Federal Income Tax: Individual Introduction

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Federal Income Tax IndividualIntroduction

• Professor Jack Williams
• Jwilliams_at_gsu.edu
• 404.413.9149

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Goals

• Develop an appreciation and understanding of
  federal income tax
• Identify the strengths and weaknesses of the
  present tax system
• Do a return
• Learn how tax consequences and policies affect
  our decisions
• Have fun and be safe

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Syllabus

• Introduction to Syllabus
• Deviations may be necessary and should be expected

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Exams

• Open book
• Part multiple choice, part short answer
• Class participation Up to 3 points

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Top Five Reasons Why You Should Take Basic Tax

• The money, stupid!
• Entertain your family and friend.
• Jobs!!!
• You sound smarter than you are.
• Me!!! Just Kidding!!!

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Assessment and Collection

• Pay as you earn
• Withholding of employee taxes
• Installment (quarterly) payments of estimated
  taxes for self-employed, etc.
• Annual Returns
• Constitute a voluntary self-assessment
• Deficiencies and refunds
• Refunds File within 3 years of return filed or
  2 years from payment of tax, whichever is later
• Deficiencies 3 years to assess from return and
  10 years to collect

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Administrative Appeals

• Audit Process
• Thirty-Day Letter
• Appellate Conference
• Statutory Notice of Deficiency 90 day letter
• Tax Court Petition

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Tax Dispute Fora

• Tax Court
• Need not pay tax before action commenced
• Special summary procedures - 50,000 or less
• Located in DC but sits across country
• Appeal to Federal Courts of Appeal
• Tax court follows law of circuit in which
  taxpayer resides (Golsen case)
• Federal District Court
• Must pay tax and sue for refund (stops interest
  clock)
• Jury trial
• Appeal to Federal Courts of Appeal
• United States Court of Federal Claims
• Must pay tax and sue for refund (may stop
  interest clock)
• Located in DC but sits across country
• Appeals to Court of Appeals of the Federal
  Circuit
• Bankruptcy Court
• Prepayment forum
• Taxpayer must be debtor under title 11, USC

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Basic Tax System Structure

• Tax base
• Tax rate
• Taxpayer
• Disclosure system
• Collection system
• Policies furthered (optional)

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Tax Calculus

• Gross Income (IRC 61) Only Positive Entry
• Subtract Exclusions (IRC 101-150 income item
  not taxable by operation of law)
• Subtract Business Deductions (IRC 162)
• Subtract Specified Deductions under IRC 62
• Subtotal Adjusted Gross Income
• Subtract Higher of Standard Deduction or Itemized
  Deductions
• Subtract Personal Exemptions
• Figure Taxable Income
• Apply Rate Schedule in IRC to Taxable Income
  (rates presently from 15 to 39.6)

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Internal Tax Code Logic

• Income is Taxed only Once in the Hands of the
  Same Taxpayer
• Items of Expense are Deducted only Once by the
  Same Taxpayer
• Tax Benefit Rule

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Tax Policy

• Horizontal Equity
• Raising Revenue
• Allocate cost of public goods and services
  through an ability to pay mechanism
• Tool of social policy
• Tool of economic policy

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Basic Methodology

• What items constitute Gross Income?
• When and to whom?
• What items of expense are deductible?
• When and to whom?
• Are these deductions above or below the line?
• What is the character of the item?

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Consider IRS Form 1040

• Filing information
• Filing status
• Personal exemptions and Dependents

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Conclusion

• Questions