the Idolatry of ideology Alternatives Magazine. http://www.alternativesmagazine.com/25/beaton.html
Tax Deductions: Are Unpaid Loans Tax Deductible?
John loaned his friend Jack $1,000. Jack did not repay the debt and left town. John wants to know if he can claim any tax deduction, and, if so, what is the character of the deduction? However, to answer John's question, one must first find out more information about the nature of the loan. This is critical because there are two broad types of loans and debts: business loans and personal loans. Furthermore, under the correct circumstances, it is possible for people to take tax deductions for certain types of business loans and personal loans. Knowing whether John made Jack a loan from his personal money or from his business money is the crucial first step in determining which, if any, Internal evenue Service (IS) regulations or tax laws will permit John to deduct the unpaid debt.
If John is a business owner…
Bailey, A.C. (2014). Unpaid personal loans can reduce your tax bill. Retrieved April 12, 2014
from MyTaxHQ website: http://mytaxhq.com/unpaid-personal-loans-can-reduce-your-tax-bill/
Fishman, S. (2013, June 7). Bad loans to friends and family may be tax deductible. Retrieved April 11, 2014 from Inman News website: http://www.inman.com/2013/06/07/bad-loans-to-friends-and-family-may-be-tax-deductible/
Internal Revenue Service. (2013, December 12). Topic 453- Bad debt deduction. Retrieved April 12, 2014 from IRS website: http://www.irs.gov/taxtopics/tc453.html
Accessed 15 September 2009. http://www.nchc.org/facts/coverage.shtml
Newhouse, J. (1993). Free for all?: Lessons from the RAND health insurance experiment. New York: Harvard University Press.
Physicians for a National Health Program. Accessed 15 September 2009. http://www.pnhp.org/
Quadagno, J. (2005). One nation, uninsured. New York: Oxford University Press.
Sains, a. (2002). "European and U.S. health insurance converging." Europe 420, pp. 11.
Salmon, K. (2007). "Ailing U.S. health insurance system under the spotlight." PharmacoEconomics & Outcomes News 524, pp. 3-4.
Stevens, W. (2003). Health insurance: current issues and background. Hauppauge, NY: Nova Publishing.
homasson, M. (2000). he importance of group coverage: How tax policy shaped U.S. health insurance. Washington, D.C.: National Bureau of Economic Research.
revino, F. (1999). "Quality of healthcare for ethnic/racial minority populations." Ethnicity & health 4(3), pp. 153-64.
U.S. Census Bureau. (2006). "Income Climbs, Poverty Stabilizes, Uninsured Rate Increases." Accessed 15 September 2009. http://www.census.gov/Press-Release/www/releases/archives/income_wealth/007419.html
Thomasson, M. (2000). The importance of group coverage: How tax policy shaped U.S. health insurance. Washington, D.C.: National Bureau of Economic Research.
Trevino, F. (1999). "Quality of healthcare for ethnic/racial minority populations." Ethnicity & health 4(3), pp. 153-64.
U.S. Census Bureau. (2006). "Income Climbs, Poverty Stabilizes, Uninsured Rate Increases." Accessed 15 September 2009. http://www.census.gov/Press-Release/www/releases/archives/income_wealth/007419.html
ith the extra money that businesses make, they not only invest it, but they pay some of that in taxes as well. Those taxes go to government, which can spend more. Government spending also fuels increases in business income. As governments collect more taxes from business, they can reduce consumer taxes further.
The net effect of all of this is that lowering taxes on consumers can have an exponential effect on increasing the Gross National Product. Tax reductions not only have a direct effect, but they have indirect effects that filter throughout the nation's economy. In this way, cutting taxes boosts the economy.
