Instructor's Guide PDF to Taxation

Instructor's Guide: Nel en/Cuccia/Persellin/Young, SWFT 2023 Volume 4: Essentials of Taxation: Individuals and Business Entities. 9780357720103; Chapter 1: Introduction to Taxation Chapter Objectives The following objectives are addressed in this chapter: 1.1 Explain the importance of taxes, how...

Instructor's Guide: Nel en/Cuccia/Persellin/Young, SWFT 2023 Volume 4: Essentials of Taxation: Individuals and Business Entities. 9780357720103; Chapter 1: Introduction to Taxation Chapter Objectives The following objectives are addressed in this chapter: 1.1 Explain the importance of taxes, how to study taxes, and how tax and finance professionals work with taxes. 1.2 Explain the components of a tax. 1.3 Identify the various taxes affecting business entities and individuals. 1.4 Describe the basic tax formula for individuals and business entities. 1.5 Explain the tax systems that apply to business entities and their owners. 1.6 Identify tax planning opportunities using a general framework for tax planning. 1.7 Explain the economic, social, equity, political, and compliance considerations that underlie the tax law. 1.8 Describe the influence of the IRS and the courts on the Federal tax system. [return to top] Chapter Outline In the outline below, each element includes references (in parentheses) to related content. "CO CH.##" refers to the chapter objective; "PPT Slide #" refers to the slide number in the PowerPoint deck for this chapter (provided in the PowerPoints section of the Instructor Resource Center); and, as applicable for each discipline, accreditation or certification standards ("BL 1.3.3''). Introduce the chapter and use the Ice Breaker in the PPT if desired, and if one is provided for this chapter. Review learning objectives for Chapter 1. (PPT Slides 2-3). I. Taxes in Our Lives (1.1, PPT Slides 8-11) i. Various types of taxes, such as income, sales, property, and excise taxes, come into play in many of the activities of individuals, businesses, nonprofit entities (like charities), and governments themselves. ii. Ultimately, all taxes are paid by individuals. The corporate income tax, for example, is paid directly by the corporation, but it really is paid indirectly by individuals in their capacity as customers, investors (owners), or employees; the taxes are passed along to individuals through higher prices for products and services, lower dividends, and/or lower wages. iii. Federal, state, and local elections often include initiatives that deal with taxation. Candidates running for office often have ideas on tax changes they would like to make if they are elected. a. The Relevance of Taxation to Accounting and Finance Professionals Instructor's Guide: Nellen/Cuccia/Persellin/Young, SWFT 2023 Volume 4: Essentials of Taxation: Individuals and Business Entities, 9780357720103; Chapter 1: Introduction to Taxation i. A large corporation may devote about 25% of its net income to pay income taxes, plus it is subject to employment taxes, property taxes, sales taxes, and various excise taxes. Corporations with international operations are subject to taxation in other countries. Small businesses also pay a variety of taxes that affect profits and cash flows. ii. Given its significance, taxation is a crucial topic for accounting and finance professionals. They must understand the various types of business taxes to assist effectively with: 1. Compliance: Ensure that the business files all tax returns and makes all tax payments on time. Mistakes and missed due dates will lead to penalties and interest expense. 2. Planning: Help a business to apply favorable tax rules, like deferring income and obtaining tax credits, to minimize tax liability (and maximize owner wealth). The time value of money concept also is important here, as is coordinating tax planning with other business goals to maximize earnings per share. 3. Financial reporting: Financial statements include a variety of tax information, including income tax expense on the income statement and deferred tax assets and liabilities on the balance sheet. Footnotes to the financial statements report various tax details, including the company's effective tax rate. 4. Environmental, Social, and Governance (ESG) reporting: A growing trend in corporate reporting is to address various business sustainability and responsibility matters and report environmental, social, and governance activities and impact. This reporting can include taxes paid in each country (part of "country-by-country reporting"), reconciliation between taxes paid and the statutory tax rate on financial statement profits, financial assistance received from governments via tax deductions and credits, and an explanation of the corporation's tax policy and strategy. 5. Controversy: Assist when the taxpayer interacts with a tax agency (like the IRS). The IRS and state and local tax agencies regularly audit tax returns to verify that taxes were properly computed and paid. 6. Cash management: Taxes must be paid on time to avoid penalties and interest. Income taxes must be estimated and paid quarterly and reconciled on the annual return. Other taxes may be due weekly, monthly, quarterly, or semiannually. Businesses must be sure they have the funds ready when the taxes are due and have procedures to track due dates. 7. Data analysis: With a majority, if not all, of a company's records maintained in digital form, there are opportunities to use this information to enhance profits, better understand the customer base, and improve and understand the information from a tax �-= �� � - � � --:- . �-_J.--:: . . ;: . . - _·' . . . . . = ---- . - �� - - -