LESSON 47 Computing Taxes on Individual Assessments You are still employed as a clerk in the Rosedale Tax Collector's office, and as such you will perform the following duties: First, prepare five tax tables for the five tax rates which you found in your tax statement, as follows: (1) A table for the state rate; (2) A table for the county rate; (3) A table for the city rate; (4) A table for the school rate; (5) A table for the total rate. Be sure that each result in each table is exactly right. Solve each item by at least two different methods. Errors must not be allowed to remain or all the rest of your results in this set will be wrong. Second, using the tables for reference, compute the taxes on each total assessed value on Sheet 1 in your Real Estate Assessment Roll, as follows: (1) Find the state tax on each total assessed value. Third, prove this page, as follows: (1) On each line, add horizontally the state tax, the county tax, the city tax, and the school tax to see if this gives the total tax. It is sometimes necessary to add or subtract 1 or 2¢ from some of the items to make these results agree exactly on account of turning the items into dollars and Such minor adjustments should be made cents answers. before attempting to prove the page as a whole. (2) Find the totals of the state tax, the county tax, the city tax, the school tax, and the total tax columns. (3) Add horizontally the totals in the state tax, the county tax, the city tax, and the school tax columns to see if this agrees with the total in the total tax column. (4) Forward the totals from Sheet 1 of the Assessment Roll to Sheet 2. Fourth, make the tax extensions, and prove as above explained for each of the items on Sheet 2 of your Real Estate Assessment Roll. Fifth, using the same tables and methods, make the tax extensions on each sheet of your Personal Property Assessment Roll, and prove. Sixth, submit everything to your teacher for approval and credit. CHAPTER XVII FEDERAL INCOME TAXES LESSON 48 The Revenue Act of 1921 imposes a tax upon the net income, above certain exemptions, of citizens of the United States and upon the net income of all corporations within the United States. Each of these must file a sworn statement called a Federal Income Tax Return, with the Collector of Internal Revenue, certifying the amount of income received. Every citizen should have a knowledge of this subject. Definitions. The Federal Income Tax is a tax upon the net incomes of all citizens whose net income is $1000 if single or $2500 if married and upon the net income of all corporations within the United States. Net income is the difference between the gross income and legal deductions. Gross income includes: 1. Salaries, wages, commissions, etc. 2. Interest on bank deposits, notes, mortgages, and corporation bonds. 3. Income from partnerships, fiduciaries, etc. 4. Rents and royalties. 5. Profits from business or profession. 6. Profit from sale of real estate. 7. Profit from sale of stocks, bonds, etc. 8. Other income. Legal deductions include: 1. Interest paid. 2. Taxes paid, except Federal Income Tax. 3. Losses by fire, storm, etc. 4. Contributions. 5. Bad debts. 6. Other deductions. 7. Exemptions allowed by law: a. For single persons, $1000. b. For married persons, $2500 unless income exceeds $5000, in which case it is $2000. c. For each child or dependent relative, $400. DETERMINING THE TAXABLE NET INCOME The first essential in determining the taxable net income is to prepare a Profit and Loss Statement, showing in detail the profit arising from the purchase and sale of merchandise, expenses incurred in conducting the business, gains from other sources than merchandise sales, and all losses. Accountants follow these principles in finding the taxable net income: 1. Old Inventory + Purchases - New Inventory = Cost of Goods Sold. 2. Sales Cost of Goods Sold=Gross Profit from Trading. 3. Gross Profit from Trading from Trading. Expenses = Net Profit 4. Net Profit from Trading + Income from Other Sources 5. Net Profit - Legal Exemptions+ Profit and Loss Items Not Deductible in Tax Return = Taxable Net Income. PROFIT AND LOSS STATEMENT The following is the Profit and Loss Statement of William H. Thomas, a hardware merchant of #212 E. Water St., Milwaukee, Wis., for the year ending Dec. 31, 1921. Study this form very carefully and learn the accounting principles contained therein: |