Cloutier, R. (2009). Do tax cuts stimulate the economy? Investopedia. Retrieved November 29, 2009 from http://www.investopedia.com/articles/07/tax_cuts.asp?viewed=1
Medicare, in addition to covering the elderly, is made available to lower-income individuals, and other direct assistance programs also go to these individuals. Combined with other goods and services such as road maintenance and other infrastructure, national security, etc., which are all consumed essentially evenly (again, in one perspective), this would mean that those at the lowest end of the economic spectrum consume the most and should pay the most -- a regressive tax that places the largest burden on those with the least ability to pay (417). In another perspective, however, those with high levels of income, wealth, and consumption benefit a much greater degree from the general services the government provides. The owner of a company benefits from the roads each time an employee drives into work, and from airwaves every time an Internet sale is made, and so on. Calculated thus, the benefit principle would lead to…
The common guiding principles of economics provide little direction. As a consequence, U.S. international tax policy is a clutter of rules with a diversity of political and economic reasons. It is frequently described as a concession that strikes a balance. Policy leans toward tightening foreign tax rules and putting foreign income on equal footing with U.S. income when it is thought that foreign investment hurts the U.S. economy. Then policy leans toward relaxing the rules and giving foreign income favorable treatment if it is thought that foreign investment promotes U.S. interests (Sullivan, n.d.).
Due to the fact tat every government charges taxes by its own process and at its own rates, the ensuing system of international taxation often warps investment and adds to reductions in international economic well-being. The environment of these alterations depends on the way of taxing profits from international investment. If investment earnings are taxed only at…
Tax Research Memo
Personal Injury winning treatment and other issues research
John Smith tax issues
Treatment for purposes of Federal Tax Income of $300,000 fee received out of the amount awarded by Jury.
Applicable Law:Any winnings in a personal injury lawsuit that cover the treatment of physical injuries are not taxable except for attorney fees which are taxable. IRC SEC 104(a)(2).Taxability also depends upon the place of residence of the taxpayer.
$300,000 received by John Smith as fees from jury award is taxable for federal tax income purposes.
Treatment for purposes of Federal Tax Income of $25,000 expenses paid upfront and received out of the amount awarded by Jury.
Applicable Law: Any winnings in a personal injury lawsuit that cover the treatment of physical injuries are not taxable except for attorney fees which are taxable. IRC Sec 104(a)(2).Any expenses can be claimed as a deduction.Taxability…
Cancellation of debt in this instance may not be taxed in this manner but might be taxed another way.
Certain farm debts: This exemptions only applies to debt incurred directly from an operation of a farm. If more than half your income from the past three years came from farming, and the loan was owed to a person or agency regularly engaged in lending, your cancelled debt is generally not considered taxable income.
Since 2007 and 2008, California conformed, with modifications to IC section 108 (a)(1) (E) that allows a limited amount of COD income resulting from the foreclosure or short sale of a qualified principal residence to be excluded. This exclusion does not currently apply for any foreclosure or short sale that occurs on or after January 1, 2009. Danny made his short sale in 2012. "The Mortgage Forgiveness Debt elief Act of 2007 was enacted on December…
Foreclosure and Short Sales | California Franchise Tax Board, (2012) [ONLINE] Available at:https://www.ftb.ca.gov/professionals/taxnews/2009/July/Article_9.shtml. [Accessed 16 June 2012].
New California short-sale law can help homeowners -- North Bay Business Journal - North San Francisco Bay Area, Sonoma, Marin, Napa counties - Archive, (2012) [ONLINE] Available at: http://www.northbaybusinessjournal.com/39868/new-california-short-sale-lay-can-help-homeowners/ . [Accessed 16 June 2012].
The Mortgage Forgiveness Debt Relief Act and Debt Cancellation, (2012). [ONLINE] Available at: http://www.irs.gov/individuals/article/0,,id=179414,00.html . [Accessed 16 June 2012].
Federal Government Tax
The main source of government income is taxes. The government taxes various organizations in the economy differently to ensure that adequate revenue is collected. Corporate use loopholes in the tax system to reduce the tax paid to the federal government. The government should eliminate these loopholes to improve tax collection. Some taxes such as gift and estate tax as they are counter productive. Changes made to the federal tax collection systems will increase the tax collected by increasing compliance.
esearch the most common tax loopholes used by corporations and partnership to avoid paying federal income tax. Discuss two (2) loopholes identified and what strategies you would recommend to the federal government for closing these loopholes.
