income tax case study with solution

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Top tax cases practitioners should know

• IRS Practice & Procedure

Pinning down whether an activity is a trade or business for tax purposes, whether a tax penalty should be waived for reasonable cause, or the eternal question of when income is recognized for tax purposes — these issues arise often, and CPAs can benefit from being familiar with the judicial doctrines governing them.

That’s the premise of “Top Ten Federal Tax Cases of All Time,” a presentation by Annette Nellen, Esq., CPA, CGMA, during the AICPA & CIMA ENGAGE 2021 conference. Nellen, a professor at San José State University and director of its Master of Science in Taxation program, is a past chair of the AICPA Tax Executive Committee. Her discussion takes place on July 28, beginning at 3:30 p.m. PDT (6:30 EDT).

Although the issues that will be discussed carry a long legacy of controversy, the discussion is meant to be topically relevant to tax practices’ common concerns and help resolve uncertainties, Nellen said in an interview. Accordingly, her talk won’t focus exclusively on historic bedrock cases or on the cases most often cited in subsequent opinions, although those will both be considerations.

“I want to make this as useful as possible,” Nellen said. “In talking about the most important cases to be aware of in practice today, the focus I want to take is, which are good cases to have in your back pocket that might be able to help solve an issue.”

Often, the broad principles of tax law are best appreciated by their contours around taxpayers’ facts. For example, determining when a trade or business begins might hinge on forces beyond the taxpayer’s control. Certainly, the COVID-19 pandemic has brought such concerns to the fore, she observed.

“One question that has come up a couple of times in the last six months was, a business had planned to put some equipment in service but then got closed down by government order. Could they still take depreciation on it?

“I guess you have to have been in practice or in the tax field for over 30 years, and having a relatively good memory, I can remember, oh, that’s like the Sears Oil case [ Sears Oil Co., Inc. , 359 F.2d 191 (2d Cir. 1966)], where an oil barge was stuck in the ice. Had it been placed in service while it was stuck in the ice?”

To that question, the Second Circuit answered, yes, the taxpayer’s depreciation period for its new barge began when it was ready and available for use in the taxpayer’s business, months before the icy New York state canal in which it had been trapped thawed, releasing it for its first service. In so holding, the court drew on several earlier cases and provided precedent for many more after — the case is cited in 35 subsequent federal cases and four IRS revenue rulings, according to Thomson Reuters’s Citator 2nd Series .

Other cases may not be frequently cited but nonetheless will figure in Nellen’s top 10 because they treat certain commonplace practice issues arising under memorable circumstances.

“One in that category is Woodsum [136 T.C. 585 (2011)]. The taxpayer was a very high-income individual; he had over 160 information return forms,” Nellen said.

The taxpayer’s tax preparer omitted only one of those forms from the taxpayer’s return for 2006; however, that Form 1099-MISC, Miscellaneous Income , reported nearly $3.4 million in income. The omission resulted in an accuracy-related penalty of more than $104,000, which the taxpayer and spouse contested on claimed grounds of reasonable cause and good faith by showing they relied on professional advice that their return was complete.

“But instead, the court said, ‘You're responsible for what’s on your return,’” Nellen said, adding that preparers in turn owe it to their clients to allow sufficient time to review their return. “So it’s to remind practitioners to allow a minimum, I think, of a day for the taxpayer to look at it. And for them to remind clients they’re responsible for what’s on that return.”

Some historic cases, by the fundamental nature of the tax issue they settled, are cited frequently, sometimes in the most novel of contexts. One such is Glenshaw Glass Co. , 348 U.S. 426 (1955) (over 1,000 entries in Citator 2nd ), which is invoked for the principle that income recognition for tax purposes hinges on whether and when taxpayers have “accessions to wealth, clearly realized, and over which the taxpayers have complete dominion.” Nellen noted Glenshaw Glass had figured recently in Chief Counsel Advice 202114020, answering whether a taxpayer who received bitcoin cash as the result of a “hard fork” thereby had gross income.

Sometimes, tax cases can serve as a help when IRS guidance might lead to a less than optimal outcome, Nellen said.

“One I come across frequently is where some practitioners think a rental is not a trade or business for Sec. 199A purposes unless you use that safe harbor in Rev. Proc. 2019-38,” she said. “But there’s a whole body of case law that lays out when a rental could be a trade or business.” (And the revenue procedure itself states that an enterprise that fails to satisfy the safe-harbor requirements might otherwise meet the definition of a trade or business in Regs. Sec. 1.199A-1(b)(14).)

One such recent case is Keefe , 966 F.3d 107 (2d Cir. 2020), aff’g T.C. Memo. 2018-28. In analyzing why the taxpayers did not, as they claimed, engage in a trade or business of renting their historic mansion in Newport, R.I. (and therefore could not claim an ordinary loss), the Second Circuit “laid out very well” the tests taxpayers must meet, Nellen said.

The topics covered in the presentation may indeed be varied, but a touchstone will be preventing difficulties through awareness of both familiar case holdings and others with a lower profile but sound applicability, Nellen said.

“It’s looking at some key cases that can come up, to remind you of how to avoid a problem,” she said.

AICPA & CIMA ENGAGE 2021 , the premier event for accounting and finance professionals, will be a hybrid event this year. Join us at the Aria Resort and Casino in Las Vegas or online, July 26–29, for keynotes and sessions on accounting and auditing; tax; technology; leadership; personal financial planning; diversity, equity, and inclusion; and more.

— Paul Bonner ( [email protected] ) is a JofA senior editor.

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• Publication 4491 Refund and Amount of Tax Owed
• Intake/Interview & Quality Review Sheet
• Refund and Amount of Tax Owed Job Aids from Publication 4012
• Case Study 1: Errors that Affect the Refund
• Case Study 1: Offsets
• Case Study 2: Offsets
• Skills Warm Up: Direct Deposit
• Case Study 1: Purchasing U.S. Savings Bonds
• Skills Warm Up: U.S. Savings Bonds
• Skills Warm Up: Balance Due
• Case Study 1: Balance Due
• Case Study 1: Estimated Tax Penalty
• Skills Warm Up: Estimated Tax Penalty
• Case Study 1: Form W-4
• Case Study 1: Estimated Tax Payments
• Out of Scope Situations for VITA/TCE
• Certification Warm Up: Question 1 of 2
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Case Study #7: The Earned Income Tax Credit

Download (PDF) Fiscal Fact No. 385: Case Study #7: The Earned Income Tax Credit

These results are part of an eleven-part series, The Economics of the Blank Slate , created to discuss the economic effects of repealing various individual tax A tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. expenditures. In these reports, Tax Foundation economists use our macroeconomic model to answer two questions lawmakers are considering:

• What effect does eliminating these expenditures have on GDP, jobs, and federal revenue?
• What would be the effect on GDP, jobs, and federal revenue if the static savings were used to finance tax cuts on a revenue neutral basis?

For an overview of the project, click here . For links to articles from the rest of the series, click here .

Key Points:

Eliminating the EITC would:

• Increase tax revenues by $56 billion on a static basis;
• Increase GDP by $34 billion; and
• Produce slightly more revenues ($64 billion) on a dynamic basis;
• Increase employment by the equivalent of approximately 274,000 full-time workers; and
• Produce little change in hourly wages.

Eliminating the EITC and trading the static revenue gains for individual rate cuts would:

• Allow for an across-the-board rate cut of 5.7 percent;
• Boost GDP by $125 billion per year; and
• Boost federal revenues by $29 billion on a dynamic basis;
• Increase employment by the equivalent of approximately 783,000 full-time workers; and
• Increase hourly wages by 0.1 percent.

