Video: Types of Federal Taxes

In this lesson, Nick Palazzolo, CPA, unpacks the different types of federal taxes and their impact on various entities including individuals, corporations, trusts, and estates. By diving into federal income tax, employment and unemployment taxes (including Social Security and Medicare taxes), excise taxes, and transfer taxes like estate and gift taxes, Nick elucidates the complexities of the U.S. tax system. He explains how these taxes apply across different scenarios, from corporate earnings to individual wealth transfers, while also highlighting the rationale behind certain tax rules. With an approachable demeanor, Nick ensures that each intricate detail is made clear and relatable, aiming to simplify the labyrinth of tax regulations that inevitably surface whenever money changes hands.

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Video Transcript

Instructor: Nick Palazzolo

Nick Palazzolo is head instructor of ExamPrep.ai CPA Review. Nick's teaching style is engaging & upbeat, combining practical Big 4 tax & assurance expertise with years of 1-on-1 coaching. His lessons are concise and emphasize what you need to know to pass. Whether you're a recent grad or working full-time, we’re confident you can conquer your CPA exams with Nick’s review.

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All right, diving in, we got our types of taxes. These are all federal taxes. We're going to talk a little bit about state taxes. However, generally throughout the exam, this is all about federal taxes. And why is that? Well, there are 50 big, old, beautiful states. So some are small like Rhode Island. No hate to Rhode Island though. And as such, all the states have different ways of means of taxing everyone. So we're really dealing with federal taxes throughout this exam. However, yeah, we're going to mention states here and there. You'll obviously, you'll see that as we talk about it. So how do our taxes work? Where are the taxes coming from that we're going to see throughout the exam? Well, yeah, obviously we're not going to mention taxes we're not going to see in the exam because we're trying to keep it nice and concise. The first, the biggest one is the federal income tax. This is going to be the largest tax assessed by the U.S. government. It's levied on individuals, corporations, states, and trusts. You know, they try to get that from everyone. You might say, well, where's partnerships and escorts? Well, those partnerships and escorts are going to flow that income down to individuals. And then those individuals will pay tax on that. This is just the biggest amount of money. This is where the U.S. government's getting all of their hard-earned income. The individual income tax, this accounts for approximately 46.2% of all tax revenues collected in the U.S. By no means do you need to memorize any of these amounts, these percentages. This is just, again, kind of leading us into what we're going to see on the exam. So what's important? The maximum rates, we've got tax brackets.

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