ACCY 312 Principles of Taxation
The Complete Exam Bible · Fall 2026ACCY 312 Overview
- Fall 2026
- Upper-division accounting course
- Prerequisite: ACCY 202 or equivalent
- Two closed-book exams plus projects
What ACCY 312 is about
ACCY 312 Principles of Taxation is an upper-division accounting course at the University of Illinois Urbana-Champaign, taught in Fall 2026 with ACCY 202 or an equivalent course as the prerequisite.
- Assessed by Five quizzes, two homework sets, two tax return projects, a team research memo and two closed-book exams.
- Hardest step Putting each item on the right line of the formula before computing anything.
- How to prepare Build your permitted note sheet as you go, from the thresholds and rate schedules used in class.
- Second chance Attendance of at least 80% by November 19 opens a retake of the two lowest quizzes.
How ACCY 312 is assessed
| Component | Weight | Format |
|---|---|---|
| In-class Quizzes | 15% | Five quizzes of 15 points each (75 points), taken on Canvas at the start of class |
| Homework | 8% | Two homework assignments of 20 points each (40 points); collaboration allowed, submitted individually |
| Tax Return – Individual | 8% | 40 points; compute the liability and prepare an individual return from a set of facts |
| Exam I (midterm) | 16% | 80 points; in person, closed book, one side of an 8.5 x 11 inch note sheet |
| Research Memorandum and Presentation | 15% | 75 points; team acts as CPA-firm consultants, writes a client memo and presents in class |
| Tax Return – Corporation | 6% | 30 points; compute the liability and prepare a corporate return from a set of facts |
| Exam II (cumulative final) | 32% | 160 points; in person, closed book, both sides of an 8.5 x 11 inch note sheet, at the University-scheduled time |
The Fall 2026 syllabus grades ACCY 312 out of 500 points, and each percentage in the table is that component's share of the 500. Final letter grades use the total points with plus and minus grades on a standard scale (for example A+ for 97 to 100 percent, A for 93 to 96 and A- for 90 to 92), and the syllabus keeps the option of a curve if averages are low. By November 19, 2026, a student whose attendance is at least 80% (20 classes or more) is given the chance to retake the two lowest quizzes. Up to 1% of total points is available as extra credit through Accountancy research studies. Late assignments are not accepted, and a missed exam with an approved excuse is handled by re-weighting other components. The syllabus describes the corporate tax return as individual work in one section and as a team project in another, so confirm the arrangement on Canvas.
Assessment structure
Each bar is drawn to the points the Fall 2026 syllabus assigns. The two exams together hold 240 of the 500 points, so almost half the grade is decided in two closed-book sittings.
Current ACCY 312 dates
| Date | Item | Control |
|---|---|---|
| 14 October 2026 | Exam I (midterm) | In person during the regular class time; the schedule lists textbook Chapters 1 to 6, 8 and 9. |
| 15 November 2026 | Research project memo and slides due | Due at 5:00 pm, with presentations in class on 16 and 18 November. |
| 19 November 2026 | Attendance date for quiz retakes | Attendance of at least 80% by this date allows a retake of the two lowest quizzes. |
| 9 December 2026 | Corporate Tax Return project due | Due at 11:59 pm, the day of the final exam review. |
Dates are taken from the tentative Fall 2026 schedule in the syllabus. The final exam is scheduled by the University; check Canvas for its date and room.
What ACCY 312 covers
Eight chapters cover the opening block of the Fall 2026 schedule, from what a tax is to the individual formula, the regular tax computation, other taxes and credits.
What a Tax Is and How Tax Rates Work
Tax base times tax rate; proportional, progressive and regressive structures; marginal, average and effective ratesThree conditions make a payment a tax
The course opens with a working definition. A tax is a required payment, it is imposed by a government agency, and it is not tied directly to the benefit the payer receives. The third condition does the sorting.
