ACE Class Report # 63 : Taxes and Business
Begin: 4/25/2024
Finish: 5/3/2024
Title: Taxes and Business
Instructor: Abbas Saeedi
Why I choose to take this class:
To learn more about taxes an the tax system used. Knowledge about taxation will help me plan, save and pay for my taxes in the future.
What I learned from this class:
Tax Evasion: is the use of illegal methods to avoid full payment of taxes. Th amount of money that a person or business owes the government is taxes is called tax liability. Tax evaders use a number of strategies to reduce their liability. Such strategies includes: submitting false information, failing to report income, overstating deductions and exemptions. Tax evasion is a criminal offense. Other forms of tax evasion: staying outside of the tax system, keeping incomes and business activities hidden from tax authorities, unrecorded tax transaction, transferring income to offshore bank accounts, forge financial documents or claim personal money withdrawals as business expenses. Pyramiding is a common form of tax evasion among business. It occurs when a company withhold taxes from its employees but does not submit money to the government. Tax evasion differs from tax avoidance, which is the attempted reduction of tax liabilities through legal means. Some methods of tax avoidance take advantage of irregularities an loop holes in the tax laws or difference of tax policies.
Taxation: is a system of raising money to finance government services and activities.
Kinds of Taxes: includes: property, income and taxes on transaction.
Property Taxes: levied on value of such property as: farms, houses, stores, factory and business equipment. Chief sources of income for many local government. Property taxes are called direct taxes because they are levied directly on the people.
Income Taxes: are levied on income from such sources as: wages and salary, dividends, interest, rent and earning of corporation.
Two types of Income taxes: Individual income taxes and corporate income taxes.
Capital gains taxes – income from sale of capital assets including: stocks, bonds, real estate and partnership. Capital gains taxes rates are usually lower than income tax rates. Special income taxes that help fund social security programs, unemployment are considered as direct taxes.
Taxes on transaction: are levied on sale of goods and services and on privileges. There are three main types on transactions: General sales taxes, excise taxes and tariff. Value added tax (VAT) is sales tax levied to the increase in value of a product at each stage in its manufacturing and distribution. Excise taxes are levied on the sale of specific products and on privileges suck as: gasoline, tobacco and alcohol beverages, marijuana. Other excise taxes are: license tax, franchise tax and severance tax. Severance tax is levied on the processing of natural resources such as: timber, natural gas, or petroleum. Tariff are taxes on imported goods to protect their own industries from foreign competition.
Other Taxes: Estate taxes, inheritance taxes, gift taxes, and taxes on wealth or net worth. An estate tax is applied to the value of property before it is given to the heirs. An inheritance tax is levied on the value of property after it has been given to heirs. A gift taxes – value if property given away during a donor’s lifetime. The donor pays the tax. A tax on wealth or net worth is based on the value of a person’s or company’s assets.
Principle of Taxation:
A good tax system must satisfy several general principle of taxation which include: productivity, equity an elasticity.
Productivity – a system that will generate adequate taxes to meet the needs.
Equity – Most people agree that a tax system should be equitable to the taxpayers. Progressive tax applies a higher taxes rate to large taxable incomes, than it does a smaller one.
Elasticity – flexible enough to satisfy changing financial needs of the government. Should dB able help control: inflation, recession, economic growth, economic decline or spur the economy.
Taxation in the United States:
The constitution of the US gives Congress the right to levy taxes. It was first used in 1789. During the Civil War the government levy a series of excise taxes and other new taxes. In 1894 – the government levied a tax on individual income and abolished it in 1985. In 1913, the e16th amendment removed the restriction, the first modern income tax took effect. In 1900 Income taxes became the main source of federal revenue. Local government relied chiefly on property taxes. In the 1930, state government received a large percentage of their revenue form income taxes and sales taxes. Today the main federal taxes are individual and corporate income taxes and social security contributions. Some revenue from other taxes goes to state and local government to finance such projects as roadbuilding and public housing.
How will this class contribute to my success upon release:
Knowledge learned form this class includes how taxes were created, its uses, types of taxes and how taxes are utilized. This information helps me better understand the role of government and taxation. I will know my tax liability, pay them and avoid getting in trouble with the government. This information can be conveyed to other communities where I intend to volunteer my services.
