TAXATION

STUDENT NAME

AFFILIATION

DATE

Question 4

To access the credit ratio of all individuals that can be fitted in this tax bracket. This is available to entrepreneur’s who have small business that qualify for such a taxable year. In full definition disabled access credit is the eligible access expenditure that is rated as 50% of which exceed $250 but is below the class of $10,250 in a taxable year.

To qualify for such a credit it is important to note that such businesses have minimal income as compared to corporate companies To be eligible for such a credit it is imperative that the company to have a substandard employee number .In such a case a limited company should be able to cope with the market demand and help the business in decision making. In financial statement the business should be able to get a gross receipt of less than a million (Lakomski, 1999).This is in comparison with a limited company but the difference is that it is its own legal entity.

A business that generates less than a $1million is capable of getting such a credit especially if they maintain a proper book of accounts which will state the preceding income statement and financial statement. In a limited company the number of employees are restricted by the law but in a business it depends on the end of year financial system. Increasing employees helps increase profit ratio but depending on the income. To be eligible for such a credit a business should have a maximum of thirty employees and a minimum of two.

In understanding the eligibility of a credit facility one has to identify the sort of credit required. In our case we understand that the Americans with Disability act requires a business to identify its access expenditures. This entails that a credit should be governed by the amount expected to incur if such a credit should be offered. They should adhere to such requirements as provision of modified equipment’s for individuals with disabilities .they should provide access to business by removing all barriers pertaining to individuals with disabilities. Through acquisition of modified equipment’s they should be able to cope with all types of disabilities.

Question five

Negative income tax is when the government gives an individual a supplement pay instead of paying actual taxes to the government. According to research such as payment is referred to a system that incorporates a progressive income tax system of taxation. EITC program identifies individuals who have earned income such as wages, salaries, tips, net earnings from self-employment. Thus a negative income tax is not a factor that disrupts low wage markets but increases the availability of cheap labor but at the same time making minimum wage impossible. In the USA most minimum waged employees are employed leaving majority of the low income Americans unemployed (Lakomski, 1999). According to Friedman NIT was outgrown by Earned Income Tax Credit which in his own understanding this would assist individuals acquire credit.

According to Friedman EITC he suggest that food stamps are a birth from this and it is just an incentive to work. The EITC is not a NIT because it facilitates the unemployed to continue receiving in kind support. A woman will be reluctant to work when they notice their husband is receiving extra credits. This means that when an individual loses work he/she will receive neither wages nor credit. EITC is not practical and does not give enough incentive to work because it compare the non-working g poor and the working poor. If the above was a NIT it would have proved that all are equal deserving the same amount.

Optimal transfers can be identified to acquire the optimal tax and should have a higher tax rates at lower income.

Question 6

EITC is a credit that needs an individual to have earned income at a certain time in their life. This can be included with such earnings from, wages, salaries and other forms of taxable pay. Earned income is considered important especially to disabled individuals who earn disability payments before retirement. It is important to note that premiums gotten after retirement are not considered as earned income. Especially from a policy you received or paid for after retirement. This include other benefits such as, interest and dividends, social security and railroad retirement benefits (Lakomski, 1999).

Social security benefits as mentioned above is not considered as Earned income because it is not acknowledged .The only time you can consider Social security is when you have a Supplementary Security Income which is accessible within 12 months according to SSI .If you are above the age of 65 years old tax credit can only be identified when the social Security is not high and is only useful when you actually owe the government (Robson, 1997)

Question 8

To qualify for EITC one has to have earned income and this will assist in saving for the future of a child. Saving is crucial and through investment opportunities a family can have the right formula for an effective payment system. Although there are tax reliefs on tuition fees including student contribution a parent should not rely on such means to invest. In the course of saving for education Coverdell Savings Account is an ideal method to save for a child’s future because they are not taxable if you pay higher educational expense. This is also advantageous because the in case of excess payment an individual can claim credit for the excess amount.

The above claim is simplified into a more effective and efficient mode of saving. This is because the plan offers a post educational savings that increase the time for money to grow. A student will have the ability to acquire unsubsidized and subsidized loans in the duration of their studies. This will limit the borrowing expenditure especially considering the 401k if your company will agree. Taking loans is effective but depending on the duration of pay it can affect the family contribution as a whole. A 529 plan is effective if managed a parent might require the whole amount for tuition but this is inappropriate because he can be disqualified from the American Opportunity credit that is worth $2,500.It is thus important not to tap the 529plan until the parent pays a certain amount to reduce the expenses on tuition.

Question 22

She should sign up for the Dependent Care because her income and eligible dependents .This is however difficult due to increase in income for Polly. A dependent Care FSAs provide better tax advantage than a dependent tax credit which requires one to file a federal income tax. For a Dependent Care FSA there is a maximum amount to contribute of $5000 a year for individuals or married couples. The above plan has benefits such as placement fee for a dependent care provider and fees for daycare or adult care facilities.

Question 40

Taxable income-$700,000{500,000+200,000}

US sourced-$500,000

Income Tax Liability-$238,000

Foreign Sourced-$200,000/Foreign income taxed-$45,000==$165,000

Income tax liability-$500,000-$165,000

ITL=$445,000

In the above case the tax is an income tax thus it qualifies for a foreign tax credit. In the above scenario Blue Horizon has accrued income amounting to $200,000 from a foreign country which generally qualifies for a tax credit. In the US one can only claim credit if you paid foreign tax to a foreign country or the mother country such as US.

In assumptions

Income received from EU is $200,000 which has a withholding tax of 20% on interest income but according to tax treaty benefits the withholding rate is 10% if a withholding certificate is produced. Foreign tax qualified will be 10% of $200,000 that is $20,000-=

Thus to identify the tax credit limit

Income tax liability *Taxable income/Total taxable income

${238,000*500,000/700,000} =170,000

The above amount can be claimed thus

Thus income tax liability will be ${238,000-170,000}

=$68, 0000

Reference

Lakomski, G. (1999). Critical theory. In J. P. Keeves and G. Lakomoki (Eds.). Issues in Educational Research. Oxford: Elsevier Science Ltd., 174-82

Robson W (1997) Strategic management and information systems (2nd edition)

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