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Fed Taxation I
Federal Taxation I: Individuals, Employees, and Sole Proprietors
| Question | Answer |
|---|---|
| What is tax ? | Tax is an enforced contribution. |
| What is tax used for? | For public or governmental purposes and not as a privilege granted or rendered. |
| What are the three components of tax? | - Tax payment is mandatory as required by law. - The payment is imposed and collected by a government agency. - Payment is not directly tied to any benefits received by the taxpayer. |
| What is IRS? | The Internal Revenue Service or IRS administers the federal income tax law and collects tax payments. |
| For what purpose was the first federal individual income tax used to for? | In 1861, the first federal individual income tax was enacted to pay for the civil war. (Wartime activities). But is was repealed after the war ended. |
| In 1894, a new federal individual income tax was enacted. What happened to this tax law? | This tax was found to be unconstitutional after it was challenged and thus it was abolished. |
| In 1909, the first federal corporate income tax was enacted, what happened to this law? Why? | This law was actually found to be constitutional because federal income tax was considered an excise tax or a tax on the entity's ability to do business in the US. |
| In 1913, Congress ratified the 16th Amendment to the Constitution. What was the result of this constitutional amendment? | the 16th Amendment to the Constitution is essentially formally sanctioned both the federal individual and corporate income tax regimes. |
| What are the sources of the Federal government revenue? | U.S. government's tax revenue is from the following sources: -personal income taxes -payroll or employment taxes (social security, medicare tax) -borrowing -corporate income taxes -excise taxes, customs taxes, estate and gift taxes |
| What is the largest source of the Federal government revenue? | from personal income taxes, more than other sources of income about 48%. |
| What is the smallest source of the Federal tax revenue? | The smallest piece of government tax (about 8%) is collected from the following: - excise taxes -customs taxes -estate - gift taxes and other types of taxes |
| What are payroll or employment taxes? | These are taxes collected to cover Social Security, Medicare and other employment and retirement benefits. |
| Are payroll or employment taxes the same as income taxes? | They're not income taxes. They're collected on top of income taxes and related to the US's social safety net such as SS, Medicare and Medicaid. |
| Is borrowing an income? Why does the US government borrow money in addition to tax revenue. | Well, the federal government considers borrowing money (as source of income). Why borrow money? because the government's spending exceeds tax revenue. |
| What amount do you think the government borrows to meet meet the deficit in federal spending ? | U.S. government borrows more than corporate income taxes to fill the tax gap of federal spending. |
| What is the second largest source of the federal government revenue? | Payroll or employment taxes which are collected on top of income taxes. (about 35%.) |
| What is the third largest source of the federal government revenue? | Corporate income taxes (about 9%). |
| Which is the largest outlay (expenditure) of the federal government? | Social security benefits |
Created by:
ashenafi
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