The federal government gets most of its revenue from collection of tax used to fund most of the expenditure. The government should ensure that the tax collection avenues are free from loopholes…
Gans, J. (2011). Principles of economics. South Melbourne, Vic: Cengage Learning.
Ganghof, S. (2006). The politics of income taxation: A comparative analysis. Colchester: ECPR Press.
Conklin, D.W., St.-Hilaire, F., & Institute for Research on Public Policy. (1990). Provincial tax reforms: Options and opportunities. Halifax, N.S: Institute for Research on Public Policy = Institut de recherches politiques.
Pechman, J.A. (1987). Federal tax policy. Washington, D.C: Brookings Institution.
The Federal Tax system that is managed by the Internal Revenue Service (IRS) contains many complicated rules and regulations that presents many problems and issue for taxpayers wishing to abide by these laws. Itemized deductions is one method of self-reporting that taxpayers choose to use to file their returns. The purpose of this essay is to examine the use of itemized deductions on federal income tax returns. This investigation seeks to understand the history of this application while also evaluating the complex nature of the qualities that determine the appropriateness of this selection. This essay will also examine the effectiveness of itemized deductions as part of the larger component of income tax returns. The essay will conclude by highlighting certain examples where IRS audits were started because of misuse of the itemized deduction.
History of the Itemized Deduction
According to the Internal Revenue Service's web site its history…
The Internal Revenue Service Tax Code. Viewed 19 Feb, 2013, Retrieved from http://www.irs.gov/publications/p17/ch20.html#d0e67864
Viard, A. (2013). The myth of the limits on itemized deductions. The American, January 9, 2013. Retrieved from http://www.aei.org/article/economics/fiscal-policy/taxes/the-myth- of-the-limits-on-itemized-deductions/
Wood, R. (2013). Shh, Home Office and other IRS Audit Trigger Secrets. Forbes, 25 Jan 2013. Retrieved from http://www.forbes.com /sites/robertwood/2013/01/25/shhh-home-office- and-other-irs-audit-trigger-secrets/
professional VAT (value added tax) advice for the managing director of the Grape Limited. The Grape Limited is a U.S. multinational company and decides to incorporate new companies that provide supply management services, management company, manufacturing company and marketing companies. The management company will deliver supply management services to foreign services providers. On the other hand, the manufacturing company will focus on the electronic parts, and marketing company will deliver marketing services for the parts manufactured by the manufacturing company.
The VAT (value-added tax) is a government levy on any goods or services produced in the epublic of Ireland. The first condition that must be fulfilled before Grape Limited demands for the VAT numbers is to incorporate its businesses in the epublic of Ireland. After the company registrations, the next step is to apply for the VAT number. To apply for the VAT registration number in the epublic…
Chattered Accountant (2014). Form VAT 56A. Ireland.
Department of Finance (2015).Summary of 2015 Budget Measures Policy Changes. Ireland.
O'Brien, C. (2014). Personal Tax. KPMG Ireland .
KPMG (2009). Ireland: Country Fact File. KPMG International.
global tax treaties, UN model and OECD model with the view of analyzing their consideration towards rights to capital and tax income. By throwing light on differences and similarities among the models, the fundamental logic of each of them is explained. The article explains the prospecting policies of consideration when tax treaties are to be signed. It is because there is strong need to enforce a flexible but more aggressive strategy. The Section 1 of the article discusses rights about tax earnings through immovable property. The Section 2 is about business profits. The Section 3 throws light upon income from investment channels like royalties, interests and dividends. The Section 4 describes the capital gains. The conclusion of the article is given in Section 5.
ight to tax income from immovable property
Because of well-known significant relationship between the country of source of the income and the source of income itself,…
Bin Yang, A Comparative Study on the Rules and Administration of the International Taxation System (China Tax Publishing House, 2003).
Bin Yang, International Taxation (Fudan University Press, 2004).
Commentaries on Paragraph 3, Article 7 of the OECD model.
Jin Zhi Liu (translator), Commentaries of UN model Tax Convention between Developed and Developing Countries (China Financial & Economic Publishing House, 1996) 56.
