 Income tax 2022-2023, excise taxes. Let's do some wealth preservation with some tax preparation. Support Accounting Instruction by clicking the link below giving you a free month membership to all of the content on our website, broken out by category, further broken out by course. Each course then organized in a logical, reasonable fashion, making it much more easy to find what you need than can be done on a YouTube page. We also include added resources such as Excel practice problems, PDF files and more like QuickBooks backup files when applicable. So once again, click the link below for a free month membership to our website and all the content on it. Most of this information comes from the Tax Guide for Small Business for Individuals who use Schedule C, Publication 334 Tax Year 2022. You can find on the IRS website, irs.gov, irs.gov. Looking at the income tax formula we're focused on line one income. Remember in the first half of the income tax formula is in essence an income statement, although it's just the outline. The scaffolding, other forms and schedules flowing into it, including the Schedule C for the business income, which in essence is its own income statement having income minus expenses or business deductions. The net income then flowing into line one here of our income tax formula. Looking at page one of the form 1040 we're looking at line eight. Schedule C would flow into schedule one flowing into page one of the form 1040 here on line eight. This is a Schedule C profit or loss from business, which is an in essence and income statement income minus expenses on down below. We'll now dive into the excise tax first question. What is an excise tax? An excise tax is a legislative tax on specific goods or services at the time they are purchased. So they're actually going to be picking specific goods and services and assigning a tax to them specifically based on or applied when those goods and services are purchased. Now because they're going to be specific in nature they will be specific to a particular industry. So we won't spend a lot of time on them spending a lot of time together lately. In general because it will be dependent upon a particular industry. So goods subject to excise taxes could be fuel, tobacco and alcohol amongst other things. You might ask the question of course why would they put a tax on a particular item. And one reason could be for example with fuel you might think that you want to apply the tax to the people that might be using a related public good for example like the freeway system. And you would imagine that the more people buy fuel then the more they're likely using the public good that was built with tax dollars and therefore it would make sense that you tie those two things together somehow. So you tax fuel, people that buy more fuel are paying more for the public good that has been provided by taxpayer dollars. People that don't buy as much fuel or shouldn't be paying as much in possibly for that public good would be the rationale. Other things like tobacco and alcohol are usually kind of like a moral argument. The idea being that we're going to disincentivize the purchase of tobacco and alcohol by raising the price on them artificially by creating a tax. So the argument would be we're not trying to get revenue from it at all even though it generates a lot of revenue. We're just trying to get people not to purchase tobacco and alcohol because of supply and demand. And as the price goes up you would think that demand would go down. Other skeptics would argue and I'm kind of skeptical of this would argue that if someone is addicted to something in particular it's going to be an inelastic good. So you can raise the price on it and people will still be buying the inelastic good just because the nature of the situation. And it also seems like it might be a regressive tax because the people that tend to buy more tobacco and alcohol seem to be on the lower income side of things. So you're actually increasing taxes on lower income individuals. So it's a kind of double edged kind of moral argument that comes into play with those. But that is what it is. So then you've got the excise taxes are international taxes imposed within a government infrastructure rather than international taxes imposed across county borders. So they'll be subject to a particular you know location. Typically a federal excise tax is usually collected from motor fuel motor fuel sales airline tickets tobacco and other goods and services. OK so excise taxes this section identifies some of the excise taxes you may have to pay and the forms you have to file if you do any of the following. So if you're subject to the excise taxes then of course you would have to put that into your business model if you're dealing with those types of areas. So manufacture or sell certain products operate certain kinds of businesses use various kinds of equipment facilities or products receive payments for certain services. So for more information on excise taxes you can see publication 510. Obviously this is quite broad right here if you're subject to excise tax can't excise me. If you're in an industry that is subject to them then you want to dive down onto it in more detail. You can take a look at publication 510 on the IRS website iris.gov iris.gov. We've got the form 720 the federal excise taxes reported on form 720 quarterly federal excise tax return consists of several broad categories of taxes including the following. You've got the environmental taxes on the sale or use of ozone depleting chemicals and imported products containing or manufactured with these chemicals. So I'm not if you're older you might remember that when the ozone was a big environmental problem it was like the problem for a while and they needed to reduce these ozone producing chemicals. And I think that's still in place today and they actually did they actually did a pretty good job of it. The ozone seems like it's it's repairing itself. So that was a good deal communications and air transportation taxes. You've got the fuel taxes. You got tax on the first retail sale of heavy trucks trailers and tractors manufacturers taxes on the sale or use of a variety of different articles and tax on indoor tanning services. I'm not sure exactly why that is. Maybe it's because of the tanning machines have some kind of bad environmental thing. I'm not exactly sure but you have that if you have a tanning. I'm not a tanning expert apparently you got the form 2290. There is a federal excise tax on the use of certain trucks truck tractors and buses on public highways. So you can kind of understand that one to some degree if they're trying to say that again a business that is using the highway all the time is using a public good to make money. Right. They're using the highway which was made with tax dollars to make money. So it would kind of make sense then that if they were to try to tax them on like fuel or something or trucks or the things that are taking a lot of use of the highway to pay for. In essence the maintenance of the highway because they're getting more benefit from it than other people that are never on the highway. So the tax applies to vehicles having a taxable gross weight of 55,000 pounds or more report the tax on form 2290 heavy highway vehicle use tax return for more information. See the instructions for form 2290 depositing excise taxes. So if you have to file a quarterly excise tax return on form 720 you may have to deposit or your excise taxes before the return is due for details on depositing excise taxes. See the instructions for form 720. You can find those on the IRS website.