- Definition of a tax and a taxpayer
- Revenue and behavioural objectives
- Tax equals base times rate
- Proportional, progressive and regressive structures
- Marginal, average and effective tax rates
- Computing tax from a 2026 rate schedule
Federal, State and Local Taxes
Income, employment, excise and transfer taxes; sales, use and property taxes; implicit taxes and municipal bondsFederal taxes by base
At the federal level the course lists four families. Income taxes fall on individuals and corporations.
- Federal income, employment and unemployment taxes
- Excise taxes on quantity
- Estate and gift taxes
- Sales and use taxes
- Real and personal property taxes
- Implicit taxes and before-tax rates of return
Evaluating a Tax System
Sufficiency, static and dynamic forecasting, income and substitution effects, horizontal and vertical equity, certainty, convenience and economySufficiency: will it raise enough
A tax system is judged first on whether it raises the revenue the government needs. The difficulty is forecasting.
- Sufficiency of revenue
- Static and dynamic forecasting
- Income and substitution effects
- Horizontal equity
- Vertical equity
- Certainty, convenience and economy
The Individual Income Tax Formula
Gross income, realization, exclusions and deferrals; deductions for and from AGI; standard and itemized deductions; credits and prepaymentsGross income is all-inclusive
The formula starts with gross income, which the law defines as all realized income from whatever source derived.
- Realized income and gross income
- Exclusions and deferrals
- Deductions for AGI
- Adjusted gross income as a reference point
- Standard deduction or itemized deductions
- Newer deductions from AGI
Dependents and Filing Status
Qualifying child and qualifying relative tests, tiebreakers, the five filing statuses, head of household and the abandoned spouse ruleWhy dependents come first
Whether someone is a dependent decides the filing status and eligibility for benefits including the American opportunity credit and the child tax credit. A dependent must be a U.S.
- Qualifying child: relationship, age, residence, support
- Tiebreaker rules
- Qualifying relative tests
- Gross income limit for 2026
- Five filing statuses
- Head of household and the qualifying person
Computing the Regular Income Tax
Rate schedules by filing status, character of income, stacking qualified dividends and long-term gains, and the kiddie taxOrdinary income and the rate schedules
The regular tax starts from the rate schedule for the taxpayer's filing status.
- Ordinary rate schedules for 2026
- Character of income
- Short-term and long-term capital gains
- Qualified dividends
- Stacking preferentially taxed income
- Kiddie tax and net unearned income
AMT, Net Investment Income and Employment Taxes
The alternative minimum tax concept, the 3.8% net investment income tax, FICA, the additional Medicare tax and self-employment taxThe alternative minimum tax as a second computation
The alternative minimum tax exists to make sure taxpayers pay some minimum level of tax.
- Alternative minimum tax as a parallel computation
- Net investment income tax at 3.8%
- Social security and Medicare taxes
- Additional Medicare tax thresholds
- Net earnings from self-employment at 92.35%
- Employee versus independent contractor
Tax Credits, Prepayments and Penalties
The child tax credit, the dependent care credit, education and earned income credits, estimated payments and penaltiesHow credits differ from deductions
A credit reduces tax dollar for dollar, so its value is its full amount rather than its amount times a rate. Credits fall into three groups. Nonrefundable personal credits can reduce the tax to zero but not below.
- Nonrefundable, refundable and business credits
- Child tax credit and its phase-out
- Child and dependent care credit
- American opportunity tax credit
- Lifetime learning credit
- Earned income credit
Its syllabus aims to give students both technique and judgement: working out what individuals and businesses owe in federal income tax and reporting it, handling the tax side of buying, using and selling property, and weighing tax planning choices under U.S. law.
Class time combines lecture and discussion with quizzes and projects, and the required text is the 2027 edition of the Spilker textbook on taxing individuals and business entities.
Three parts across the semester
The tentative schedule is organised in three parts.
Part I, an introduction to federal taxation and to individual and business income taxation, moves from the introductory chapter through the individual tax formula, tax computation and credits, gross income, individual deductions and business income, then tax compliance and tax planning, and ends with the midterm.
Part II turns to property transactions and investments: business entities, cost recovery, property dispositions, investments and retirement savings.