The Earned Income Tax Credit A tax credit is a provision that reduces a taxpayer’s final tax bill, dollar-for-dollar. A tax credit differs from deductions and exemptions, which reduce taxable income, rather than the taxpayer’s tax bill directly. (EITC) was introduced into the tax system in 1975 as a small tax subsidy for the working poor with children. It has been expanded several times and now includes benefits for low-income earners without children, with one child, with two children, and with three or more children. The credit is refundable; after the credit has reduced a filer's tax liability to zero, the filer is eligible to receive the remainder as a check from the government. The refundable part is technically classified as an outlay in federal budget documents, but people determine the entire credit on their tax forms. The JCT notes that its measure of the tax expenditure Tax expenditures are a departure from the “normal” tax code that lower the tax burden of individuals or businesses, through an exemption , deduction , credit , or preferential rate. Expenditures can result in significant revenue losses to the government and include provisions such as the earned income tax credit ( EITC ), child tax credit ( CTC ), deduction for employer health-care contributions, and tax-advantaged savings plans. includes both the nonrefundable and (much larger) refundable portions.

The EITC has three phases. In the first, each added dollar of earned income receives a federal matching credit, which sharply lowers the marginal tax rate The marginal tax rate is the amount of additional tax paid for every additional dollar earned as income. The average tax rate is the total tax paid divided by total income earned. A 10 percent marginal tax rate means that 10 cents of every next dollar earned would be taken as tax. s of filers whose incomes are within that range. In the second phase, extra earned income has no effect on the credit's size and no effect on marginal tax rates for filers whose incomes are on the plateau. In the third phase, extra income reduces the credit, which means that the phase-out sharply raises the marginal tax rates of filers whose incomes are within the phase-out range.

For example, in 2012, a single parent with three or more children received a 45 percent match on each dollar of earned income from zero to $13,090 (a marginal tax rate, or tax subsidy, of minus 45 percent), a constant EITC of $5,891 if earned income was in the range $13,090 to $17,090 (no marginal tax rate effect), and lost the credit at a rate of 21.06 cents for each extra dollar of income over the range $17,090-$45,060 (an effective marginal tax rate spike of 21.06 percent). The phase-in powerfully encourages people with very low incomes to work. The phase-out strongly discourages the larger number of people with somewhat higher incomes from working more. It is an empirical question what the net effect on the nation's labor supply is.

When the Tax Foundation's Taxes and Growth model is run under the conventional static revenue estimation assumption that all macroeconomic aggregates are fixed, it appears that eliminating the EITC would lift federal revenue by $56 billion. (See Chart 1.) This is close to the Joint Committee on Taxation's estimate that the EITC was a $59.0 billion tax expenditure in 2012.

When our model is rerun under the dynamic assumption that marginal tax rate changes alter aggregate investment, employment, and economic activity, the model estimates that the negative impact of the phase-out depresses the labor supply by more than the phase-in bolsters the labor supply. Once the economy has adjusted, GDP would be $34 billion higher without the EITC. Because of the growth effect, the model further estimates that the dynamic revenue increase, $64 billion, would exceed the static estimate.

The growth could be enhanced if the added revenue financed a cut in marginal tax rates. Chart 2, below, shows the outcome if the size of the rate cut were geared to the conventional static revenue estimate. Individual income tax An individual income tax (or personal income tax) is levied on the wages, salaries, investments, or other forms of income an individual or household earns. The U.S. imposes a progressive income tax where rates increase with income. The Federal Income Tax was established in 1913 with the ratification of the 16th Amendment . Though barely 100 years old, individual income taxes are the largest source of tax revenue in the U.S. rates could be dropped 5.7 percent (for instance, the current 25 percent rate would become 23.6 percent). The model estimates that as a result of trading the EITC for an across-the-board tax rate reduction, GDP would be a net $125 billion larger than otherwise and federal revenue would be a net $29 billion higher.

We believe that, on net, the EITC probably reduces total hours worked as people who are already in the labor force react adversely to the phase-out. However, several studies have found that the EITC encourages some people to enter the work force who otherwise would not at a rate greater than this model assumes. On the other hand, a second effect outside the model cuts in the other direction. A long series of studies by government watchdog agencies have found a considerable amount of EITC fraud, with over 20 percent of payments being improper. [1] In cases where people have filed tax returns claiming phony work and phantom earned income in order to receive real EITC payments, the credit could be removed with no reduction in work effort in any area except for tax fraud investigation.

Finally, we determined the impact of these scenarios on employment and wages. We found that eliminating the EITC would increase employment by the equivalent of about 274,000 full-time workers with little change in the hourly wage. With the rate cut offset, employment would increase by the equivalent of about 783,000 full-time workers and hourly wages would rise by 0.1 percent.

[1] See , e.g. , Government Accountability Office, Beryl H. Davis, Improper Payments: Remaining Challenges and Strategies for Governmentwide Reduction Efforts , GAO-12-573T, Mar. 28, 2012, http://www.gao.gov/assets/590/589681.pdf .

• Kreyòl Ayisyen

Virtual tax preparation case studies

Welcome! You may be a tax preparer working with the public. If you are offering some or all of your tax preparation services virtually, the case studies below may provide you some good ideas of how to adapt and best serve your tax preparation customers.

Check out the creative ways some Volunteer Income Tax Assistance (VITA) providers have utilized their volunteers, leveraged social media, and offered additional services to their VITA customers.

Case studies

CA$H Maine has been a leader in using tax time to communicate the importance of saving and to provide saving options. At tax sites, staff in the role of opportunity guides help taxpayers save and take other actions that improve their financial well-being. They use information collected at intake to engage taxpayers in conversations about their financial challenges and goals and how saving a portion of their tax refund could help. This follows one of our Tax Time Savings Initiative’s promising practices for increasing saving at tax time : dedicate staff or volunteers to encourage saving.

CA$H Maine is a statewide collaboration of 10 local coalitions from across the state, made up of 50 nonprofit and for-profit partners. Since 2003, CA$H Maine has provided free tax return preparation services, typically serving around 4,500 filers during tax season.

In past years, CA$H Maine used a train-the-trainer model to prepare opportunity guide volunteers. Due to the heavy winters in Maine, many local organizations have already developed technologies and procedures that enabled them to work remotely, and CA$H Maine was able to use the University of Maine’s remote training platform to train leaders from each local coalition. Those local leaders, in turn, trained their opportunity guides.

CA$H Maine’s challenges this year were two-fold. First, the train-the-trainer model for opportunity guides had proven burdensome for local coalition leaders, given their other responsibilities, and it also led to training inconsistencies. Second, midway through the 2020 tax season, the COVID-19 pandemic limited the ability to conduct in-person trainings and forced the organization to rely on virtual technology for both service delivery and program management.

CA$H Maine’s leadership decided to deliver a single statewide opportunity guide volunteer training via the remote training platform for 2021.

CA$H Maine offered the two-hour training at five different times in January. Because no one signed up for the Saturday offering, just four sessions were held during both daytime and evening hours. Attendance ranged from four to 27, with a total of 55 participants. Those who couldn’t attend a session live could access a recording.

Although the two-hour session length seemed daunting, the sessions moved quickly and smoothly. Training participants viewed the experience positively, especially the discussions of how to use sample conversation starters to talk with filers about savings.

Local coalition coordinators also liked the unified approach. One commented that a consistent statewide training for the opportunity guide volunteers provided updates and new information in an environment that helped them make the best use of their time as volunteers, as well as instilled confidence in their role and provided context by sharing historical information about CA$H Maine.

Looking Forward

CA$H Maine expects to continue the virtual opportunity guide and return preparer trainings beyond the pandemic. One potential improvement the coalition coordinator identified was trying to move some of the presentation content into handouts or online resources to open up time for conversations among volunteers in virtual breakout rooms.

CA$H Maine’s statewide coordinator cited the principal benefits from her perspective: “It broadened access to training expertise, promoted consistency that maximizes the likelihood of successful savings conversations, and gave local volunteers the opportunity to see and experience the program’s statewide reach.”

“And it sure beats battling snow plows,” she added.

