Taxation is a fundamental element of the day to day living of humankind. It is always at the heart of policymakers, businesses, and also academics. In the modern day and age, tax research has been carried out to find solutions to problems involving taxes. This is efficiently done by the application of tax law in the situation, and it helps in formulating tax policy (Hanlon & Heitzman, 2010). Moreover, it is also conducted to determine what consequences taxpayers are bound to be subjected to. It is always a process that follows through four steps. It starts by identification of the issue, determination of the reliably accountable authorities, evaluation of how these authorities are effective, and application of the results in reality (McKerchar, 2008). In other words, tax research implies the study of the source of tax laws and how they interpret the laws.
Tax research is divided into two categories: applied tax research and academic tax research (McKerchar, 2008). Applied tax research always looks at law that is already existent and examines how it impacts on a given situation. In other words, in the case where there is a tax problem situation, research is done on the existing tax laws with the aim of finding an applicable law. Once one has been found, the tax researchers then perform an analysis to determine the consequences of its application in the problem situation. Academic tax research, on the other hand, is one that is obtained from a sensual experience. It is always based on observation and experience. At most times, academic tax research is non-theoretic and does not imply the use of logic.
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Of the two categories, the applied tax research is the most authoritative one. This is because it makes use of existent tax laws to study a certain situation. The use of law makes it substantial over academic tax research (McKerchar, 2008). Academic tax research is less authoritative because it tends to defy logic and use empirical evidence. The failure to administer laws makes it less authoritative and thus less likely to make a difference in matters taxation.
Good examples of applied tax research situations involve divorced parents dependent exemptions, conversion of a limited liability company to a corporation, and taxability of a gain on a property sale. These three situations are duly handled by the law as there are laws that are already put in place to govern how such activities are carried out. Necessary resources to handle this kind of information can be found on the internet freely. However, most of these resources are always sold at a price. These includes journals, magazines, tax courts, IRS, and also treatises (Hanlon & Heitzman, 2010). These resources provide similar situations to the one’s being researched and relevant information at hand.
Academic tax research is not costly because the resource mostly used is knowledge and it is acquired through observation and experience. In the case of experimentation, a few expenses could be incurred. Examples of types of academic tax research situations include a person/ organisation not paying tax, a taxable sale on a piece of property, and non-filed returns by an agency. Just from observation, a tax professional can make conclusions and remedy such a situation. It is, however, not a highly recommended method of tax research.
Tax research is vital component in a country’s economy. At most times, key tax agencies like the IRS and tax courts could have different interpretations of the tax laws as compared to tax professionals. Tax research makes it possible for one to come up with viable conclusions on certain areas of tax flaws. It digs deep into the laws and brings out the best out of the situation in terms of legality.
References
Hanlon, M. & Heitzman, S. (2010). A Review of Tax Research. Journal of Accounting and Economics, 50 (2-3), 127-178.
McKerchar, M. (2008). Philosophical Paradigms, Inquiry Strategies and Knowledge Claims: Applying the Principles of Research Design and Conduct to Taxation. eJournal of Tax Research , 6(1), 5-22.
