Mgt 4010 Business Taxation

MGT 4010 Business Taxation

Review Sheet for Exam 1

What is a tax?

A payment required by the government that is unrelated to any specific benefit or service from the government.

How do you calculate a tax? What are the primary two parts?

Tax = Tax Base X Tax Rate

Compare marginal rate vs average rate vs effective rate

Marginal tax rate is the tax rate that applied to the next additional increment of a taxpayer’s income (or to deductions). Specifically, where “old” refers to the current tax and “new” refers to the revised tax after incorporating the additional income (or deductions) in question.

[pic 1]

Compare proportional rate vs progressive rate vs regressive rate

Proportional tax structure or flat rate structure imposes a constant rate to the tax base. As the tax base increases, the taxes paid increase proportionally. Because this rate stays the same throughout all levels of the tax base, the marginal tax rate remains constant, and in fact, equals the average tax rate. The new corporate rate of 21 percent is example of a flat tax.

Progressive tax structure imposes an increasing marginal tax rate as the tax base increases. As the tax base increases, both the taxes paid and average tax rate increases.

Regressive tax structure imposes a decreasing marginal tax rate as the base increases. As the tax base increases, both the taxes paid and the average tax rate decreases.

Compare implicit vs explicit taxes

Explicit taxes are directly imposed by the government.

An implicit tax is simply the effect of taxes on the price of an asset. For example, if an asset is tax-preferred, the price will be bid up to reflect the tax preference.

What are the 5 characteristics of a tax system?

Fairness, adequacy, simplicity, transparency, and administrative ease.

(FASTA)

Evaluate the US federal tax system on these 5 bases

Ch. 1 #9

[pic 2]

What are the available filing status for people?

Married filing jointly, married filing separately, single, head of household, and qualifying widow or widower

Due dates for individuals/c corporations/partnerships