Tax Law and Accounting
In today's society income taxes are something in which almost everyone is familiar. However, the tax law and general purpose of income taxes is something in which the general society gives little thought. In addition, few tax preparers are aware that differences exist between the Generally Accepted Accounting Principles (GAAP) and tax accounting, not to mention the ramifications of avoiding or evading to proper complete the reporting of income taxes. This paper will discuss the objectives of modern tax law, the differences between Generally Accepted Accounting Principles (GAAP) and tax accounting as well as the differences between tax evasion and tax avoidance.
Objectives of Modern Tax Law
William Perez explains that income taxes are paid because the United States has to pay for such expenses as "schools, roads, hospitals, the military, government employees, national parks, and so forth" (2007, ¶ 2) and the process in which the United States pays for these expenses is through income taxes. The United States requires that the people and companies with earned income pay to the government a portion of the income earned. This portion of earned income paid to the government helps to pay for the many expenses needed by our society.
The process in which income taxes are paid is simple. Tax laws are written by the President and Congress of the United States. Enforcing the laws written by the President and Congress is the responsibility of the Internal Revenue Service (Perez, 2007), an organization that was once named the Bureau of Internal Revenue but was changed to the Internal Revenue Service (IRS) in the 1950s (IRS, Brief History of IRS, n.d., ¶ 4). The IRS is responsible for collecting taxes, issuing refund...
... middle of paper ...
...ight against abusive tax avoidance. Retrieved June 3, 2007,
from
http://taxes.about.com/gi/dynamic/offsite.htm?zi=1/XJ&sdn=taxes&cdn=money&tm=10&gps=122_87_1006_544&f=00&su=p649.0.147.ip_&tt=2&bt=1&bts=1&zu=http%3A//www.irs.gov/
Jacobs, V. (2004). Offshore tax evasion. Retrieved June 3, 2007, from
http://www.offshorepress.com/vkjcpa/tax-evasion.htm
Perez, W. (2007). Taxes 101: Five basic ideas. Retrieved June 3, 2007, from
http://taxes.about.com/od/taxplanning/a/taxbasics.htm
Plesko, G. (2002, Spring). Reconciling corporation book and tax net income, tax years 1996-
1998 - Statistical data included. Retrieved June 3, 2007, from http://findarticles.com/p/articles/mi_m2893/is_4_21/ai_90116649/pg_4
Pope, T.R., Anderson, K. E., Kramer, J. L., (2007). Prentice Hall's federal taxation
Individual. 2007 edition. Pearson Prentice Hall, Upper Saddle River, NJ
Our current system of taxation is a varied rate percentage based on different income brackets. Many say that it violates our constitutional rights through unequal taxation. Multiple deductions, loopholes, special rates, and a complex system of regulations all characterize our Federal Income Tax System, prompting many to question why it is still being used (Peters, 2013). The current system although bringing in over $3 trillion, taxes income multiple times, and includes the taxing of estate, labor, savings, and investments (National Priorities Project, 2013). The system itself is complex with over 20,000 pages of regulations, requiring a massive filing system, which is set up and maintained by an even larger IRS, requiring over $225 billion in compliance costs (Hall, 2001). One can be hard pressed to find an advantage in the current system, other than the fact that it provides the government with an enormous amount of funds, and it has...
Henchman, Joseph. "Income Tax Reform." Journal Of State Taxation 31.1 (2012): 33-34. Business Source Premier. Web. 19 Jan. 2014.
Tax law changes every year. Laws are updated, loopholes are blocked and other modifications are generated. A few of these changes affect essentially each of the wage earners while others could impact primarily small businesses or higher-income taxpayers.
In this study I will use the cash effective tax rate (CASH ETR) as a proxy for corporate tax avoidance. Chen et al. (2010) use the cash effective tax rate as one of the measures of tax aggressiveness in their study. Another effective tax rate measure which has been widely used in tax avoidance research is the GAAP effective tax rate. However, the GAAP effective tax rate only reflects the permanent book-tax differences, while the CASH ETR reflects both the temporary and permanent book-tax differences (Chen et al. 2010). Moreover, the CASH ETR captures the tax benefits of employee stock options, while the GAAP effective tax rate does not (Dyreng et al. 2008). The CASH ETR also captures the strategies that are used to defer taxes while the GAAP effective tax rate does not (Hanlon and Heitzman 2010). The GAAP effective tax rate is also affected by changes in estimate while the CASH ETR is not. Therefore, Dyreng et al. (2008) conclude that t...