Money Power Day® is CASH Campaign of Maryland’s (CASH) annual and free financial fitness fair that usually draws 800 to 1,000 attendees. The fair offers a combination of workshops, an exhibitor hall (for non-profit organizations, businesses, and government agencies), and financial services including credit counseling, legal services, and tax-return preparation. This implements one of our promising practices for increasing saving at tax time : hold special events to encourage saving.

The CASH Campaign of Maryland promotes economic advancement for low-to-moderate income individuals and families in Baltimore and across Maryland. Its strategies include free tax-return preparation services, financial education and coaching, and connections to high-quality financial services and products. CASH serves approximately 20,000 taxpayers annually.

The 15th annual Money Power Day® in 2020 would normally have occurred in late March or early April, but CASH had to postpone it due to the COVID-19 pandemic lockdown. Knowing they couldn’t replicate an event that relied on people gathering in person, they needed a new plan.

CASH Campaign of Maryland had experienced virtual conferences and seen the demand for virtual services. To make the event fit the new approach’s capabilities, they prioritized access to financial education services, exhibitors, and a virtual financial planning zone.

The virtual Money Power Day® was held on October 17, 2020, with 57 exhibitors and 607 registered attendees. The day included several workshops, which were pre-recorded, with 40 minutes of content and 20 minutes for questions and answers via a live chat box.

A total of 235 people participated on the day of the event, and 164 of those attended one or more of the financial education workshops. The most-attended workshop, with 96 participants, was Credit Check-Up. Follow-up e-mails focused on those who registered but didn’t attend. Anyone who had registered was able to access the event’s content online for 30 days after the event.

CASH Campaign’s staff was happy with the online conferencing platform they chose. Exhibitors had a range of options: text with links, a chat box, pre-recorded videos, live video conferencing, and scheduled one-on-one video chats. Some stayed all day, and the platform featured red and green lights to show if a “booth” was currently staffed.

Staff knew the format would present obstacles in serving the most vulnerable populations. This was certainly true for community members without smartphones or with limited access to or comfort with technology.

A positive aspect of attendance was participation by residents from 21 of Maryland’s 24 counties, underscoring the role of virtual technologies in reaching widespread regions. Money Power Day® is typically held at a high school in Baltimore.

Applying the lessons learned from the 2020 event, CASH Campaign of Maryland is increasing their use of social media platforms for distanced participation in its service offerings, including live-streaming content. Maryland CASH Academy has also increased its online financial education. CASH is also looking for ways to provide content through other organizations’ virtual events.

CASH Campaign’s director of financial capability reflected: “It was a really great event. While we don’t see ourselves trying to do another fully virtual financial fair, we’ve learned some new ways of doing things that we’ll be taking forward beyond the pandemic.”

South Texas’s cdcb | come dream. come build (cdcb) operates a Volunteer Income Tax Assistance (VITA) program that typically prepares returns for more than 600 families each year. The organization also participates in the CFPB’s Tax-Time Savings Initiative to promote the use of tax returns to build savings and financial stability.

cdcb (formerly Community Development Corporation of Brownsville) provides safe, sanitary affordable housing to residents of South Texas. Since 2009, cdcb has provided affordable housing for over 1,600 families and educated 10,000 additional families with financial and housing counseling. Its financial security program provides access to financial services including free tax return preparation and opportunities to save.

cdcb partners with GetYourRefund, the national program of Code for America that provides organizations that operate VITA sites with tools for preparing returns virtually. cdcb provides its virtual services in both Spanish and English.

In a socially distanced world, virtual VITA creates opportunities, but it can also limit tax preparers’ opportunities to talk about the importance of saving refunds. For example, cdcb found that conversations with taxpayers were limited to the very end of the virtual VITA process when they reviewed tax returns together. “And at that point, they want to get off the phone quickly, making it much more challenging than meeting in person,” reflected cdcb’s VITA program manager.

To reach taxpayers at more receptive moments, social media provided a valuable alternative communication channel. Cdcb regularly posted short videos to provide information on the 2021 tax season, including the new process for preparing online returns, economic stimulus payments, and the extension of the filing season in Texas due to winter storms.

Digital marketing strategies expanded the reach of the program, which typically has just one paid staff member and two unpaid volunteers. The staff has a considerable amount of information to convey, but this was especially true in 2021. Social media provided a channel to reach new audiences and to provide timely tax and financial information to cdcb’s followers.

Social media will continue to serve as an important resource to communicate with those they serve. Posting short videos can remind taxpayers about the opportunity to use their tax return to save some of their refund, reinforcing one of our promising practices for increasing saving at tax time : communicate with taxpayers about saving before they come to the tax site.

Many tax programs rely on the interaction between taxpayers and return preparers to promote saving at tax time. The Boston Tax Help Coalition and CA$H Maine also use dedicated savings volunteers—called financial guides and opportunity guides, respectively—who have been present at tax sites to assist with savings and other financial capability interventions.

CA$H Maine is a statewide collaboration of ten coalitions, comprised of 50 non- and for-profit partners, working together to help empower Maine individuals and families to achieve long-term financial stability.

Boston Tax Help Coalition is a partnership of nonprofits, businesses, and community organizations that has been promoting the economic independence of working individuals and families since 2001.

CA$H Maine opportunity guides are trained to have extended conversations with taxpayers. They make referrals to local saving opportunities, such as New Ventures Maine’s Rainy Day Savings Account program. For several years, opportunity guides have also provided the Scan and Go drop-off option at tax sites and the offices of local community partners.

Boston Tax Help’s financial guides provide taxpayers with one of the most extensive financial well-being consultations in the VITA field, administering the Financial Check-Up to screen taxpayers for various financial challenges. The Financial Check-Up includes a credit review and is an integral part of the Boston Builds Credit campaign. Financial guides have traditionally been an integrated component of in-person tax services.

In response to the COVID-19 pandemic, VITA programs dramatically shifted operations to “Virtual VITA,” a term the IRS uses to describe both fully virtual service delivery, where the taxpayer is not physically present at any point and transmits documents electronically, and drop-off, where taxpayers deliver documents to a tax program location but are not present when returns are prepared. Virtual VITA eliminates face-to-face interactions, but it can often reduce communication with taxpayers.

For example, taxpayers using Virtual VITA don’t always know which documents they need to provide and often struggle with uploading and transferring files. The volunteer preparing the return can have difficulty reaching the taxpayer for missing information and obtaining additional information can create delays and burdens for the taxpayers.

Through our Tax-Time Savings initiative, CA$H Maine and Boston Tax Help were in regular dialogue about how to use their respective savings volunteer programs to address the service delivery challenges created by COVID-19.

CA$H Maine built on its opportunity guides’ experience with savings outreach as part of Scan and Go drop-off tax assistance. This year they expanded their role to deliver both saving interventions and intake assistance through video conferences or over the phone. Boston Tax Help’s financial guides began offering the Financial Check-Up via video conference, over the phone, and at drop-off locations. They also assisted drop-off taxpayers with intake and virtual filers with tax document uploads.

Boston Tax Help and CA$H Maine found that their dedicated savings volunteers could successfully promote savings at drop-off, over the phone, or by video conference, but the pandemic did create unique challenges. The rapid expansion of drop-offs and virtual return preparations forced volunteers to make things work on the fly, and as a result, savings volunteers weren’t always available at intake or able to consistently engage about savings.

Even with CA$H Maine’s previous success using opportunity guides at drop-off sites, engaging taxpayers about saving proved extremely difficult. The conversations were less effective at a six-foot distance wearing masks, and there was less time for those conversations. Even when taxpayers were allowed in facilities, there were no large waiting areas and intake needed to be completed quickly. CA$H Maine offered taxpayers, who dropped off tax information, the option of discussing savings by phone but few took advantage of that opportunity.

