Question

In: Accounting

Please answer the following questions. What factors affect taxable income or the difference between gross and...

Please answer the following questions.

What factors affect taxable income or the difference between gross and taxable income?

What are the primary types of taxable income, as defined by the IRS?

In addition to random selections, what are the four most common signals the IRS look for when selecting taxpayers for audits?

What are the five general tax reduction strategies?

Give a brief synopsis of each.

Expert Solution

What factors affect taxable income or the difference between gross and taxable income?

Factors affecting taxable income:

Adjustments
Exemptions
Tax deductions
tax credits

Difference between gross and taxable income.

Gross income means income earned or received by a person during a yearwithout claiming any deductions, exemptions and other adjustments. Taxable income is the income which attracts tax after claiming exemptions, deductions and other adjustments.

Q. What are the primary types of taxable income, as defined by the IRS?

Primary types of taxable income as defined by the IRS are portfolio income, passive income and earned income.

Q. In addition to random selections, what are the four most common signals the IRS look for when selecting taxpayers for audits?

1. Self employment

2. Income over 100k

3. Previously audited

4. Deductions in excess of 44% of income

Q. What are the five general tax reduction strategies?

1. Deferred income

2. Income from capital gains

3. Maximize deductions

4. Deferred income

ekkarill92 answered 1 year ago

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