Part III covers corporate operations and equity-based compensation before a cumulative final.
What this guide covers
This guide works through the opening block of the course, the three textbook chapters taught in the first two weeks and tested together in the first in-class quiz.
Eight chapters divide that material by the job each part does: what a tax is and how its rate is measured, the main federal, state and local taxes, the criteria used to judge a tax system, the individual income tax formula, dependents and filing status, the regular tax computation, the other taxes that sit beside it, and credits, prepayments and penalties.
Dollar thresholds are the 2026 figures used in class, so check any number against the current slides before relying on it in a return.
Why the formula carries the course
Almost every later topic fills in one line of the individual income tax formula. Gross income, less deductions for adjusted gross income, gives AGI.
AGI, less the larger of the standard deduction or itemized deductions and the other deductions taken from AGI, gives taxable income. Taxable income times the rates, plus other taxes, less credits and prepayments, gives the amount due or refunded.
A student who places an item on the wrong line loses marks in every chapter that follows, because the same misplacement changes AGI, every threshold that uses AGI and the final liability.
How the grade is built
Grades are points-based: 500 points across quizzes, homework, two tax return projects, a team research memorandum with a presentation, a midterm and a cumulative final.
Both exams are in person and closed book, with a hand-written 8.5 by 11 inch sheet allowed (one side for the midterm, both sides for the final) and only a basic four-function calculator. Quizzes run on Canvas at the start of class on a charged personal device.
Late assignments are not accepted, so the schedule dates matter as much as the content.
How to use this guide
Start with the assessment table and the chapter list, then take one chapter at a time. Each chapter moves from the rules to a finished worked computation and then to practice questions with answers.
Work every number yourself before reading the solution, and write down which line of the formula each item belongs on. The worked examples and practice items are written by AskSia with their own figures; they are not copies of course problems or of the textbook solutions.
Evidence and assessment control
Assessment components and points follow the Fall 2026 syllabus, and the syllabus calls the schedule tentative.
Confirm dates, quiz coverage, the final exam slot and any change on Canvas, where the course says updates will be posted.
ACCY 312 cheatsheet for the final exam
AskSia publishes a free ACCY 312 cheatsheet for the final exam, a cheat sheet that follows the official permitted-materials rule for this assessment and condenses the topics in this guide.
Worked example · free
Run the formula from wages to refund
- 2AGI: $72,000 of wages less the $2,000 IRA deduction for AGI is $70,000.
- 2Taxable income: the $16,100 single standard deduction beats $9,000 of itemized deductions, so $70,000 less $16,100 is $53,900.
- 2Tax: $53,900 sits in the 22% band, so $5,800 plus 22% of $3,500 over $50,400 is $6,570.
- 2Settle up: $7,000 withheld less $6,570 of tax leaves a $430 refund.
Key terms
- Tax Base
- What a tax is charged on, such as taxable income, the value of property or the price of a purchase.
- Marginal Tax Rate
- The rate charged on the next slice of taxable income or deduction, measured as the change in tax divided by the change in taxable income.
- Average Tax Rate
- Total tax divided by taxable income; the course treats it as the rate for budgeting tax expense.
- Effective Tax Rate
- Total tax divided by total economic income, including tax-exempt income; the best single measure of a tax burden.
- Adjusted Gross Income
- Gross income after deductions for AGI; many credits and deduction limits are tested against it.
- Standard Deduction
- A fixed from-AGI deduction set by filing status, taken instead of itemized deductions when it is larger.
- Qualifying Child
- A dependent who meets the relationship, age, residence and support tests; the course abbreviates them as RARS.
- Head of Household
- The filing status for an unmarried taxpayer who covers over half of a home's upkeep for a qualifying person.
- Preferentially Taxed Income
- Qualified dividends plus net long-term capital gain, stacked on top of ordinary income and taxed at 0%, 15% or 20%.
- Refundable Credit
- A credit that can reduce tax below zero and be paid out as a refund, unlike a nonrefundable credit.
