Question

9. Explain what is meant by regressive tax. Why is the social security tax considered a regressive tax?

10. Define and compare these terms: average tax rate and marginal tax rate.

3. What qualifications are necessary to file as head of household?

6. What are the three general tests that a qualifying person must meet to be a dependent of the taxpayer?

9. What are the four specific tests necessary to be a qualifying relative of the taxpayer?

10. What is a multiple support agreement, and what is its purpose?

6. What is the definition of tax base, and how does it affect the amount of tax levied?

9. Explain what is meant by regressive tax. Why is the social security tax considered a regressive tax?

10. Define and compare these terms: average tax rate and marginal tax rate.

3. What qualifications are necessary to file as head of household?

6. What are the three general tests that a qualifying person must meet to be a dependent of the taxpayer?

9. What are the four specific tests necessary to be a qualifying relative of the taxpayer?

10. What is a multiple support agreement, and what is its purpose?

Please provide new answers and also SHOW THE HOW THE PROBLEM WAS SOLVED

Answer 1

9.regressive tax :

Under this system of taxation, the tax rate diminishes as the taxable amount increases. In other words, there is an inverse relationship between the tax rate and taxable income. The rate of taxation decreases as the income of taxpayers increases.

Social Security is a regressive tax. Social security tax obligations are capped at a certain level of income. This means that once an individual reaches that income threshold , any wages he earns above that are not subject to the bite. In other words, the annual maximum that one pays in Social Security tax is "capped" at $7,979 (in 2018) – whether one earns $128,701 or $300,00 or $1 million. Because of this cap, higher-income employees effectively pay a lower proportion of their overall income into the Social Security system than lower-income employees do.

10.average tax rate Vs marginal tax rate :

The average tax rate is the total amount of tax divided by total income.Average tax rates are a measure of a household’s tax burden; that is, how taxes affect the household’s ability to consume today or (through saving) in the future. Marginal rates measure the degree to which taxes affect household (or business) economic incentives such as whether to work more, save more, accept more risk in investment portfolios, or change what they buy. Higher marginal rates reduce incentives to engage in a particular activity (such as work) or (in the case of sales taxes) consume a particular item.

The marginal tax rate is the rate of tax income earners incur on each additional dollar of income. As the marginal tax rate increases, the taxpayer ends up with less money per dollar earned than he or she had retained on previous earned dollars. Tax systems employing marginal tax rates apply different tax rates to different levels of income; as income rises, it is taxed at a higher rate. It is important to note, however, the income is not all taxed at one rate but at many rates as it moves across the marginal tax rate schedule.

The goal of the marginal rate is to place the burden of supporting government on the shoulders of taxpayers more financially able to do so, versus spreading the burden evenly to the detriment of taxpayers not able to afford any more, while attempting to balance the problems of a straight progressive rate.

3.qualifications are necessary to file as head of household :

1. The taxpayer must be unmarried at the end of the year

2. Be a US citizen or resident throughout the year

3. Not be a widow

4. Maintain a household that is the principal place of abode of a qualifying person for more than half a year.

5. Pay for more than half of the cost for keeping up a home

6. What are the three general tests that a qualifying person must meet to be a dependent of the taxpayer?

1. Dependent taxpayer test

2. Joint return test

3, Citizen or resident test

6. Tests (dependents) :

Citizen or Resident Test - A child is a U.S. citizens or national, or residents of the US Canada or Mexico.

Joint Return Test - Taxpayers will meet this test for persons who are:

• married but do not file a joint return, or
• married and file a joint return only to claim a refund of withheld tax; neither would have a tax liability on separate returns; neither the dependent nor spouse can claim personal exemptions on their joint return.

Age or Student Test - The child is under the age of 19 years of age at the end of the year, or under the age of 24 years of age at the end of the year and is a full-time student for at least 5 months. This test does not apply to a child who is permanently and totally disable at any time during the year...

Support Test - The child will meet this test if the taxpayer provided more than half of a person's total support for the entire year.

9.Tests(relative ):

a. The person cannot be your qualifying child or the qualifying child of any other taxpayer.

b. The person must either be related to you in one of the ways listed under Relatives who do not have to live with you.

c. The person's gross income for the year must be less then specifed amount.

d. You must provide more than half of the person's total support for the year.

10. Multiple support agreement :

A multiple support agreement is a document which is signed by two or more taxpayers who provide the financial support for a single dependent. This agreement allows several persons who jointly support a dependent to take turns claiming this person as a dependent on their tax returns. Multiple support agreements are necessary in cases where several children contribute to the support of an elderly parent.