ACCT553

WEEK 1 HOMEWORK

Please provide your answer to each Question in the space provided below: When finish submit to drop box.
Chapter 1 (5 pts)
1. Briefly discuss the purpose of the sixteenth amendment.
The Sixteenth Amendment was ratified on February 25, 1913. It gave Congress the power to directly or indirectly tax all income.

Chapter 2 (5 pts)
2. Explain the two “safe Harbors” available to an individual taxpayer to avoid a penalty for underpayment of estimated tax.
1. The first safe harbor is based on your total tax in the current year. If your payments equal or exceed 90% of your tax in the current year, you can escape a penalty.

2. The second safe harbor is based on your total tax in the immediately preceding tax year. If your payments equal or exceed 100% (110% if your prior years adjusted gross income was more than $150,000, or $75,000 if married filing separately) of your prior year's tax, you can escape a penalty.

Chapter 3 (5 pts)
3. Explain the distinction between an “above the line:” deduction (i.e. FOR AGI) and a below the line deduction (i.e. FROM AGI). Which one is more valuable?
An above-the-line deduction is a deduction that the Internal Revenue Service allows a taxpayer to subtract from his or her gross income in arriving at "adjusted gross income" for the taxable year. These deductions are set forth in Internal Revenue Code Section 62. Below the line” deductions are those that you will subtract from your adjusted gross income