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Level 29

Federal Income Tax Law

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Purpose of Taxes
this is how the government is financed. Not inclusively to raise funds anymore like it used to be.
Group that pushes certain issues to the congress and senate.
16th Amendment to the United States Constitution
Passed in 1909 and ratified by the states in 1913. Congress shall have power to lay and collect taxes on incomes. Tax law is government by statute - the internal Revenue Code.
The Internal Revenue Code
the tax statutes listing code (IRS)
What is missing from the tax statute ?
forgot to mention that taxes is to help the government pay for government debt.
1 - Legislature
How does the tax laws evolves ?
This is a joint community that develops and idea to which is brought to interest groups
Interest Groups
group of lobbyist who are pushing certain issues. Trying to get congress to notice the issue.
Internal Revenue Code
IRS - task is to enforce tax laws. Statutes is the bible for the Federal Income Tax
What IRS puts out explaining the rules and words how the laws are to be administered.
Revenue Rulings (2 ways)
Public - Only applicable to the person applying
Case Law
law that is based from judical decisions
When does a law become an actual law?
When the president signs off on the law. This creates the establishment of the law.
Self Assessment concept of taxation
When you do everything yourself and just provide proof to the IRS.
Tax examination and appeal procedure
All examination are chosen randomly or when someone snitches on someone due to tax violations. This is done because IRS really wants to have proof and whats to know about deductions.
Appellate Division
Can appeal on a taxation outcome.Need to use a senior and better trained to dissolve dispute. Can take into consideration risk of litigation.
Court System
Responsible for the interpretation of laws.
Statute if Limitations
Deemed by the date to which something needs to be filed.
Timing of Income & Deductions
Cash Basis = Have income when received in a biweekly form
Deductible when you pay it. Reduce income. exceptions to this rule are credit cards. Deductible when you sign always get bill first then thats what goes on taxes.
Sam sex marriage
Federal law does not recognize same sex marriages.
Who must file an income tax return?
Earned Income and Passive Income
Gross Income is made up of two parts ?
Filing Status
This is very important on a tax return. Determines what tax rate schedule is used and the amount of the standard deductions.
Head of Household
Unmarried on last day of tax year and must be principal place of abode for the entire taxable year.
Qualifying Widow (surviving Spouse with dependent Child)
Unmarried- in order to be considered as a surviving spouse you had to be legally married and not remarried before the end of the year of death.
Marital Status
Marital Status Is determined on the last day of the tax year. If one spouse dies during the year you are considered to be married for the entire year.
Personal Exemption Amount
amount for tax payer, spouse or a dependent is $38,000 for 2011
No, joint return will double the personal exemption amount. 3,800 X 2
If a married couple files joint return can they be a dependent on someone else return ?
no more than 38,000
How much can a dependent make to qualify as a dependent on someone's return?
Can you get a full deduction if you make a lot of money?
No, if you gain too much money then you might no get the full deduction
Filing Requirements
General rule for filing is income. If you DONT make more than the requirement you dont have to file. HOWEVER if there are any type of withholding you must file in order to get refund.
Married filing jointly 19,500
List the income amount for filing Requirement
Self Employment
Must file a return if they had net earnings from self-employment of $400.00 or more