The Taxation Process

Tax law is the codified system of law that explains the different government levies which a taxpayer needs to follow on various economic transactions. The main taxation issues in the US are taxes like income, estate, capital gains, corporations, LLCs, partnerships and taxes on specific investment products or retirement accounts.

Income Tax Information

US Tax laws

Taxation in the United States is a complex system which includes payment for four different sectors of the government and involves various types of taxation. Tax law is developed by the federal government, state government, counties, cities and other municipalities. It also involves regional sections like school and utility and transit districts. The tax laws are distributed into codes sections, regulations, procedures, statements and administrative codes announced by the respective government along with state court pronouncements. Usually, the state tax laws are designed based on the federal tax laws.

Everyone Pays

The National Bureau of Economic Research results indicate that the combined federal, state and local government average marginal tax rate is 40% of the earnings of most US workers. The Tax Foundation has announced that the government, at various levels, needs to gather 30.8% of US income for 2008. This basically means that the US government takes their cut of your earnings, before your check is issued, to pay their bills.

All Encompassing

Tax law encompasses the taxation of income and property obtained personally as well as professionally. There is sales tax, gift tax, inheritance tax, capital gains tax, property tax, and innumerable other taxes. Federal income tax became law in 1913 when the 16th Amendment to the Constitution was approved. Though there are some states which do not have income tax, it is imperative for all residents and citizens of the United States to pay their federal income taxes. If there is an increase in the assets held by an individual, the tax laws become more complex.

The tax laws are compiled by Congress and the Internal Revenue Service (IRS) is accountable for the interpretation of the tax code. A commissioner appointed by the President is responsible for the IRS which is an offshoot of the U.S. Treasury Department, headquartered in Washington, D.C. Apart from the commissioner, regional commissioners and district directors who are political appointees also take care of IRS operations.

The cities that have IRS service centers which issue tax notices, collection notices, audit notices and tax forms to taxpayers are :

• Andover, MA
• Atlanta, GA
• Austin, TX
• Cincinnati, OH
• Fresno, CA
• Holtsville, KY
• Kansas City, KA
• Memphis, TN
• Philadelphia, PA

Every citizen of the US needs to maintain record of their gross income and the Secretary of the Treasury is responsible for restructuring income based on the actual income generated. A taxpayer will qualify for different scores of deductions and credits, along with earned income tax credit, child tax credit and deductions and credits for college education.