Business income refers to any income usually realized for the execution or transaction of business activity. This indicates that business income is the aspect of earned income from the perspective of business transaction or activity. In order for the business income to apply to the aspect of the taxation system, it is essential to classify business income as ordinary income. Business income consists of business expenses, business losses, and business profits. It is the difference between revenues and expenses of the process of business transactions. This indicates that business income can be positive or negative within the financial year depending on the size of the expenses and revenues. Business income is received from the transactions or sales of products or services within the defined market.
OECD model treaty defines a clear perspective in relation to the handling of the business income. This is through indicating that the income…
Ault, H.J., & Arnold, B.J. (2010). Comparative income taxation: A structural analysis. S.l:
Kluwer Law International.
Gustafson, C.H., & Pugh, R.C. (1993). International income taxation: Code & regulations, selected sections. Chicago, Ill: Commerce Clearing House.
Scha-fer, A. (2006). International company taxation in the era of information and communication technologies: Issues and options for reform. Wiesbaden: Deutscher Universita-ts-Verlag.
Incentive Programs Among Low Income
The effects of work incentive programs in encouraging low income individuals to participate in employment depend on the income thresholds of reforms in whether the individual gains benefits that are equal to or greater than what they would receive by not working. The factors in the determination include after tax income plus benefits, such as Earned Income Tax Credit (EITC) and fixed work costs, compared to the total change in revenue received. If the loss of welfare is greater than the total change in revenue, work incentives have no value and discourage employment participation. On the other hand, if the total amount of changed revenue is greater than the welfare loss and compensates for fixed work costs, incentives encourage employment among the low income.
The Tax Reform Act of 1986 (TRA86) expanded EITC benefits by increases in the standard deduction, personal deductions, and favorable tax…
Elissa, Nada. Taxation and Labor Supply of Married Women: The Tax Reform Act of '1986 as a Natural Experiment. Feb 1995. working paper. 20 July 2013.
Elissa, Nada, Kleven, Henrick Jacobsen, & Kriener, Claus Thustrup. Welfare Effects of Tax Reform and Labor Supply at the Intensive and Extensive Margins. May 2004. working paper. 20 July 2013.
Riccio, Jim. Promoting Employment Stability and Advancement Among Low-Income Adults. Mar 2013. article. 20 July 2013.
Rothstein, Jesse. The Unintended Consequences of Encouraging Work: Tax Incidence on the EITC. May 2008. pdf. 20 July 2013.
Thorndike, Joseph J. "The IRS Is Hiding Its History." The ashington Times.
December 19, 1997, p. A23. February 18, 2008. http://www.taxhistory.org/thp/readings.nsf/cf7c9c870b600b9585256df80075b9dd/9de7fcd59915a3be85256e430079327d?OpenDocument
After 9/11, the Federal Reserve Bank, then led by Alan Greenspan, used monetary policy reduced the interest rate, or the rate that consumers must pay to borrow money. This did encourage individuals to spend more. However, it is still debatable if this was the most vital component in extricating America from the throws of economic recession. Government spending, or fiscal as opposed to monetary policy, is often seen as a more direct and superior way to rapidly change economic conditions. Fiscal policy was required to stimulate America's recovery from the Great Depression, according to conventional wisdom, although some still argue that it was the Hoover administration's monetary policy that was ineffective, not that monetary policy was ineffective altogether.
But most economists believe that, to get the…
Heakal, Reem. "What is fiscal policy?" Investopedia. October 22, 2008. http://www.investopedia.com/articles/04/051904.asp
Fairness does matter when creating a tax system. In terms of a consumption tax, the poor often consume more than the rich, at least in terms of a percentage of their income. While for a wealthy individual, much of his income can be locked up in assets, making money off of money, for a poor individual, the bulk of his or her income is devoted to buying necessary goods, including rent and food. The consumption tax taxes everyone equally on the surface, regardless of how someone has benefited from the economic system of a particular society, and actually favors those who can allocate their income to sectors of the economy that are not taxed (such as investments, which are not technically consumption).