Savings volunteers were able to improve the intake process by working with taxpayers to provide complete information. This could be a challenge, however, when taxpayers had more complex circumstances, even when the savings volunteers were also certified as return preparers, and tax law changes in December and March also exacerbated intake challenges. Many savings volunteers completed training before these laws were enacted and had to quickly adjust to the changes. As intake then took more time, it was harder to be engaged around the importance of saving.

Both organizations learned from their dedicated savings volunteer programs during the challenging 2021 filing season. Although savings volunteers didn’t achieve all of their objectives, using them at intake proved it could be effective in engaging clients on both return preparation and savings promotion. Having savings volunteers work remotely also opens up opportunities to utilize them in new ways. For example, it may help expand services, like the Financial Check-Up, beyond the tax site. Initiating intake and savings outreach over video or phone before taxpayers arrive at a tax site can also facilitate a more effective in-person engagement around the importance of saving.

Both CA$H Maine and Boston Tax Help are committed to continuing to use savings volunteers in the future with Virtual VITA for intake and for in-person tax assistance services. Because Virtual VITA requires more time, the ratio of savings volunteers to tax preparers may need to increase to ensure sufficient time for savings interactions.

The City of Boston offers a wide array of services that can help people recover from economic hardship. Residents need a quick and convenient way to assess their financial needs and get referrals to available resources. The Boston Tax Help Coalition has worked for years to provide the Financial Check-Up, an interview that screens taxpayers for various financial challenges, at its Volunteer Income Tax Assistance (VITA) sites. An integral part of the Boston Builds Credit campaign, the check-up serves as a comprehensive version of the kinds of tools VITA programs use to help taxpayers improve their financial well-being, especially those who are not typically in contact with social service networks.

The Financial Check-Up is a pre-filing interview conducted by Boston Tax Help volunteers serving as financial guides. The check-up form is a set of tick boxes that help guide the interview and track outcomes, and the data from the form is generally entered directly into a Customer Relationship Management System. Financial guides discuss options for saving at tax time, and they make referrals to other supporting services, such as legal, debt management, immigration, housing, health care, and employment. Guides can also request and review credit reports and recommend steps to build positive credit histories, improve credit scores, and improve economic well-being. The Financial Check-Up has helped thousands of Bostonians improve their financial situation at tax time.

The COVID-19 pandemic exacerbated economic disparities in the Boston area and highlighted the need for access to services and opportunities that empower residents and make savings possible. Many residents, who had never been unemployed, found themselves unable to work to do COVID restrictions or the related economic recession, and in Boston and other cities with high housing costs, a sudden loss of income can be particularly devastating.

The pandemic shift to Virtual VITA, which allowed taxpayers to not be physically present at the tax site, dramatically reduced communication between return preparers and taxpayers. The Financial Check-Up had almost always been conducted in person, and the pandemic disrupted not only tax assistance but also this assessment and referral tool.

Boston Tax Help quickly created a financial check-up process via phone or video conference. This included establishing a virtual Private Branch Exchange (PBX) phone system, so financial guides could conduct the Financial Check-Up from anywhere without sharing their personal telephone numbers. Because social distancing required an enhanced process at intake, financial guides augmented the Financial Check-Up to include an assessment of taxpayer qualification for VITA services and the sufficiency of the documentation needed for return preparation.

Boston Tax Help successfully delivered the Financial Check-Ups remotely. The augmented process to encompass intake also helped ensure that return preparers had all the required documents. Although Boston Tax Help overcame many challenges and completed several hundred Financial Check-Ups, it fell short of its initial goal of 1,000 financial assessments.

The rapid expansion of Virtual VITA proved to be a capacity challenge for the financial guides. Tax law changes during the 2021 filing season required a more extensive intake interview, forcing several process changes. The constant adjustments implemented as a result of the tax law changes caused tax-site coordinators to adapt in order to keep return preparation systems working effectively. This often limited the ability to deliver the assessment.

Completing the Financial Check-Up by phone or video conference opens new possibilities. Because it can now be done from anywhere or at any time, it can be a viable stand-alone service or one that complements other social service programs offered by coalition members. In the process, financial guides can also deliver other interventions that encourage savings. Equipped with Virtual PBX, guides can also serve as the first point of contact to respond to taxpayer inquiries, helping tax sites to follow up quickly with taxpayers having filing issues. Foreseeing increased service demands, Boston Tax Help plans to increase the number of available financial guides.

Wayne Metro's Volunteer Income Tax Assistance (VITA) program has a long history of encouraging taxpayers to save a portion of their tax refunds. The organization has used a mix of incentives to encourage tax-time saving, including a SaveYourRefund sweepstakes and prepaid gift cards for taxpayers, which is one of our promising practice for increasing saving at tax time : offering saving options more than once at the tax site.

Wayne Metropolitan Community Action Agency (Wayne Metro) is a 501(c)(3) non-profit organization serving approximately 35,000 low-and moderate-income residents throughout Wayne County, Michigan. Wayne Metro empowers people and communities to be strong, healthy, and thriving in its pursuit to eliminate poverty.

With the COVID-19 pandemic, Wayne Metro had to switch from its traditional in-person model to a combination of fully virtual tax preparation, where the taxpayer is never physically present at the tax site, as well as drive-up/drop-off assistance. This strategy kept taxpayers, volunteers, and staff members safe, but it dramatically reduced interaction between taxpayers and VITA volunteers. This eliminated many opportunities to offer savings options, including at the critical moment when taxpayers enter direct deposit information into their tax returns and could allocate some of their refund to savings. As a result, Wayne Metro needed to redefine what ‘multiple offers to save’ meant in this new service model.

Wayne Metro identified two critical opportunities within its Virtual VITA process to encourage savings and promote their saving incentives. The first opportunity was the intake appointment, when staff or volunteers could talk with taxpayers about the amount they wanted to save and the special incentives available. The second was when staff and volunteers review the completed tax returns with taxpayers to ensure accuracy. Wayne Metro's seized those opportunities to share information about savings incentives and ask whether taxpayers wanted to split their refunds. The volunteer return preparers, who were trained on the importance of savings at tax time and the program's savings incentives, were also prepared to take advantage of any other opportunities to encourage savings if they had any communication with taxpayers.

Despite the challenges of the pandemic and the limited opportunities for taxpayers and preparers to communicate, Wayne Metro helped taxpayers maintained the same level of savings in the 2021 filing season as they had in prior tax seasons. The program identified six reasons for this success:

• Establishing taxpayer expectations around saving. Based on their experiences in previous years, returning customers expected to be offered savings incentives. They planned to save so they could again receive those rewards.
• Forwarding direct deposit instructions to return preparers. At intake, taxpayers elected to save a specific amount and provided their direct deposit information so preparers already knew what portion of the refund to direct to savings.
• If the taxpayer had used Form 8888 the year before to split direct deposits, suggest saving the same amount this year.
• If the taxpayer claimed children as dependents and could anticipate a larger refund, but had not previously used Form 8888, suggest saving $500.
• If the taxpayer didn’t claim children and could anticipate a smaller refund, suggesting $50.
• Reassessing at quality review. Taxpayers who wanted to postpone a savings decision until knowing the size of their refund would learn the amount and decide whether to use Form 8888. Those who had decided at intake to save could adjust the allocation if the refund was smaller or larger than anticipated. Knowing there would be an opportunity to change their mind before the return was filed made taxpayers more comfortable making a saving plan at intake.
• Training all volunteers on tax-time savings. All volunteers received training on the benefits of saving and Wayne Metro's savings incentives. Even though the pandemic li4mited direct conversations between preparers and taxpayers, the return preparers understood the savings options and could engage taxpayers when opportunities arose.
• Offering an incentive. A $30 gift card for saving is a proven motivator. Wayne Metro secured private funding from financial institution partners to provide gift cards, and at the close of the reporting period, 150 gift cards were issued to savers.