ACCY 312 FAQ
How is the Principles of Taxation grade split?
It is points-based out of 500: quizzes 75, homework 40, the individual return 40, the midterm 80, the research memo and presentation 75, the corporate return 30 and the cumulative final 160. The final alone is worth close to a third of the course.
Can I bring notes into the tax exams?
Both exams are closed book, but you may bring one 8.5 by 11 inch sheet of your own formulas and notes. The midterm allows one side of it and the final allows both sides, in any font size you can read. Only a basic four-function calculator is permitted.
What happens if I do badly on a quiz?
The syllabus links a second chance to attendance. Students whose attendance reaches at least 80%, meaning 20 classes or more, by November 19 may retake their two lowest quizzes before the end of semester. Quizzes are taken on Canvas, so arrive with a charged device.
Why does adjusted gross income matter so much in individual tax?
AGI is the checkpoint between the two kinds of deduction and the reference point for many limits. Credits such as the education credits phase out on AGI, and the net investment income tax starts from a modified version of it, so an error above the line spreads.
How do I choose a filing status in a tax question?
Work from facts to status in a fixed order: whether a spouse died, whether the taxpayer was married on December 31, and then whether an unmarried taxpayer paid more than half the home costs for a qualifying person. Single is the default when nothing else applies.
Is a tax credit worth more than a deduction of the same amount?
Usually yes. A deduction saves the amount times the marginal rate, so $1,000 saves $220 in the 22% band, while a $1,000 credit cuts the tax itself by $1,000. A refundable credit can even pay out beyond zero liability.
Questions students ask in each ACCY 312 chapter
- Why is a driver's license fee not treated as a tax?
- The payment buys a specific privilege for the person who pays it. A tax must be unconnected to any direct benefit, which is why a hotel levy that funds general city projects qualifies while a license fee does not. Chapter 01 · What a Tax Is and How Tax Rates Work
- How do sales and use taxes differ?
- A sales tax is collected on a retail purchase made in the state. A use tax reaches goods bought elsewhere and then used or consumed in the state, so it closes the gap a buyer would otherwise exploit by purchasing out of state. Chapter 02 · Federal, State and Local Taxes
- Why do static revenue forecasts often overshoot?
- They ignore how people react. If a higher rate pushes activity toward untaxed alternatives, the base shrinks and actual collections fall short of the rate multiplied by today's base. Chapter 03 · Evaluating a Tax System
- Is a gift of cash from parents taxable income to the child?
- No. Gifts and inheritances are exclusions, so the recipient leaves them out of gross income entirely. The gift tax, where it applies, falls on the person who gives, not on the person who receives. Chapter 04 · The Individual Income Tax Formula
- Does a college student living on campus fail the residence test?
- No. Time away at college is treated as a temporary absence, so a full-time student who returns home counts as living with the parents for the year, provided the other tests are also met. Chapter 05 · Dependents and Filing Status
- Why is preferential income taxed last rather than first?
- Stacking it on top means ordinary income fills the lower bands first. The preferential slice then meets the 0%, 15% and 20% thresholds at the highest point of taxable income, which is the rule the thresholds were written for. Chapter 06 · Computing the Regular Income Tax
- Who is most likely to owe the alternative minimum tax?
- The slides point to taxpayers with large capital gains or large itemized deductions. Their broader alternative base can produce a tax above the regular tax, and only that excess is payable as AMT. Chapter 07 · AMT, Net Investment Income and Employment Taxes
- How is the child tax credit phase-out rounded?
- The credit falls by $50 for each $1,000 of AGI over the threshold, and any part of $1,000 counts as a full step. So $15,500 of excess AGI is 16 steps, a reduction of $800, not $775. Chapter 08 · Tax Credits, Prepayments and Penalties
How to study for the exam
Keep one sheet that holds the formula lines and the 2026 thresholds you have met so far, and add to it after each class; that sheet becomes the draft of your exam note sheet. Work the assigned practice problems before checking the solution manual, and time yourself on short computations so quiz conditions do not surprise you.
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