A flat tax, where everyone pays the same amount, has similar problems in terms of allocating wealth. 15% of a poor person's income, a person who must pay for his or her rent, food, and necessities out of his or her weekly paycheck, means more to that individual than 15% of an income where much of that income can be devoted to investments and luxuries. While not as unfair as a consumption tax as investment income is also taxed, a flat tax is still unfair, and finding the right percentage to finance government operations yet not to be prohibitively costly for the poorest members of society is a difficult balance to strike. The only good thing about the flat tax is its simplicity, as along with the consumption tax as it requires less bureaucracy to enforce. Bureaucracy is expensive as well as frustrating (as anyone who has ever had to fill out a tax form beyond the standard EZ-file well knows!).
U.S. TAX in the TEATMENT
US Tax Treatment
Items of income considered earned from within the U.S.
Earned income can be defined as the payment for the performed personal services, for example wages, professional fees or salaries. The list below provides the categories of the types of income tax. It is essential to appreciate the fact that deductions made on the income are determined by the category in which the income falls. The column with heading variable income consists of income in the category of either unearned or earned income or even both (Fraser, 2009).
Types of income
Variable income: they include rents, royalties, and business profits
Unearned income: such incomes include annuities, pensions, social security benefits, Alimony, gambling winnings, capital gains, and interest dividends.
Earned income: tips, professional fees, bonuses, commissions, wages and salaries
Besides the types mentioned which always occur in the form of cash, other taxable sources…
Bater, P. (2007). The tax treatment of NGOs: Legal, fiscal and ethical standards for promoting NGOs and their activities. The Hague [u.a.: Kluwer Law Internat.
Dilworth, R.H. (2009). U.S. tax treatment of financial transactions involving foreign currency -- 1990. Arlington, VA: Tax Analysts.
Fraser M. (2009). Canada-U.S. Tax treaty: A practical interpretation. Toronto: CCH Canadian Limited.
Hammer, D.L., Shartsis Friese LLP., & American Bar Association. (2005). U.S. regulation of hedge funds. Chicago, Ill: American Bar Association Section of Business Law.
Capital Gains Tax in Australia
Capital gains tax refers to a type of tax levied on capital gains incurred by organizations or individuals. The capital gains refer to the profits that an organization or individual selling a capital asset obtains through selling an asset at a price higher than the original price. In many countries, the amount of capital gains tax takes into consideration the type of investment and the holding period of the asset. Australian capital gains tax takes a proportion of all achieved capital gains. Capital gains are not separate tax but part of the income tax on individuals and corporations upon disposing of capital assets. Australian capital gains tax exempts personal properties such as home, car, and furniture. Australian residents in any part of the world are subject to capital gains tax.
Issue 1. Moodly's Conversion of her main residence.
Moodly being a childcare worker, wishes to…
OECD Tax policy studies. 2006. Taxation of Capital Gains of Individuals: Policy
Considerations and Approaches. No.14. Paris: OECD Publishing.
Pricewaterhouse Coopers. 2006. Mergers and acquisition: A global Tax Guide. New Jersey:
John Wiley and Sons Inc.
Carbon emissions during recent decades have generated much controversy and some communities have taken harsh measures in order to combat effects associated with the process. The Australian Federal Government introduced a carbon tax of $23AUD per ton of emitted carbon dioxide on a series of fossil fuels in order to effectively deal with pollution. Finances gained from the process have been used to reduce income tax and provide Australian citizens with several benefits. hile the legislation has been welcomed by many local and international bodies, some have frowned upon it and have called for its repeal on account of how it produced much damage both on a small level by increasing cost of living and on a larger level by preventing businesses from being able to experience progress.