Intake and review will remain critical moments to encourage tax-time savings, even as more tax assistance is delivered in person. The lessons learned during the pandemic will help leverage those moments. In addition, as in-person assistance resumes and Virtual VITA methods evolve, the 2021 experience will enhance the quality of increased direct communications between return preparers and taxpayers.

The Prince George’s Community College (PGCC) Volunteer Income Tax Assistance (VITA) program is a reliable source of quality and free tax assistance. During the COVID-19 pandemic, the program needed to find a solution for operating safely in a socially distanced environment. Most VITA programs switched to Virtual VITA, providing fully virtual services, in which the taxpayer weren’t required to be present, and drop-off locations were provided for delivering documents.

The Financial Empowerment Center at Prince George’s Community College believes a strong local economy and financially stable households benefit the entire community. PGCC’s expert volunteers provide financial coaching, financial workshops, tax preparation, small business coaching, and credit improvement solutions.

Although Virtual VITA was a viable option for many programs, PGCC VITA had several concerns. Taxpayers sometimes didn’t know what documents they needed to provide and often struggle with uploading documents in a fully virtual process. Volunteer return preparers also often encountered difficulties reaching taxpayers to obtain missing information. Because PGCC was unable to provide a large space to gather safely, volunteers needed to work from home, which raised additional concerns about the security of home computers and internet connections

To utilize its strong base of experienced volunteers, avoid requiring taxpayers to upload information, and address the security challenges of volunteers working from home, the PGCC VITA program decided to use Facilitated Self-Assistance (FSA) as the primary service method. With FSA, taxpayers prepare and file their own returns using self-preparation software, and a VITA volunteer is available to answer questions in a timely manner via phone, e-mail, or text. Tax programs generally use FSA as an additional option for taxpayers who need no or minimal assistance with their returns. Taxpayers who participate in FSA sometimes don’t need any assistance in future years.

Although some VITA programs have offered FSA at workstations at local tax sites, it has more commonly been an at-home option. However, unlike the usual FSA clientele, PGCC needed to figure out how to use this mode of service delivery with taxpayers who have more complicated returns and little experience preparing them.

PGCC decided to structure its FSA similar to a traditional in-person process. Taxpayers seeking assistance were given an appointment when a volunteer would meet them in an online video conference to provide step-by-step assistance with the online tax filing software. Because the taxpayer entered their own information, there was no need to upload or drop off documents. This reduced information security risks by limiting data sharing. Both the taxpayer and volunteer were safely working from home.

Taxpayers needed a computer or laptop with a microphone and reliable internet service. The PGCC program suggested taxpayers could have a trusted friend or family member join them on the call from home to help prepare the return. It also offered a drop-off option for taxpayers without computer access or reliable internet connection where taxpayers delivered documents to a PGCC staff member or volunteer on campus, and those returns were prepared in the usual tax site space.

PGCC VITA’s experienced volunteers provided step-by-step assistance, and they were able to respond when things didn’t go as planned. These volunteers know the importance of savings and financial empowerment, so they found moments during their engagement with taxpayers to talk about the other services of the Financial Empowerment Center.

The PGCC VITA program was pleased with serving taxpayers using the remote FSA strategy and keeping everyone safe. Many taxpayers easily completed their returns with just a little instruction. The experienced volunteers were skilled in recognizing when a taxpayer might be struggling. The drop-off service option was a critical component because not every taxpayer was successful with FSA. For example, some taxpayers’ home computer setups ended up not being suited for video conferencing.

Although taxpayers were exposed to the opportunities of the Financial Empowerment Center when signing up for appointments and in conversations with the volunteers, the savings interventions didn’t work as effectively as in person. This was partly a product of having to develop a new return preparation process quickly. The program had to trust volunteers to find their moments rather than having a formal plan.

PGCC VITA, like other tax programs, is looking forward to returning to in-person services so it will likely lower the profile of its FSA model next tax season. But, FSA will remain a reliable method for serving taxpayers who are homebound or unable to travel to atax site. FSA also offers a post-season option when tax sites are closed, and assistance resources are limited. FSA also represents an excellent opportunity to retain experienced volunteers looking for a more convenient volunteering option. With more lead time for training and planning, PGCC VITA anticipates being able to train FSA coaches more effectively in encouraging savings during the video interaction.

Goodwill Industries of Tulsa is committed to promoting tax time as an opportunity for taxpayers to build savings. It utilizes many promising practices for increasing saving at tax time , including building commitment among staff and volunteers to encourage saving, making sure tax preparers know how to help consumers save while filing, and offering savings choices more than once at the tax site.

Goodwill Industries of Tulsa offers job training and support services throughout Eastern Oklahoma. Goodwill’s VITA program provides free tax return preparation services in the Tulsa area, typically serving around 500 tax filers annually.

Goodwill Industries of Tulsa is also an innovator. It was an early partner of GetYourRefund.org , the non-profit service built by Code for America in partnership with VITA sites nationwide. GetYourRefund provides a technology platform for preparing tax returns remotely when taxpayers are unable to be physically present at a site. Goodwill Tulsa also offers facilitated self-assistance for taxpayers filing their own returns using OnLine Taxes (OLT) , one of the IRS Free File commercial preparer partners.

The 2021 tax filing season was a challenge for all VITA programs, and this extended to tax-time savings work. The return preparation process – from intake to review – was more complicated, placing additional strains on volunteers’ time. Because taxpayer demand for tax preparation services typically exceeded organizational service capacity, there was understandable pressure to complete returns as quickly as possible. This left much less time for the personal engagement throughout the process, which is valuable in successfully promoting savings options.

The Virtual VITA process, facilitated by GetYourRefund and other similar tools, was of great assistance to programs including Goodwill in Tulsa during a period of social distancing, but the remote nature of the interactions with taxpayers limited opportunities to engage with potential savers.

Despite the challenges, Goodwill Industries of Tulsa remained committed to tax-time savings. It worked with GetYourRefund to include savings messaging in the platform. This provided an additional avenue for communications before and during the return preparation process.

Recognizing the tremendous economic strains caused by the COVID-19 pandemic, Goodwill in Tulsa reached into the community to find residents in need of assistance. This included visits to homeless shelters and community meal programs. People served by these programs are often not a good match for VITA because required documents, including photo identification and Social Security cards, are often among the first things lost or stolen when someone is living on the streets. The additional benefit of the federal Economic Impact Payments (EIPs), however, had the potential to address critical financial needs during the pandemic.

Using the OLT software, Goodwill in Tulsa was able to help taxpayers experiencing or at risk of homelessness. Most had memorized their Social Security numbers, had smart phones, and quite a few had bank accounts. Not only were they able to file returns to receive EIPs, but those with wage income could get withheld taxes refunded and sometimes claim an Earned Income Tax Credit. The tax program created new relationships with people who may benefit from financial support to gain some economic security.

The immediate results of using savings messaging in the virtual return preparation software were disappointing, but the experience clarified the promising practices of encouraging savings.

Programs promoting tax-time savings tend to see growing success over time because taxpayers hear a consistent message, year after year, that can become part of their personal financial planning. The pandemic service disruption complicated this process but also underscored the value of taking a long-term view.

Goodwill Industries of Tulsa established new relationships with people experiencing homelessness, planting seeds for financial empowerment. Through its virtual services, the program realized the value of maintaining consistent communication as well as the great benefits from reinforcing text and email messaging with direct taxpayer contact. In the words of program staff: “It is considerably harder to ignore someone who looks like your mother or grandmother saying, face-to-face, ‘you should think about saving some of your refund’.”

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Taxing situations: two cases on income taxes and financial reporting description.

Two whimsical situations are described to provide illustrations of situations where income taxes paid differ from the income tax expense that might be included in financial reports. In addition to illustrating that financial reported income may differ from taxable income, the case contains data, to allow students to discover the reasons for and nature of a deferred tax account.

