Reflection Paper Chapter 4

Reflection Paper Chapter 4

Reflection Paper 3



Grossincome and inclusion concept

Thischapter aims at explaining the concept of gross income andrealization some tax concepts. It explains who should pay tax and atwhat rates that an individual in each category should pay tax. Thechapter also explains some of the most important concepts such as taxplanning. Tax planning is the strategies that an individual can taketo minimize their tax liability. Unlike tax evasion, tax planning isan acceptable and legal way of minimizing tax payable to the taxauthority (William,Hoffman &amp James, 2010).

Inthe textbook South-Western Federal Tax 2016, Gross income has beendefined as all the tax income of taxpayer regardless of where issourced from. Gross income, therefore, constitute both taxable andnot taxable income. Taxpayers are therefore required to report theirtaxable and non-taxable income while filling the Federal individualtax returns. However, only the income that is not directly earned bythe taxpayer is excluded from the gross income. Such incomes includebequests, gifts, inheritances, accidents insurance proceeds,veterans, etc.

Thegross income is then adjusted to alive at the taxable income. This isachieved by subtracting some allowable deductions including standarddeductions.

Thechapter also addresses the concept of personal and dependencyexemptions with the specific amounts of exemptions in each categoryof taxpayers. Taxpayers are classified in into the followingcategories, married filing tax jointly, married filing taxseparately, single, blind, and children. A child can be charged a taxof up to $0 and must be under the age of 19 years and living with theparents. A tax exemption is also granted to dependents who arerelated to the tax payers and meets the specified qualifications fordependency.


WilliamH. Hoffman, J. and James E. (2010). South-WesternFederal Taxation: Individual Income Taxes, 2016 EditionCENGAGE Learning ISBN: 9781305393301