Tony Abbott's article "THE COALITION'S PLAN TO ABOLISH THE CARBON TAX" is among the most recognized criticisms regarding the carbon tax in…
Bell, L. "Australian Voters Energetically Reject Concocted Climate Crisis And Carbon Tax Disasters." Retrieved October 19, 2013, from http://www.forbes.com /sites/larrybell/2013/09/29/australian-voters-energetically-reject-concocted-climate-crisis-and-carbon-tax-disasters/
Gardner, T. "U.S., China agree to cut emissions from vehicles, coal." Retrieved October 19, 2013, from http://www.reuters.com/article/2013/07/10/us-climate-usa-china-idUSBRE9690VM20130710
Ryan, R. "Kevin Rudd says Labor 'got it wrong' on introducing carbon tax without mandate." Retrieved October 19, 2013, from http://www.abc.net.au/news/2013-08-25/rudd-says-labor-got-it-wrong-on-carbon-tax/4910690
Taylor, L. "Tony Abbott insists carbon tax will end on 1 July -- even if Senate blocks repeal." http://www.theguardian.com/environment/2013/oct/15/tony-abbott-insists-carbon-tax-will-end-on-1-july-even-if-senate-blocks-repeal
The same goes for business-related periodicals and magazines. (Dratch 2008, p. 2)
Mileage: Once again, this involves careful bookkeeping, but the deductions can add up. Keep a dated log of all business-related mileage, tolls, and parking costs. According to the IRS website, the 2009 IRS deduction rate for business-related mileage was 55 cents per mile.
Travel, Entertainment, and Meals: For the small business, 100% of travel and entertainment expenses are deductible, as well as 50% of meal expenses. It should come as no surprise that these deductions must have supporting documentation showing them to be business-related.
Shelter Your Income
Investment property can be a valuable tax shelter. The IRS allows you to shelter up to $25,000 in an investment property, but there are strict requirements. You must own 10% of the property as an individual owner, not through limited partnership. And you must be involved in the "active management" of…
Akasie, Jay. (2009, Apr. 6). Last Minute Small Business Tax Tips. Retrieved May 29, 2010 from http://www.forbes.com . [website]
Dratch, Dana. (2008, Mar. 26). A Dozen Deductions for Your Small Business. Retrieved May 30, 2010 from http://www.bankrate.com/finance/money-guides/a-dozen-deductions-for-your-small-business-1.aspx . [website]
Tax Tips for Small Businesses. (2010, Jan. 20). Retrieved May 30, 2010 from www.fool.com. [website]
In addition, the estimation of seventy-seven thousand individuals that would be able to receive an additional refund from the tax credit suggests that it could actually cost the state a substantial amount of money to operate this program. These students would not only pay no taxes, but would actually receive money from the state -- a minimally employed student that owed no income tax to begin with could actually receive a refund of eight hundred dollars (forty percent of two-thousand) or more. Clearly, there would be a major impact o the overall state budget from the cost of this program. Though a billion dollars doesn't go as far as it used to, it is still a substantial portion of the state's total sixty-three billion dollar budget (POB, 2012). Though the money saved or sent out to individual taxpayers through this tax credit would most likely be used to make purchases…
PASDC. (2012). Quick facts. Pennsylvania State Data Center. Accessed 3 March 2012. http://pasdc.hbg.psu.edu/sdc/pasdc_files/pastats/PaFacts_2011.pdf
POB. (2012). Budget in Brief. Pennsylvania Office of the Budget. Accessed 3 March 2012. http://www.budget.state.pa.us/portal/server.pt/community/current_and_proposed_commonwealth_budgets/4566
American Tax System vs. Other Countries
The federal government first imposed an individual income tax in 1862 as an emergency means of financing the Civil ar. It also established the Bureau of Internal Revenue, predecessor of the Internal Revenue Service. Tax rates were 3% on income from $600 to $10,000 and 5% on income above $10,000. Later in the war the maximum rate increased to 10% of income." (Encarta)
My how times have changed. This paper will compare the tax systems of four different countries to the American tax system. The four countries that have been chosen are South Africa, Mexico, Hong Kong, and New Zealand..
First lets attempt to briefly (if that were possible) explain the American tax system.
The American Tax System
America has a progressive tax system meaning the greatest tax burden is on people who have the most income. The American tax system can be described…
Corporate Service Center. "Federal Tax Rates." http://www.corporateservicecenter.com/Corp/federal_tax_rates.htm. April16, 2002
Film New Zealand. "New Zealand's tax Environment." Jan. 2002 http://www.filmnz.com/filmnz/Content/Production/Development/Taxation/Taxation.html
Flags of the World. http://www.crwflags.com/fotw/flags/mx.html . April17, 2001
Henry, Aaron. "The South African Tax System: A Nation is Microcosm." Dec. 6,1999:
Capital gains and dividend taxes were both initiated in the early 1970's, by the Democratic Party. efore dividend taxes were enforced, the government made its money through higher aftertax yields, The dividend tax was originally supposed to be a progressive measure, so that the wealthiest paid correspondingly more than the poorest because they had benefited more. At this time, only the wealthy invested in stocks. This is no longer true. Most middle-class people today are investors in the market and they do not have the expensive accountants hired by the rich to shield their investments from tax.
