Question

List the conditions that must be met in order to claim a dependency exemption for qualifying children and qualifying relatives. Briefly explain each one.

Choose one income type and describe in detail what types of income are included in that group. Have you had experience being taxed for this type of inocome?

Two broad categories of taxing authorites and sources of tax law. Explain in detail one example from the Primary category. Be sure to explain the process by which tax law is created in your source.

Choose two forms of tax and provide a detailed of explanation of both. Include a discission of how these taxes impact you.

What are some examples of state and local taxes that impact individuals and businesses?

Answer 1

1. List the conditions that must be met in order to claim a dependency exemption for qualifying children and qualifying relatives. Briefly explain each one.

A dependent may be either a qualifying child or a qualifying relative. IRS applies different tests for determining child as a dependent. The tests for determining relative are applied only when the tests for determining child are not met.

Below conditions need to be met for child and relative as a dependent.

1. Dependent Taxpayer: A taxpayer who may be claimed as a dependent by another taxpayer may not claim anyone as a dependent on his or her own tax return.

2. Joint Return: A married person who files a joint return cannot be claimed as a dependent unless that joint return is filed only to claim a refund of withheld income tax or estimated tax paid.

3. Citizen or Resident: To be claimed as a dependent, a person must be a U.S. citizen, U.S. resident alien, U.S. national, or a resident of Canada or Mexico

Child dependent

Following are the different conditions that must be met for qualifying as a child dependent:-

1.  The child must be the taxpayer’s son, daughter, stepchild, foster child, or a descendant of any of them or;

2. The child must be the taxpayer’s brother, sister, half-brother, half-sister, stepbrother, stepsister, or a descendant of any of them. An adopted child is treated the same as a natural child.

3. Child's age 19 at the end of the tax year and should be younger than the taxpayer.

4. A full-time student under the age of 24 at the end of the year and should be younger than the taxpayer.

Relative dependent

Following are the different conditions that must be met for qualifying as a relative dependent;

1. A child is not considered a taxpayer’s qualifying relative if the child is the taxpayer’s qualifying child or is the qualifying child of another taxpayer.

2. Relative should live as a member of the taxpayer’s household all year.

3. The dependent relative's gross income for the tax year must be less than the personal exemption amount of taxpayer.

2. Choose one income type and describe in detail what types of income are included in that group.

Earned income is the major most important income group from which IRS get a major portion of its tax. Income that is generated by working is known as earned income. Salary or money made from hourly employment is considered earned income.

1. Salary: Fixed income earning from working from working.

2. Professional fees: Fees received for providing a professional service.

3. Profit from small business: Profit earned from the business

4. An outcome of gambling

3. Have you had experience being taxed for this type of income?

I have an experience in paying tax for the salary I earned every month. A salaried person has to pay a certain percentage of the amount as tax. I have been paying this tax since the day I started working in an organization.

4. Two broad categories of taxing authorities and sources of tax law. Explain in detail one example from the Primary category. Be sure to explain the process by which tax law is created in your source.

The United States of America has separate federal, state, and local governments with taxes imposed at each of these levels. Taxes are levied on income, payroll, property, sales, capital gains, dividends, imports, estates, and gifts. The Internal revenue Services (IRS) is responsible for collecting taxes and administering the Internal Revenue Code, the main body of the federal statutory tax law of the United States.

Tax and Trade Bureau is another bureau which regulates and collects taxes on trade and imports of alcohol, tobacco, and firearms within the United States. TTB was created when the Homeland Security Act of 2002 split the Bureau of Alcohol, Tobacco, and Firearms (ATF) into two new organizations with separate functions. The Act transferred ATF and its law enforcement functions from the Department of the Treasury to the Department of Justice.