The laws, statutes, and policies that control the tax system are all included in the field of law known as tax law.
The taxation process, which includes the government’s imposition of taxes on:
Tax law comes in various forms, such as income tax, corporate tax, and international tax law.
Law on Federal Income Tax
The Internal Revenue Code (IRC), found in Title 26 of the United States Code, serves as the foundation for federal tax legislation. Nearly all Americans and businesses with earned income are subject to the federal income tax, which is governed by a set of laws and regulations.
Everyone who has earned income from sources located in the United States, including non-citizens, is subject to federal income tax. The income tax was implemented in order to raise funds required to run the government and provide services.
Most people pay their taxes by having money deducted from their paychecks each pay period. Employers are required to deduct a portion of their workers’ pay and send that sum to the Internal Revenue Service (IRS).
When the amount of tax withheld is insufficient to satisfy the whole amount of a taxpayer’s federal income tax liability, payment must be made to the IRS by April 15th. You can notify the IRS and set up installment payments if you cannot pay the full amount of due federal income tax.
Business Tax Law
The taxation of incorporated entities is governed by corporate tax law. Businesses and non-profit organizations are examples of such entities. The laws governing corporate taxation are distinct from those governing individual taxation, and in some cases, they may have an effect on individual taxation. The pass-through taxes of S corporations is an illustration of this. The stockholders of the corporation are responsible for paying taxes; the corporation is not.
The taxation of other corporate entities, such as partnerships and not-for-profit organizations, is also covered under corporate tax law. For example, a non-profit organization engaged in charity or religious endeavors can qualify for 501(c)3 tax-exempt status.
The IRS views partnerships as pass-through businesses, which means that all of the partnership’s gains and losses “flow through” to the partners, who are then subject to tax on their portion of the gains. If the partnership experiences a loss, the partners can write off a percentage of that loss on their personal tax returns.
Law on International Taxes
The application of various nations’ tax rules to people and enterprises is the subject of international tax law. While some nations solely tax their citizens’ local income, other nations tax their citizens’ worldwide income.
In most cases, there is a tax reduction or a provision for international credits for taxes paid to other jurisdictions where there is a tax on worldwide income. In order to reduce their global tax obligations, corporations with offices in other nations frequently consult with international tax experts. On matters pertaining to foreign tax, both attorneys and accountants may provide guidance.
A corporation, person, or trust who knowingly underpays its taxes is said to be engaging in tax evasion. It entails taxpayers lying about their financial situation in an effort to lower their tax bill.
Such dishonest tax reporting may involve overstating deductions or disclosing smaller income, profits, or gains than the taxpayer actually generated. Tax avoidance, which is the legal use of tax regulations to reduce your tax due, is distinct from tax evasion.
Due to the complexity and difficulty of tax law, a tax attorney or tax accountant may be necessary for your particular circumstances. Consult a tax lawyer or an accountant if you need help resolving a tax problem.
How Are Tax Liabilities Calculated?
The government has particular filing requirements based on your filing status and income when calculating your tax burden.
Depending on the income category of the estate or trust, the income from those entities is also taxed. For instance, the tax would be $225 + 28% of the amount over $1,500 if your estate or trust had taxable income that was over $1,500 but under $3,500.
How Can I Reduce My Tax Obligation?
You can claim several credits that would reduce the amount of tax you owe if you want to reduce your tax liability. These credits include the child tax credit, the adoption credit, the credit for the elderly and totally and permanently disabled, and the credit for child and dependent care expenses you incur so that you can have a job.
What Will Happen If I Don’t Pay Every Tax Due?
Penalties could apply if a person does not pay all of their taxes. If a taxpayer has a good cause for not paying their taxes, they may be able to arrange for an extension or to set up a payment plan to pay the unpaid taxes in installments.
On the other side, a taxpayer may be charged with a crime if they do not have a good cause for why they did not pay all of their taxes or if they are purposefully avoiding doing so.
Tax evasion is generally against the law. Tax evasion is the deliberate use of a technique to avoid making tax payments to the IRS. Tax evasion is a felony offense that carries severe fines and a maximum five-year prison term.
A taxpayer who only pays a portion of the taxes they owe may also be the target of an IRS audit. In a nutshell, an audit is an examination of a person’s financial data and multiple financial accounts. The IRS uses audits to verify that taxpayers are filing their taxes truthfully and in accordance with the law. A tax audit’s findings may result in criminal charges, modified tax filings, or absolutely no changes at all.
Dispute Resolution with the IRS
Tax law is a very complicated and dynamic area of law. Title 26 of the Code of Federal Regulations contains additional federal tax laws in addition to those found in Title 26 of the United States Code, as well as rules suggested by the IRS, revenue rulings established by the IRS, private letter rulings issued by the IRS, releases issued by the IRS, and decisions made by the federal tax court.
The U.S. Tax Court hears issues involving tax underpayment disputes between taxpayers and the IRS. Although the U.S. Tax Court is based in Washington, D.C., its judges conduct trials across the nation. The Federal District Court of Appeals will consider any appeals once the Tax Court issues its ruling, and the U.S. Supreme Court will have the final say in the matter.
Do I Need to Speak with a Tax Attorney?
Tax attorneys manage tax problems and controversies and can defend you throughout the process, including audits and IRS administrative appeals. They may also aid you in comprehending the numerous convoluted and intricate laws pertaining to this field of law.
Consult a tax attorney if you’re involved in a tax dispute or conflict.
Do not try to face the IRS on your own. Hiring a lawyer is in your best interest if you have tax issues. Use LegalMatch to find the right attorney today.