Sunday, September 8, 2019

Tax accounting Essay Example | Topics and Well Written Essays - 1250 words

Tax accounting - Essay Example The Social Security tax is relative until the taxpayer reaches the maximum level of income. However, when the taxpayers income arrives at the maximum limit, all income earned over the limit is not taxed. That is why social security tax is considered as a regressive tax because lower-income individual has to pay higher taxes than the person earning in excess of the maximum income level. A marginal tax rate is the tax that applies to the taxpayer’s last dollar of taxable income. As the income increases, taxes paid by the taxpayer also increases and each additional dollar of income is taxed at the highest rate applicable to the total income. A taxpayer’s average tax rate is the ratio of the amount of taxes paid to taxable income. It is calculated by dividing the total income taxes paid by your total income. The average tax rate includes taxes paid at all levels of income so it will be less than the marginal rate. The difference between marginal and average tax rates is that the marginal tax rate is the highest rate at which persons are taxed, but average tax rate represents the percentage of the income that goes toward paying taxes. As gross income increases, the increasing marginal tax decreases after-tax net income and resulting, the effective average tax rate increases with the rising income. Sometimes no one offers more than half of the support of an individual. Instead more than one person, who is able to take the exception but for the support test who together provide for more than half of the individual’s support. This being the case any single person who currently provides for more than 10% of the individual’s support but only that person singularly, can claim an exemption for that individual. In order to process this exemption, the individual in question must agree and therefore sign an agreement of exemption for that year. Signed statements and

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