Tax Accounting - Chapter 1 Exam Test

Tax Accounting - Chapter 1 Exam Test INTRODUCTION TO TAX Who cares about taxes? - Businesses, politicians, individuals What is Tax? - A payment required by a government that is NOT related to any specific benefit or service received from the government. What are the three key components of a Tax? - •Payment required •Payment imposed by a government agency •Payment not tied directly to a benefit received by the taxpayer What is the general purpose of a tax? - It is to fund the operations of the government. What is a Sin Tax? - a tax on items considered undesirable or harmful, such as alcohol or tobacco. What is an Earmarked Tax? - Taxes assessed to fund a specific purpose. What is the formula to calculate Tax? - Tax = Tax Base × Tax Rate What is a Tax Base? - Defines what is taxed ($) (Ex: income) What is a Tax Rate? - Level of taxes imposed on the tax base (%).