Case Description Taxing Situations: Two Cases on Income Taxes and Financial Reporting

Strategic managment tools used in case study analysis of taxing situations: two cases on income taxes and financial reporting, step 1. problem identification in taxing situations: two cases on income taxes and financial reporting case study, step 2. external environment analysis - pestel / pest / step analysis of taxing situations: two cases on income taxes and financial reporting case study, step 3. industry specific / porter five forces analysis of taxing situations: two cases on income taxes and financial reporting case study, step 4. evaluating alternatives / swot analysis of taxing situations: two cases on income taxes and financial reporting case study, step 5. porter value chain analysis / vrio / vrin analysis taxing situations: two cases on income taxes and financial reporting case study, step 6. recommendations taxing situations: two cases on income taxes and financial reporting case study, step 7. basis of recommendations for taxing situations: two cases on income taxes and financial reporting case study, quality & on time delivery.

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Case Analysis of Taxing Situations: Two Cases on Income Taxes and Financial Reporting

Taxing Situations: Two Cases on Income Taxes and Financial Reporting is a Harvard Business (HBR) Case Study on Finance & Accounting , Texas Business School provides HBR case study assignment help for just $9. Texas Business School(TBS) case study solution is based on HBR Case Study Method framework, TBS expertise & global insights. Taxing Situations: Two Cases on Income Taxes and Financial Reporting is designed and drafted in a manner to allow the HBR case study reader to analyze a real-world problem by putting reader into the position of the decision maker. Taxing Situations: Two Cases on Income Taxes and Financial Reporting case study will help professionals, MBA, EMBA, and leaders to develop a broad and clear understanding of casecategory challenges. Taxing Situations: Two Cases on Income Taxes and Financial Reporting will also provide insight into areas such as – wordlist , strategy, leadership, sales and marketing, and negotiations.

Case Study Solutions Background Work

Taxing Situations: Two Cases on Income Taxes and Financial Reporting case study solution is focused on solving the strategic and operational challenges the protagonist of the case is facing. The challenges involve – evaluation of strategic options, key role of Finance & Accounting, leadership qualities of the protagonist, and dynamics of the external environment. The challenge in front of the protagonist, of Taxing Situations: Two Cases on Income Taxes and Financial Reporting, is to not only build a competitive position of the organization but also to sustain it over a period of time.

Strategic Management Tools Used in Case Study Solution

The Taxing Situations: Two Cases on Income Taxes and Financial Reporting case study solution requires the MBA, EMBA, executive, professional to have a deep understanding of various strategic management tools such as SWOT Analysis, PESTEL Analysis / PEST Analysis / STEP Analysis, Porter Five Forces Analysis, Go To Market Strategy, BCG Matrix Analysis, Porter Value Chain Analysis, Ansoff Matrix Analysis, VRIO / VRIN and Marketing Mix Analysis.

Texas Business School Approach to Finance & Accounting Solutions

In the Texas Business School, Taxing Situations: Two Cases on Income Taxes and Financial Reporting case study solution – following strategic tools are used - SWOT Analysis, PESTEL Analysis / PEST Analysis / STEP Analysis, Porter Five Forces Analysis, Go To Market Strategy, BCG Matrix Analysis, Porter Value Chain Analysis, Ansoff Matrix Analysis, VRIO / VRIN and Marketing Mix Analysis. We have additionally used the concept of supply chain management and leadership framework to build a comprehensive case study solution for the case – Taxing Situations: Two Cases on Income Taxes and Financial Reporting

Step 1 – Problem Identification of Taxing Situations: Two Cases on Income Taxes and Financial Reporting - Harvard Business School Case Study

The first step to solve HBR Taxing Situations: Two Cases on Income Taxes and Financial Reporting case study solution is to identify the problem present in the case. The problem statement of the case is provided in the beginning of the case where the protagonist is contemplating various options in the face of numerous challenges that Income Situations is facing right now. Even though the problem statement is essentially – “Finance & Accounting” challenge but it has impacted by others factors such as communication in the organization, uncertainty in the external environment, leadership in Income Situations, style of leadership and organization structure, marketing and sales, organizational behavior, strategy, internal politics, stakeholders priorities and more.

Step 2 – External Environment Analysis

Texas Business School approach of case study analysis – Conclusion, Reasons, Evidences - provides a framework to analyze every HBR case study. It requires conducting robust external environmental analysis to decipher evidences for the reasons presented in the Taxing Situations: Two Cases on Income Taxes and Financial Reporting. The external environment analysis of Taxing Situations: Two Cases on Income Taxes and Financial Reporting will ensure that we are keeping a tab on the macro-environment factors that are directly and indirectly impacting the business of the firm.

What is PESTEL Analysis? Briefly Explained

PESTEL stands for political, economic, social, technological, environmental and legal factors that impact the external environment of firm in Taxing Situations: Two Cases on Income Taxes and Financial Reporting case study. PESTEL analysis of " Taxing Situations: Two Cases on Income Taxes and Financial Reporting" can help us understand why the organization is performing badly, what are the factors in the external environment that are impacting the performance of the organization, and how the organization can either manage or mitigate the impact of these external factors.

How to do PESTEL / PEST / STEP Analysis? What are the components of PESTEL Analysis?

As mentioned above PESTEL Analysis has six elements – political, economic, social, technological, environmental, and legal. All the six elements are explained in context with Taxing Situations: Two Cases on Income Taxes and Financial Reporting macro-environment and how it impacts the businesses of the firm.

How to do PESTEL Analysis for Taxing Situations: Two Cases on Income Taxes and Financial Reporting

To do comprehensive PESTEL analysis of case study – Taxing Situations: Two Cases on Income Taxes and Financial Reporting , we have researched numerous components under the six factors of PESTEL analysis.

Political Factors that Impact Taxing Situations: Two Cases on Income Taxes and Financial Reporting

Political factors impact seven key decision making areas – economic environment, socio-cultural environment, rate of innovation & investment in research & development, environmental laws, legal requirements, and acceptance of new technologies.

Government policies have significant impact on the business environment of any country. The firm in “ Taxing Situations: Two Cases on Income Taxes and Financial Reporting ” needs to navigate these policy decisions to create either an edge for itself or reduce the negative impact of the policy as far as possible.

Data safety laws – The countries in which Income Situations is operating, firms are required to store customer data within the premises of the country. Income Situations needs to restructure its IT policies to accommodate these changes. In the EU countries, firms are required to make special provision for privacy issues and other laws.

Competition Regulations – Numerous countries have strong competition laws both regarding the monopoly conditions and day to day fair business practices. Taxing Situations: Two Cases on Income Taxes and Financial Reporting has numerous instances where the competition regulations aspects can be scrutinized.

Import restrictions on products – Before entering the new market, Income Situations in case study Taxing Situations: Two Cases on Income Taxes and Financial Reporting" should look into the import restrictions that may be present in the prospective market.

Export restrictions on products – Apart from direct product export restrictions in field of technology and agriculture, a number of countries also have capital controls. Income Situations in case study “ Taxing Situations: Two Cases on Income Taxes and Financial Reporting ” should look into these export restrictions policies.

Foreign Direct Investment Policies – Government policies favors local companies over international policies, Income Situations in case study “ Taxing Situations: Two Cases on Income Taxes and Financial Reporting ” should understand in minute details regarding the Foreign Direct Investment policies of the prospective market.

Corporate Taxes – The rate of taxes is often used by governments to lure foreign direct investments or increase domestic investment in a certain sector. Corporate taxation can be divided into two categories – taxes on profits and taxes on operations. Taxes on profits number is important for companies that already have a sustainable business model, while taxes on operations is far more significant for companies that are looking to set up new plants or operations.

Tariffs – Chekout how much tariffs the firm needs to pay in the “ Taxing Situations: Two Cases on Income Taxes and Financial Reporting ” case study. The level of tariffs will determine the viability of the business model that the firm is contemplating. If the tariffs are high then it will be extremely difficult to compete with the local competitors. But if the tariffs are between 5-10% then Income Situations can compete against other competitors.