Investing in the stock market has become far more widespread over the last two decades, as 84 million people - representing nearly half of all American households - owning stock. Tax-deferred investment tools such as 401(k) plans and individual retirement accounts (IRAs) have placed millions of Americans who make $60,000 or…
Beach, William. (January 23, 2003). Just what our economy needs. San Diego Union-Tribune. (Berlau, John. *February 6, 2003). Accounting firm fights dividend-tax cut. WorldNetDaily. Retrieved from the Internet at http://civilliberty.about.com/gi/dynamic/offsite.htm?site=http://www.wnd.com/news/article.asp%3FARTICLE%5FID=30894.
Centre for International Co-operation and Development. (2003). Corporate Income Tax. Retrieved from the Internet at http://www.gzs.si/ENG/busenv/financ61.htm .
Edwards, Chris. (January 7, 2003). Nearly All Major Countries Provide Dividend Tax Relief. The Cato Institute. Retrieved from the Internet at http://www.cato.org /dailys/01-07-03-2.html.
Hall, Joshua. (January 31, 2003). Dumping fed dividend tax practical on several levels. Columbus Business First. Retrieved from the Internet at http://www.bizjournals.com/columbus/stories/2003/02/03/editorial3.html .
The people who opt for early retirement stop staring contribution to pension system where as they start getting the benefits of pension system. (Prieto, 1997)
The traditional unfunded social security system is facing lot of problems in the United States and other developing countries with the increasing life expectancy of the people. The cost of providing any level of service is directly linked to the percentage of people who are employed against people who have already retired and enjoying pension in a pay-as-you-go system. The problem is continuing and increasing with people's move towards early retirement which is encouraged in many countries social security system. Even in the event of retirement being stabilized, the steep increase in the ratio of the aged against that of working age is contributing to the substantial raise in the cost of pay-as-you-go system. The United States estimators, who work for social security system, forecast…
Aronson, Jay Richard; Hilley, John L; Maxwell, James Ackley. (1986) "Financing State and Local Governments" Brookings Institution Press.
Brainard, William C; Perry, George L. (1990) "Brookings Papers on Economic Activity:
Macroeconomics" Brookings Institution Press.
Campbell, John Y; Feldstein, Martin S. (2001) "Risk Aspects of Investment-Based Social
Sourcing equity / ax management
Contrasting between global tax systems
National taxing has been proven to affect economic decisions made by MNEs. ypically, the settlement of taxation will take two different approaches, which are the worldwide approach and the territorial approach. he first approach will levy taxes based upon the income earned by firms that are controlled in the host country. herefore, an investor earning income internationally would find his/her income taxed by the local tax authorities. For example, a country such as the United States will tax the income earned based upon firms that are located in the U.S. whether the income is received by firms based in the United States, domestically sourced, and/or foreign sourced (Moffett, Stonehill & Eitemen, 2012). However, an issue that arises is that the taxation does not take into consideration the foreign companies that are based in the United States.
herefore, the territorial approach…
They also attract investors as they will provide a deep and liquid market, allows higher investment returns, and are a form of portfolio diversification. Therefore, an investor will profit from the international debt markets as the credit rankings of most of the borrowers are very well, and the borrowers are willing and able to pay a percentage extra for repayment (Sangiuolo & Seidman, 2008). The international debt market consists of unregulated money and capital markets although the dominant currency is the United States dollar. However, the debt securities denominated in euros have grown as the predictability, liquidity and volatility of the euro consolidates. The major forms of Eurocurrency facilities discussed are short-term bank advances (similar to term loans or fully drawn advances) and standby arrangements (source of 'back-up' fund to meet short-term cash shortfalls). They also include medium- to long-term Eurocurrency loans. International debt markets are attractive to both borrows and investors as they can benefit each member in the end. Since major Eurocurrency facilities are attractive because of the lower cost of borrowing, creating a natural hedge and the size of Eurocurrency markets (Razin & Slemrod, 2010).
