The Tax Laws: What You Need to Know

The Process of Creating Tax Laws 

The process of making tax laws in the US involves the following steps. It starts by the initiation of the bill by the Ways and Means Committee of the House of Representative. From there, the committee reads the graft of the bill to House representatives. After passing through the House scrutiny, the bill is passed on to the special Senate Finance Committee. Here it may be passed, rejected or amended. Next, the bill is sent for the senatorial voting, alongside a report from the Senate Finance Committee. If there are differences between the bills passed by the Senate and the House, the Conference Committee (that comprises of selected members of Senate and the House) must address/polish on the disputed concerns, and draft a conference bill. The committee also writes a report after drafting a conference bill. After that, the conference bill is sent back to the House and Senate for voting. If both Houses pass the bill, it is taken to the president for signing. Finally, if the president signs the bill, and it officially becomes an enforceable law. 

The Mission of IRS 

The paraphrased version of the IRS is to provide the American taxpayers with high-quality services by assisting them to well understand and meet all their tax obligations, and by employing fairness and integrity in the application of the tax laws and regulations. 

The Role of the Treasury Department in Income Taxes 

The Treasury Department has multiple roles as far as enacting and implementation of income tax is concerned. It collaborate with the IRS to codify the laws made by the Congress, i.e., Internal Revenue Code. Simply put, they guide the application of the new income tax regulations. It also coordinates with the IRS in addressing the emerging income tax-related concerns and issues in accordance with the existing codes. 

The US Tax Court versus the US District Court 

The two main reasons why a taxpayer should file the case in the US Tax Court and not the US District Court are: If you file the case in the former, you are not obliged to pay the tax in question to the IRS before the court’s verdict. But if you file the case in the former court, you have to first pay the tax in question to the IRS, and then claim for refund if you win the case. Also, unlike the US District Court’s judges, the judges of the US Tax Court travel close to the complainant’s location to hear and rule the case. 

Internal Revenue Code Information 

The content in the internal revenue code is published in the Federal Register by the IRS. So, it is through reading the Federal Register that a taxpayer gets to know the information in the Internal Revenue Code. 

Statuses for Filing Tax Returns 

There are five statuses that can be used to file tax returns in the US. They include single status (for unmarried people). Married filing jointly status is for couples in marriage. Married filing separately option is where each spouse files his/hers separately. Qualifying widow/widower with dependent child is also option for filing returns. Finally, Head-of-household status. 

Penalties for Failing to File Tax Returns on Time 

The first penalty for failure to file tax on time is 5 percent of the total amount of unpaid tax by the deadline. This fine rate is charged on monthly basis. In some cases, the fine can be as high as about 25 percent of the unpaid tax. For a 60-day delay, the penalty can be 100% of the unpaid tax or at least $135. 

Options for People Owing Money but With No Cash to Pay 

In this case, the person should file tax returns. However, he/she should seek the interventions of the Bankruptcy Abuse Prevention and Customer Protection Act (BAPCPA, 2005). That is because BAPCPA is mandated by law to prove whether or not the suspect is telling the truth (i.e., that someone owes him/her money), and react based on the findings. 

Reference 

Stefani, R. (2018). Sources of Income Tax Law Fundamentals. Tools and Techniques for Income Tax Planning, Ramona Stefani, 1-18 .