Research and Development Subsidies and Policies – Governments often provide tax breaks and other incentives for companies to innovate in various sectors of priority. Managers at Taxing Situations: Two Cases on Income Taxes and Financial Reporting case study have to assess whether their business can benefit from such government assistance and subsidies.

Consumer protection – Different countries have different consumer protection laws. Managers need to clarify not only the consumer protection laws in advance but also legal implications if the firm fails to meet any of them.

Political System and Its Implications – Different political systems have different approach to free market and entrepreneurship. Managers need to assess these factors even before entering the market.

Freedom of Press is critical for fair trade and transparency. Countries where freedom of press is not prevalent there are high chances of both political and commercial corruption.

Corruption level – Income Situations needs to assess the level of corruptions both at the official level and at the market level, even before entering a new market. To tackle the menace of corruption – a firm should have a clear SOP that provides managers at each level what to do when they encounter instances of either systematic corruption or bureaucrats looking to take bribes from the firm.

Independence of judiciary – It is critical for fair business practices. If a country doesn’t have independent judiciary then there is no point entry into such a country for business.

Government attitude towards trade unions – Different political systems and government have different attitude towards trade unions and collective bargaining. The firm needs to assess – its comfort dealing with the unions and regulations regarding unions in a given market or industry. If both are on the same page then it makes sense to enter, otherwise it doesn’t.

Economic Factors that Impact Taxing Situations: Two Cases on Income Taxes and Financial Reporting

Social factors that impact taxing situations: two cases on income taxes and financial reporting, technological factors that impact taxing situations: two cases on income taxes and financial reporting, environmental factors that impact taxing situations: two cases on income taxes and financial reporting, legal factors that impact taxing situations: two cases on income taxes and financial reporting, step 3 – industry specific analysis, what is porter five forces analysis, step 4 – swot analysis / internal environment analysis, step 5 – porter value chain / vrio / vrin analysis, step 6 – evaluating alternatives & recommendations, step 7 – basis for recommendations, references :: taxing situations: two cases on income taxes and financial reporting case study solution.

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Clients are at the heart of everything we do. These real-world success stories demonstrate that when the world's largest companies are facing their most difficult issues, they turn to our global network of professionals for solutions.

A international technology company with a presence in over 30 countries required assistance to develop a new tax operating model. Rising costs of compliance and disparate tax and statutory reporting processes, meant that they needed to rethink their approach to tax. Using our KPMG Tax Reimagined approach, we were able to help the client integrate their tax and accounting processes. We also designed a flexible operating model – this will ensure that they are able to manage their growth and business operational changes as they occur. 

Our whole approach was to lead with a technology-enabled approach to compliance, that aligned to their core business strategy. 

A telecommunication company with a global presence wanted a tax and legal turnkey collaborator to assist them to setup their new entities as they expanded into new countries. Their existing compliance processes where inconsistent without a structured governance framework. We worked with them to develop a tax operating model with a clear and standard approach to their compliance process, encompassing specifically set-up, transition and delivery. This meant that onboarding new entities became a smooth process and had assurance that they would also be compliant.

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Paying Taxes

Removing obstacles to entrepreneurship

The case study on reforms analyzes prominent regulatory changes implemented by governments since the inception of Doing Business. Among the most common regulatory changes over the past 17 years are simplifying the requirements to start a company, easing tax compliance burdens, increasing access to credit, and ensuring the survival of viable businesses. The case study also discusses the effects of regulatory changes on various dimensions of economic development and investment activity.

Paying Taxes: Assessing postfiling processes

Modern tax systems seek to optimize tax collections while minimizing administrative and taxpayer compliance costs. A low cost of tax compliance and efficient tax-related procedures are advantageous for firms. Overly complicated tax systems are associated with high levels of tax evasion, large informal sectors, more corruption and less investment.2 Tax compliance systems should be designed so as not to discourage businesses from participating in the formal economy.

Paying taxes: Trends before and after the financial crisis

The global financial crisis of 2008–09 had a dramatic impact on national tax revenue and led to a sharp increase in deficits and public debt. Fiscal measures were part of the policy toolkit that governments brought to bear in supporting the recovery. Doing Business has been monitoring how governments tax businesses through its paying taxes indicators for 9 years, looking at both tax administration and tax rates. The data give interesting insights into the tax policies implemented during the financial crisis of 2008–09.

Implementing electronic tax filing and payments in Malaysia

Taxation is essential for sustainable economic development, and tax administration is a basic function of a successful state. Taxation also helps make a government accountable to its citizens. When governments spend taxpayers’ money, they are more accountable to make budget decisions transparent and accessible. By 2012, 76 of the economies measured by Doing Business had implemented electronic tax filing and payment systems.

Rwanda: Fostering prosperity by promoting entrepreneurship

Since 2004 Rwanda has substantially improved access to credit, streamlined procedures for starting a business, reduced the time to register property, simplified cross-border trade and made courts more accessible for resolving commercial disputes.

Latvia: Maintaining a reform state of mind

Despite being substantially affected by the financial crisis starting in 2008, Latvia continued its reform agenda, adapting it to the new challenges the country was facing.  Learn what lessons can be learned about this “reform state of mind” demonstrated by Latvia.

APEC: Sharing goals and experience

The APEC Ease of Doing Business action plan identifies “champion economies” to share information and experience and to assist other members through tailored diagnostic studies. The plan seeks to implement APEC’s view of capacity building as a central part in enhancing cooperation and accelerating progress.

Colombia: Sustaining reforms over time

Colombia’s commitment to regulatory reform has led to substantial improvements in the quality of the business environment and a more solid foundation for private sector development. While the country has more development hurdles to overcome, the measures taken over the past years have greatly improved its competitiveness.

Egypt: Adding a million taxpayers

With 37% of Egypt’s workforce in the informal sector, the government realized reform was the way to broaden its tax base and increase revenues. Tax rates were high, the process of making payments was cumbersome, and tax evasion was the norm. Change was necessary.

Turkey: Giving a facelift to the Turkish tax system

Almost all tax reforms aim at a single goal: to increase revenue. But Turkey’s 2007 reform was different—simplifying and modernizing the tax system were the key goals. The government had been concerned that an antiquated corporate tax law was hindering foreign direct investment. It wanted to align its system with international standards.

Azerbaijan: How to create a world-class taxation system from scratch

The government of Azerbaijan took on the challenge of creating, from scratch, a transparent tax administration system, as was necessary. The country’s tax administration was revolutionized by creating a state-of-the-art online system.

Korea: Better business regulation and improved competitiveness

In Korea the Presidential Council on National Competitiveness, created in 2008, identified regulatory reform as 1 of 4 pillars to improve the economy’s competitiveness, along with public sector innovation, investment promotion, and legal and institutional advancement. Reviewing Korea’s business regulations, the council found that 15% had not been revised since 1998. The council applied sunset clauses to more than 600 regulations and 3,500 administrative rules.

Egypt: Boosting trade

Rachid Mohammed Rachid, Minister of Trade and Industry, describes his experience as a member of the new economic reform team appointed in 2004 by President Mubarak. The team was tasked with reviving the Egyptian economy to achieve economic growth levels of 6 percent, provide employment opportunities to the 650,000 new entrants to the job market and double both the foreign direct investment inflows and total trade through more integration into the world economy.

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Aditya, the Landlord

A case study on earning income from rent.

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How is rental income added to the owner's income tax return? Let's find out with this example.

Aditya has let out his apartment in Mumbai for Rs. 35,000 per month. It's time to file his tax returns for this year and for that he needs to determine how much he owes the I-T Department.

