Order Federal tax Discussion Assignment

Order Federal tax Discussion Assignment
1. Topic: Tax Laws
Tax laws affect all citizens of the United States. Various facets of the economy rely on correct application of tax laws. Tax professionals play a critical role in assisting individuals as well as businesses to comply with these complicated laws. To correctly compute an individual’s taxes, a brief historical review of how the United States got here is necessary.
How did these laws come to be in the United States? In this unit, you will briefly review its history. The first federal income tax was passed in 1861. When was the next one passed, and why was it necessary? Why was pay-as-you-go withholding needed in 1943?
2. Topic: Tax Avoidance or Tax Evasion
The United States income tax system is based on the idea of voluntary compliance; it is the taxpayer’s responsibility to report all income. Tax evasion is illegal. Some people try to evade paying taxes by failing to report all or some of their income.
Moneymaking activities that are not reported to the government are part of an underground economy. If taxpayers fail to pay what officials say they owe, the IRS can collect back taxes and assess a penalty.
Tax avoidance is perfectly legal. The IRS allows taxpayers to claim certain deductions, credits, and adjustments to income. For instance, some homeowners can claim a deduction for interest they pay on a home mortgage. Many people pay more federal income tax than necessary because they misunderstand tax laws and fail to keep good records.
Discuss whether each of the below listed actions is tax avoidance or tax evasion. Then, discuss the ethical implications of employing each of these in a tax return.
Keeping a log of business expenses
Ignoring earnings from a lawn mowing business
Not reporting interest earned on a savings account
Keeping a log of contributions to a charity
Order Federal tax Discussion Assignment
Not reporting tips
Claiming your dependents as tax deductions
5. Topic: Capital Gains Tax
Vincent pays $20,000 for equipment to use in his trade or business. He pays sales tax of $800 as a result of the purchase. Must the $800 tax be capitalized as part of the purchase price?
Vincent’s friend tells him that capital gains tax is discriminatory in that it is imposed upon individuals who can afford to buy capital assets. Do you agree or disagree? Why? Why not? Be sure to include definitions of capital asset and capital gain in your response.
6. Topic: Deductions for AGI and Deductions From AGI
What is the distinction between deductions for AGI and deductions from AGI, and why should this be important for individuals?
As you review deductions from AGI and for AGI, how should bribes and kickbacks be treated for tax purposes? Are they a deduction and are they allowed? As you may recall, Al Capone’s conviction for tax evasion caused mobsters and other illegal gangsters to rethink their method of keeping detailed records. Why did this rethink occur? How different was this situation of bribes and kickbacks to how multimillion-dollar corporations do business now?
7. Topic: Traditional IRA vs. Roth IRATopic: Itemized Deductions
Identify some common miscellaneous itemized deductions and identify any limitations imposed on the deductibility of these items.
One itemized deduction allowed is for medical expenses. In what cases are medical insurance premiums paid by an individual not deductible as qualified expenses?
Both nondeductible contributions to a traditional IRA and contributions to a Roth IRA are similar in the sense that neither provides a tax deduction at the date of contribution. Which of the two types would be most advantageous to taxpayers and why?
Your client is about to establish his own business and hires at least 10 employees. He asks you for advice concerning establishing a qualified versus a non-qualified retirement plan. What do you advise your client? Would your answer change if you were a potential employee? Why or why not?
8. Topic: Itemized Deductions
Identify some common miscellaneous itemized deductions and identify any limitations imposed on the deductibility of these items.
One itemized deduction allowed is for medical expenses. In what cases are medical insurance premiums paid by an individual not deductible as qualified expenses?
9. Topic: Property Deductions
When property is disposed of, what factors influence the amount of the deductible loss? Define.
What is the importance, if any, of passive activity?
Compare and contrast the computational rules for deducting casualty losses on personal-use property with casualty losses incurred on business or investment property. Define the difference. What are the limitations for both?
10. Topic: Bad Debt Deductions
Ashley is an attorney who specializes in family law. She uses the cash method of accounting and is a calendar-year taxpayer. Last year, she represented a client in a lawsuit and billed the client $5,000 for her services. Although she made repeated attempts, Ashley was unable to collect the outstanding receivable. Finally, in November of the current year, she finds out that the individual has moved without leaving any forwarding address. Ashley’s attempts to locate the individual are futile.
What is the amount, if any, of the deduction that she may claim in connection with this bad debt?