Federal Income Taxation and the Progressive and Regressive Taxes

Federal Income Taxation
Name Course Instructor Date
Chapter 1:
Questions 5, 7, 11, 36-38, & 41
5 How does the pay-as-you-go procedure apply to wage earners? To persons who have income from sources other than wages?
“The tax law requires employers to withhold a specified portion of an employee’s wages and remit them to the government to cover the worker’s income taxes. Persons with income from other than wages may have to make quarterly payments to the IRS for estimated taxes due for the year” (Maloney et al., 2021).
7 Distinguish between taxes that are regressive and those that are progressive.
Regressive taxes such as VAT have a greater impact on lower-income taxpayers relative to higher-income taxpayers. Progressive taxes, such as the federal income taxes have greater impact on higher -income taxpayers relative to lower-income taxpayers.
11 Sophia lives several blocks from her parents in the same residential subdivision. Sophia is surprised to learn that her ad valorem property taxes for the year were raised but those of her parents were lowered. What is a possible explanation for the difference?
It is likely that Sophia made capital improvements on the property that increased its value and her parents became retirees where they are 65 years and over.
36- LO.5 With regard to the IRS audit process, comment on the following:
a. The audit is resolved by mail.
This is likely a correspondence audit between the IRS and the taxpayer where there is audit of limited number of issues.
b. The audit is conducted at the office of the IRS.
This is an office audit and is mostly restricted in scope
c. A “no change” RAR results.
A Revenue Agent’s Report (RAR) summarizes the results and findings of an IRS audit. The revenue agent supports the taxpayer’s results filed.
d. A special agent joins the audit team.
The IRS suspects fraud and the taxpayer needs to retain competent legal counsel.
37 LO.5 Aldo has just been audited by the IRS. He does not agree with the agent’s findings but believes that he has only two choices: pay the proposed deficiency or resort to the courts. Do you agree with Aldo’s conclusion? Why or why not?
I disagree Aldo ought to lodge an appeal to the Appeals Division to resolve the audit dispute. Sometimes there is reduction in the assessment and even favorable settlements for the taxpayer. When there is no satisfactory settlement then he can take the tax litigation to the Tax Court, a Federal District Court, or the Court of Federal Claim
38 LO.5 What purpose is served by a statute of limitations? How is it relevant in the case of tax controversies ?
The statute of limitations is a legal provision that requires any lawsuit is brought within a reasonable period of time, and especially when there are time limits and multiple suits. Parties are discouraged from prosecuting stale claims.
41 LO.5, 6 On a Federal income tax return filed five years ago, Andy inadvertently omitted a large amount of gross income.
a. Andy seeks your advice as to whether the IRS is barred from assessing additional income tax in the event he is audited. What is your advice?
When more than 25% of the reported...