Next Level Tax Course: The only book a newbie needs for a foundation of the tax industry

By Xavier Rollins

This book was written to help all the newbies interested in becoming a Tax preparer, starting a tax business or if you just wanted to know more about taxes in general this will sharpen your tool & help build your foundation. Yes, there will be changes every ye

• Language: English
• Publisher: Next Level Tax Solutions
• Release date: Sep 26, 2022
• ISBN: 9781087993829

Book preview

Introduction

Are you a student working part-time or an accounting student needing supplementary training on all things taxation?

Or maybe you are a low- to moderate-income earner looking to learn about taxes and how to correctly file them on your own?

If you answered yes to the questions above, then this is the right book for you.

As an ordinary taxpayer, you might not have the luxury of paying other people to work out your taxes for you. On the other side, if you are an accounting student, you might not find everything you need in the classroom.

Taxes are an inevitable part of being an adult and learning how to navigate the process is critical in helping you avoid penalties or even jail time. As the saying goes, ignorance is no defense and not knowing how taxation works will not help you once the IRS comes for you.

So, if you are asking yourself the following questions:

What are taxes, and how do they work?

What is the income tax in the US?

How does taxation work?

How does one file tax returns?

And many more, then read on.

This book will teach you:

What taxes are and how the government utilizes them

What income tax laws are

How to file your taxes

Tax exemptions, deductions, and credits, and how they differ

And a lot more.

So flip over, and let’s begin.

Section I

Lesson 1

INCOME TAXES IN THE UNITED STATES

Most of us have heard a lot about taxes in our lifetime—people filing tax returns, companies and individuals being slapped with penalties for tax evasion, how billionaires don’t pay as much tax as they should, and so on.

But what are taxes really?

Tax is a mandatory contribution levied on individuals or corporations by a ruling entity, e.g., the government. The government can either be local, federal, or state government. The taxation is often on income and spending, but it can also be on the value of an estate or even a gift.

Taxation then refers to the act of a taxing agency imposing a financial levy or duty on an individual or corporation. This has been part of civilization from ancient times, going all the way back to early Mesopotamia.

Here in the United States, the body mandated by the law to collect tax and administer the Internal Revenue Code is the Internal Revenue Service (IRS). The IRS is headquartered in Washington, DC and is part of the Treasury Department. Aside from tax collection, the IRS also assists taxpayers and pursues and resolves fraudulent or erroneous filing of taxes.

Why does taxation exist?

In ancient times, taxation was used predominantly to sustain the ruling class, create defenses of cities, and form armies.

However, modern taxation has become broader in its usage.

For example, taxation is a way through which governments raise funds that enable them to function properly and provide necessary services. So, taxes enable governments to create or improve infrastructure, provide healthcare services, provide education, and run their daily operations.

Thus, as a taxpayer, the taxes paid to the government enable you to live comfortably and use the available infrastructure to meet your daily needs or use public schools to learn or educate your children.

In addition to that, taxes may be imposed to influence society by encouraging certain things or discouraging certain things.

For example, progressive taxation, which means taxing people more if they earn more, helps create a more egalitarian society.

Also, higher taxes on goods such as cigarettes are often meant to deter their widespread consumption.

When paying taxes, the amount of taxes you owe will often be calculated against your taxable income. This is your average tax rate. This rate is the total tax paid divided by the taxable income. It is used to determine the overall share of income that is paid in taxes.

After paying your taxes, you get a Tax Clearance Certificate. This is a document that the tax authority issues to a taxpayer, which confirms that you have either paid all your due taxes or that you bear no tax liability.

Types of Taxes

There are many different types of taxes; all fall into three major categories based on what you are getting taxed on:

1. Taxes on earnings – These are taxes that are charged on what you make as income or gains.

2. Taxes on purchases – These are taxes that are charged on what you buy.

3. Taxes on property – These are taxes you pay for things you own.

1. Income Tax

Income tax was first started in 1862 in the US and was used to finance the Civil War.

Income tax is a type of tax that the government imposes on the earnings of individuals or businesses within its jurisdiction. Businesses or individuals will often be obliged by law to file their income tax returns to determine their tax responsibility.

Most nations make income tax progressive, meaning that the higher one earns, the more one pays in taxes.

There are three major types of income tax:

Individual income tax

Business income tax

State and local income tax

Individual income tax

Individual income tax is a tax that is deducted from the salaries, wages, dividends, interest, or any other kind of earning that a person makes throughout a year. Often, it is required by law as a taxpayer, you file your income tax return once a year to determine your