What you can learn about income taxation

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Learning about tax law and preparation is an essential component of becoming an accountant. Nearly every individual and company in the U.S. needs to pay taxes, and they often turn to outside help when it comes time to file.

According to the Journal of Accountancy, tax and payroll activities are the most commonly requested services from outsourcing firms, highlighting the importance of tax knowledge. The University of Alabama at Birmingham recognizes the importance of understanding tax law, and dedicates a three-credit course in the Master of Accounting curriculum specifically to income tax subject matter.

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What do Master of Accounting students learn about income tax?

Having an understanding of tax law is essential to being an effective accountant. Taxes have a major impact on the finances of individuals, families, and businesses. As such, accountants must know how tax rules will impact their companies or clients, and how to work within those laws for the best benefit.

Students earning their Master of Accounting from the University of Alabama at Birmingham will take two courses in which income taxes are discussed in detail:

AC 402: Income Taxation I

In this course, students will learn the fundamentals of taxation, focusing mainly on individual federal income taxes. With this knowledge, accountants can see high demand for their services during the first quarter of the year when filing season begins.

This course is included in the bridge program for incoming students who majored in something other than accounting or business during their undergraduate years, as well as in the bachelor’s in accounting curriculum. It’s also offered as AC 502: Income Taxation I as an elective for graduate-level students.

AC 430: Financial Accounting III

Students will also discuss income taxes in AC 430: Financial Accounting III. This course focuses on business-related accounting tasks, including retirement benefits, statements of cash flows, and earnings per share in addition to income taxes.

What is the purpose of income taxes?

This is a question many individuals ask themselves and their tax preparers every year: Why do we have to file income taxes?

The practice of taxing income got its start in 1862 when Civil War expenses grew too large for the federal government. Back then, income between $600 and $10,000 was taxed at 3 percent, and income greater than $10,000 was taxed at 5 percent, according to the Federal Reserve Bank of St. Louis.

Throughout the rest of the late 1800s and early 1900s, income tax was repealed, reinstated, and repealed again. It wasn’t until 1943 that income taxation began to resemble the system in place today with the Current Tax Payment Act being signed into law. It requires employers to withhold income tax from each paycheck, simplifying the tax collection process for the government.

Today, nearly half of all federal tax revenue — 47.9 percent in 2017 — comes from income taxes from individuals. The biggest portion of it, at 28 percent, went to the Department of Health and Human Services, while 25.1 percent went toward the Social Security Administration. Another 14.3 percent went toward the Department of Defense – Military Programs, and 13.7 percent went to the Department of Treasury, according to data from the White House.

The remaining budget went toward other departments such as the Department of Agriculture, Department of Veterans Affairs, and the Department of Energy, with no other allocation totaling more than 4 percent of the overall revenue.

Who pays income taxes?

Every U.S. citizen must pay income taxes if they earn at least $10,400 in a year, according to the Federal Bank of St. Louis. However, the rules that determine the minimum amount of income earned that require you to pay taxes are subject to change.

In addition to individuals, corporations must also pay income taxes based on the amount of revenue they brought in throughout the year.

There were more than 136 million tax returns processed during the 2018 tax filing season through May 23, 2018, according to the IRS. Some individuals pay their taxes at another time, such as those who file for a six-month extension. In all, total individual income tax revenue reached about $1.66 trillion in 2018, according to the White House.

Taxes are complicated for many people. In 2017, 43 percent of respondents to a Pew Research Center poll said their top frustration about the tax system is how complex it is. Perhaps that’s why many seek out experts who can help them out.

Only 8.5 percent of respondents to a GOBankingRates survey said they file their own taxes using forms straight from the IRS. Nearly 40 percent said they either go to an accountant or ask a friend or family member to prepare their taxes.

Master of Accounting students learn tax law at the University of Alabama at Birmingham

Students pursuing their Master of Accounting degree at the University of Alabama at Birmingham will have the opportunity to learn the important details of tax law in their coursework. This will be an essential component to their work as an accountant, whether working at a big firm, on staff at a company, or offering their services through their own accounting business.

To learn more about how the University of Alabama at Birmingham prepares future accountants for their careers, reach out to an enrollment advisor today.

Recommended Readings:

How professionals stay up-to-date on current trends in accounting

Career Spotlight: Chief Financial Officer


Federal Reserve Bank of St. Louis: The purpose and history of income tax

The White House

Federal Reserve Bank of St. Louis: Who pays income taxes, and how much?


Pew Research Center


University of Alabama at Birmingham BACC course descriptions

University of Alabama at Birmingham MACC course descriptions

Journal of Accountancy

The White House: An American Budget