ACCT430 Unit 1 IP Tax Structure and Law

To prepare the new staff for the upcoming tax season, you have decided to hold 1-week training.
Prepare a short PowerPoint presentation of 4-5 slides outlining the following:

What type of tax rate structure does the U.S. tax system apply?

What are the individual tax forms, and what factors are used to determine which one to
use?

What is taxable income, and how is it determined?

There are 3 different tax rate structures

Proportional tax rate structure
The tax rate remain the same regardless of the tax base
The most famous one is flat tax which the U.S. does not use
Real estate tax, personal property tax, and state or local sales tax
Regressive tax rate structure
The tax rate decrease as the tax base increases
The overall tax liability decreases as one earns more income
Social security tax use this type of tax rate structure- its withheld from paychecks
Progressive tax rate structure
Its called progressive because as the taxpayer has more taxable income, they pay a
progressively higher income tax rate or percentage
The tax rate increase as the tax base increases
The U.S. federal tax system uses this tax rate structure
The tax rate schedules can be reviewed online at irs.gov

Marginal and Average tax rates

Marginal and average tax rates are two very important terms discussed within the current
U.S. tax system
The amount of tax liability that will be paid on the next dollar of taxable income earned is
marginal tax rate
Average tax rate is the percentage of income tax liability the taxpayer pays given his or her
taxable income. Average tax rate is all marginal rates combined
Formula: total tax liability divided by total taxable income

Individual tax forms

Form

Purpose of form

Filer

Form 8825 Used to report income and expenses from rental real estate

Partnerships
and S
Corporations

Form 1041 Used to report income, expenses, and tax liability of the entity

Fiduciary of an
Estate of Trust

Any tax filer that

Used to report depreciation and/or amortization for business and
Form 4562
has
income-producing property
depreciation
Schedule A Used to report itemized deductions for Form 1040
Schedule C

Used to report income and expenses for a sole proprietorship

and is attached to Form 1040

Individuals
Individuals

Schedule B Used to report interest and dividend income in excess of $1,500 Individuals
Schedule D Used to report the sale of a capital asset

Schedule E

Used to report income and expenses from rental real estate,

partnerships, S corporations, estates, and trusts

Schedule G Used to report the regular tax computation for Form 1041
Schedule I

Individuals,
Trusts, or
Estates
Individuals
Trusts or
Estates

Used to report the alternative minimum tax computation for Form Trusts or
1041
Estates

Schedule J Used to report the regular tax calculation for Form 1120

Corporation

Schedule K

Used to report the other information for Form 1120, such as

business entity and activity

Corporation

Schedule L

Used to report the financial reporting balance sheet for Form

1120

Corporation

Schedule
M-2

Used to report the unappropriated retained earnings for financial

Corporation
reporting purposes

Taxable income
The amount of income used to calculate an individuals or companys income tax due
Gross income or Adjusted gross income minus any deductions or exemptions allowed in that tax
year.

M.U.S.E. (2013). Tax Structure and Law. M.U.S.E.