These are the other expenses related to the house during the year:

He paid Rs.25,000 in property taxes in November and spent Rs.8,000 in repairs and Rs.30,000 in electricity bills. He is also paying an interest of Rs.2,20,000 on the money borrowed to build the house. Since the property is let out, the entire interest on the home loan can be claimed as a deduction.

Aditya needs to find out the gross annual value of the property to calculate income from house property. For a rented house, it is the annual rent collected. Rent collected must be higher than or equal to the reasonable rent of the property as determined by the municipality. In Aditya's case, the municipality has determined the reasonable rent to be Rs. 32,000. Therefore, the gross annual value is Rs. 4,20,000.

Subtract property tax payment to arrive at net annual value. Section 24 of the Income Tax Act allows Aditya to claim a standard deduction of 30% on the net annual value. Aditya's home loan interest is also fully deductible.

This is how his income from house property is calculated

Note that Aditya's expenses on repairs and electricity are not allowed to be deducted. Also note that if Aditya was getting rental income from more than one house property, he would have to calculate for each one of them individually in the same manner as above.

Read more about income from house property on the house property guide.

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Accounting for income taxes case study analysis & solution, harvard business case studies solutions - assignment help.

Accounting for Income Taxes is a Harvard Business (HBR) Case Study on Finance & Accounting , Fern Fort University provides HBR case study assignment help for just $11. Our case solution is based on Case Study Method expertise & our global insights.

Finance & Accounting Case Study | Authors :: David F. Hawkins

Case study description.

Accounting for Income taxes under US-GAAP and IFRS. Analysis of income tax information in financial statements.

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[10 Steps] Case Study Analysis & Solution

Step 1 - reading up harvard business review fundamentals on the finance & accounting.

Even before you start reading a business case study just make sure that you have brushed up the Harvard Business Review (HBR) fundamentals on the Finance & Accounting. Brushing up HBR fundamentals will provide a strong base for investigative reading. Often readers scan through the business case study without having a clear map in mind. This leads to unstructured learning process resulting in missed details and at worse wrong conclusions. Reading up the HBR fundamentals helps in sketching out business case study analysis and solution roadmap even before you start reading the case study. It also provides starting ideas as fundamentals often provide insight into some of the aspects that may not be covered in the business case study itself.

Step 2 - Reading the Accounting for Income Taxes HBR Case Study

To write an emphatic case study analysis and provide pragmatic and actionable solutions, you must have a strong grasps of the facts and the central problem of the HBR case study. Begin slowly - underline the details and sketch out the business case study description map. In some cases you will able to find the central problem in the beginning itself while in others it may be in the end in form of questions. Business case study paragraph by paragraph mapping will help you in organizing the information correctly and provide a clear guide to go back to the case study if you need further information. My case study strategy involves -

• Marking out the protagonist and key players in the case study from the very start.
• Drawing a motivation chart of the key players and their priorities from the case study description.
• Refine the central problem the protagonist is facing in the case and how it relates to the HBR fundamentals on the topic.
• Evaluate each detail in the case study in light of the HBR case study analysis core ideas.

Step 3 - Accounting for Income Taxes Case Study Analysis

Once you are comfortable with the details and objective of the business case study proceed forward to put some details into the analysis template. You can do business case study analysis by following Fern Fort University step by step instructions -

• Company history is provided in the first half of the case. You can use this history to draw a growth path and illustrate vision, mission and strategic objectives of the organization. Often history is provided in the case not only to provide a background to the problem but also provide the scope of the solution that you can write for the case study.
• HBR case studies provide anecdotal instances from managers and employees in the organization to give a feel of real situation on the ground. Use these instances and opinions to mark out the organization's culture, its people priorities & inhibitions.
• Make a time line of the events and issues in the case study. Time line can provide the clue for the next step in organization's journey. Time line also provides an insight into the progressive challenges the company is facing in the case study.

Step 4 - SWOT Analysis of Accounting for Income Taxes

Once you finished the case analysis, time line of the events and other critical details. Focus on the following -

• Zero down on the central problem and two to five related problems in the case study.
• Do the SWOT analysis of the Accounting for Income Taxes . SWOT analysis is a strategic tool to map out the strengths, weakness, opportunities and threats that a firm is facing.
• SWOT analysis and SWOT Matrix will help you to clearly mark out - Strengths Weakness Opportunities & Threats that the organization or manager is facing in the Accounting for Income Taxes
• SWOT analysis will also provide a priority list of problem to be solved.
• You can also do a weighted SWOT analysis of Accounting for Income Taxes HBR case study.

Step 5 - Porter 5 Forces / Strategic Analysis of Industry Analysis Accounting for Income Taxes

In our live classes we often come across business managers who pinpoint one problem in the case and build a case study analysis and solution around that singular point. Business environments are often complex and require holistic solutions. You should try to understand not only the organization but also the industry which the business operates in. Porter Five Forces is a strategic analysis tool that will help you in understanding the relative powers of the key players in the business case study and what sort of pragmatic and actionable case study solution is viable in the light of given facts.

Step 6 - PESTEL, PEST / STEP Analysis of Accounting for Income Taxes

Another way of understanding the external environment of the firm in Accounting for Income Taxes is to do a PESTEL - Political, Economic, Social, Technological, Environmental & Legal analysis of the environment the firm operates in. You should make a list of factors that have significant impact on the organization and factors that drive growth in the industry. You can even identify the source of firm's competitive advantage based on PESTEL analysis and Organization's Core Competencies.

Step 7 - Organizing & Prioritizing the Analysis into Accounting for Income Taxes Case Study Solution

Once you have developed multipronged approach and work out various suggestions based on the strategic tools. The next step is organizing the solution based on the requirement of the case. You can use the following strategy to organize the findings and suggestions.

• Build a corporate level strategy - organizing your findings and recommendations in a way to answer the larger strategic objective of the firm. It include using the analysis to answer the company's vision, mission and key objectives , and how your suggestions will take the company to next level in achieving those goals.
• Business Unit Level Solution - The case study may put you in a position of a marketing manager of a small brand. So instead of providing recommendations for overall company you need to specify the marketing objectives of that particular brand. You have to recommend business unit level recommendations. The scope of the recommendations will be limited to the particular unit but you have to take care of the fact that your recommendations are don't directly contradict the company's overall strategy. For example you can recommend a low cost strategy but the company core competency is design differentiation.
• Case study solutions can also provide recommendation for the business manager or leader described in the business case study.

Step 8 -Implementation Framework

The goal of the business case study is not only to identify problems and recommend solutions but also to provide a framework to implement those case study solutions. Implementation framework differentiates good case study solutions from great case study solutions. If you able to provide a detailed implementation framework then you have successfully achieved the following objectives -

• Detailed understanding of the case,
• Clarity of HBR case study fundamentals,
• Analyzed case details based on those fundamentals and
• Developed an ability to prioritize recommendations based on probability of their successful implementation.

Implementation framework helps in weeding out non actionable recommendations, resulting in awesome Accounting for Income Taxes case study solution.

Step 9 - Take a Break

Once you finished the case study implementation framework. Take a small break, grab a cup of coffee or whatever you like, go for a walk or just shoot some hoops.

Step 10 - Critically Examine Accounting for Income Taxes case study solution

After refreshing your mind, read your case study solution critically. When we are writing case study solution we often have details on our screen as well as in our head. This leads to either missing details or poor sentence structures. Once refreshed go through the case solution again - improve sentence structures and grammar, double check the numbers provided in your analysis and question your recommendations. Be very slow with this process as rushing through it leads to missing key details. Once done it is time to hit the attach button.

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Accounting for Income Taxes Harvard Case Solution & Analysis

Home >> Accounting Case Solutions >> Accounting for Income Taxes

Accounting for income tax on US-GAAP and IFRS. Analysis of income tax information in the financial statements. "Hide by David F. Hawkins 10 pages . Publication Date: December 2, 1999. Prod. #: 100035-PDF-ENG

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