Hospitality Industry Managerial Accounting HRT 374

1
Hospitality Industry Managerial AccountingHRT 374

• Chapter 15
• Income Taxes

2
Outline

• Tax Basics
• Tax Avoidance
• Forms of Business Organization
• Accounting Methods
• Accounting Income vs. Taxable Income

3
Tax Basics

• Income
• Less adjustments to income
• Equals adjusted Gross Income (AGI)
• Less Deductions
• Less Exemptions
• Equals taxable income
• Times tax rate
• Equals Federal Income Tax
• Less Tax credits
• Plus other federal taxes
• Equals total tax

4
Income

• Wages
• Salaries
• Tips
• Interest income
• Dividend income
• Proprietorship income or loss

• Capital gains or losses
• Rents
• Royalties
• Partnership income or loss
• S Corp income or loss

5
Adjustments to income

• Individual IRA deductions

6
Deductions (See next slide for Standard)

• Medical and dental gt 7.5 of AGI
• Other taxes (state and local income tax)
• Real estate tax
• Home mortgage interest
• Contributions
• Casualty theft losses
• Union dues
• Tax prep fees
• All over 2 of AGI

7
Standard Deduction
IRS Publication 501
8
Exemptions

• 3,000 in 2002

9
Tax credits

• Subtract from taxes due
• Child care
• Dependent care
• Education credits

10
Tax Avoidance

• Keep it low and keep it legal

11
Forms of Business Organization

• Proprietorship
• Partnership
• Limited partnership
• Limited Liability Companies (LLC)
• Corporations
• S Corporation

12
Accounting Methods

• Cash vs. accrual
• Modified accrual

13
Accounting Income vs. Taxable Income

• MACRS vs. financial depreciation
• Pre-opening amortized for five years
• Loss carrybacks three years
• Loss carryforwards five years

14
Homework