4. Distinguishing the characteristics of debt instruments
The international debt market uses debt instruments to regulate borrower's repayment plans and investor's investment plans. A debt instrument is a paper or electronically signed obligation that allows the issuing party to raise funds by promising to repay the lender in accordance with the terms of a contract. The borrower will be set up on a plan in order to repay any money used whether it is a short-term or long-term. Typical debt instruments would include the following: notes, bonds, certificates, mortgages, leasing, or other agreements between a
The other side of this is that the companies have to spend finances in areas of language training or job training when they outsource. However, over the years, many U.S.-based companies haven't been discouraged by these additional costs because the overall costs of outsourcing with the job training session and language teaching and outplacement requirements are still far less when compared to the costs that they would have to endure when they don't outsource. If the overall costs of outsourcing was even marginally close to the costs on domestic hiring then there is a high probability that the overall right of firing of the employers would not be employed as much as it ahs been in the past. Of the negative perception of using the firing right at such an extensive level does create negative images which the company has to spend money to correct and rebuild into positive images…
Poor Payers to a Degree," the Economist, June 10, 2004.
David Cay Johnston. "How Offshore Havens Helped Enron Escape Taxes." New York Times. January 18, 2002.
David Cay Johnston. "Tax Inquiries Fall as Cheating Increases." New York Times. April 14, 2003.
Duncan Campbell. "Havens that Have Become a Tax on the World's Poor." Guardian. September 21, 2004.
Naturally, to the extent the AMT applies to the specific segment of taxpayers to whom it was initially addressed, it is serves a beneficial purpose; on the other hand, that benefit must be considered against the unintended consequences and unfairness of its application to taxpayers completely outside the ranks of the very wealthy, particularly at the lower end of that income category. Undesirable Consequences:
The first major potential problem with the AMT is that it does not incorporate inflation at all; as a result, it applies to more and more taxpayers every year despite the fact that their wealth actually remains unchanged during that time. This is particularly important in times of economic recession, especially where income increases fail to keep pace with rising inflation. Whereas the AMT applied to a fewer than 200 households when first implemented in 1970, it currently affects as many as 15% of households earning…
Congressional Budget Office. (2004). Revenue and Tax Policy Brief: Alternative Minimum Tax.
Leiserson, G. (2008). The Individual Alternative Minimum Tax: Historical Data and Projections. "http: Brookings Institution.
The New York Times. (2007). Times Topics: Alternative Minimum Tax. (Dec. 6/07).
Sixth, nearly one half of taxpayers in this country do not pay a nickel in federal income tax and that needs to change. There is something to be said of the poor not paying federal income but when households making north of $60,000 are paying nothing, there is something wrong with that. Many people point to the rich as needing to pay more but they've been paying progressively more and more for generations and if shared contribution and shared sacrifice is truly the goal, then everyone who has the means to at least pay a little something, should do so. As it currently sits, the top 1% of all taxpayers pay more than a third of all income taxes. The top five percent pays nearly sixty percent of income taxes. The top ten percent pays more than seventy percent of income taxes. The bottom 50%, on the other hand, pays…
NTU. (2012, November 17). National Taxpayers Union - Who Pays Income Taxes?. National Taxpayers Union. Retrieved November 17, 2012, from http://www.ntu.org/tax-basics/who-pays-income-taxes.html
SSA.gov. (2012, November 17). 2012 Social Security tax rate and maximum taxable earnings. Frequently Asked Questions. Retrieved November 17, 2012, from http://ssa-custhelp.ssa.gov/app/answers/detail/a_id/240/~/2012-social-security-tax-rate-and-maximum-taxable-earnings
SSA.gov. (2012, November 17). Contribution and Benefit Base. The United States Social Security Administration. Retrieved November 17, 2012, from http://www.ssa.gov/oact/cola/cbb.html