Wolk, H., Dodd, J., & Tearney, M. (2003). Accounting Theory: Conceptual Issues in a Political and Economic Environment (6th edition ed.). South-Western College Pub.
The use of taxes is one of the government's favorite ways to make its presence known in the economy. While this method seems blatantly obvious, many of the ways the government uses the money collected by taxation is not. Some of the money it takes is used to fund other programs designed to "protect" consumers and to "create" jobs. Be...
s had with this topic. Following are summaries of major pronouncements dealing with accounting for income taxes.
Learn the truth and the truth will set you free. The everyday United States citizen does not understand the tax code. We could compare the system to the biblical account of David and Goliath, the citizen being David and the Internal Revenue Service being Goliath.The facts are confusing. Most Americans are frustrated, but it is like trying to
The government use of taxes plays a crucial role in today’s economy as well as personal finances, it has and will continue to leave its mark on the world we live in.
The four types of taxes this paper will discuss are income tax, sales tax, property tax, and user fees. Income tax was not permanently established until the 16th Amendment was passed in 1913. Most federal taxes had been previously derived from excise taxes on tobacco and alcohol and other consumer goods. The US Constitution, when written and still continues to, legitimize taxation in the United States through Article I, Section 8, that Congress has the power to lay and collect taxes, duties et al, pay the debts or provide for the common defense and general welfare of the United States (Cornell Law LII). Investopedia defines income tax as ‘a tax government(s) impose on financial income generated by all entities within their jurisdictions (Investopedia, 2014). Businesses and individuals are required to file an income tax return every year to determine if they owe taxes or qualify for a refund. That is determined by measuring the total income one earns to a designated tax rate, calculating one’s taxable income, which are some or all items of income reduced by other adjustments or expenses in that tax year. There are different subcategories of income tax; there is a federal income tax that is set by the federal government, apart from a few states, there is a state income tax that is imposed on their respective residents, as well as the possibility of there being local income tax ...
The tax system is an important part of our country's method of ensuring that government leaders are paid, roads are maintained, and we have a well-armed military to defend all of our citizens. But that doesn't stop the millions of people who live in the United States from dreading the complicated procedures set up by the Internal Revenue System (IRS) that they have to go through to pay their fair share of the expenses each year. Part of the reason for this is that there are so many myths surrounding the process. Unfortunately, those who believe in them end up with costly fines and legal problems though. So to help clear things up, the following is a list of five of the top tax myths and the real truth behind them all.
[13] Young, Anthony. It’s tax day: H&R Block vs. TurboTax. Media Works.com Mar 22 2011
The revenue/cost period-: Revenue and the cost period in accounting that the company get income from normal business activities. It’s referred to normal business income that the company got by selling their product and service.
In this project we will be looking at the tax evasion by individuals and how banking secrecy laws in certain countries aiding this tax evasion. First we define what is tax heaven, the problems faced by both developing and developed countries due to tax evasion and what are the various arguments in favor of the banking secrecies and the fundamental flaws in those arguments then we will be looking at the existing approaches to combat these tax heavens by TIEA and OECD approach then the EU directive and thirdly eliminating the capital gain taxes all over the world and the weaknesses of these three approaches then we move on to the potential solution by creating a global tax organization on the lines of WTO where all countries ...
Taxes. Businesses and individuals are required to pay them, but what are they? Merriam-Webster defines a tax as the following: “A charge, usually of money imposed by authority on persons or property for public purposes.” (Merriam-Webster) Taxes in the United States are typically frustrating. There are countless rules to follow, several forms to fill out, and overall it is time consuming. As a taxpayer, what is the first thing that comes to mind when a conversation about tax cuts occurs? Is it wanted? Most consumers would likely say yes, but is it a good situation for the United States economy as a whole? Well, that depends on who is asked. While yes, less taxes do allow for consumers to potentially have more money, it may not always be the