Tax Law Essay Example for Free

Tax Law EssaySummarize the sources and preys of advanced(a) in scrape value statutes. The primary source of US appraise truth is Congress. Power to initiate taxation code is vested in the Ho expenditure of Representatives but all tax bills must pass both houses and be sign-language(a) into law by the President. M any times the details of the legislation argon not dictated by Congress, but left to the Treasury Department which adopts regulations (that have the force of law) to spell out the details as well as interpret the statutes and provide guidance on the law. In addition, the Internal Revenue dish up (IRS) issues rulings that address the application of the law to specific fact situations. The court system is also involved in making tax law through decisions about specific fact situations. The main tax courts atomic number 18 the US Tax address and the Di inexorable motor lodges of the US. These decisions can (and do) overturn and change tax provisions base on oth er decisions, as well as the legislative history of the particular legislation.The primary objective of the federal income tax law is to raise revenues for government operations. In recent years, the federal government has broadened its use of the tax laws to accomplish various economic and social policy objectives. Economic Objectives The federal income tax law is used as a fiscal policy tool to stimulate private investment, reduce unemployment, and excuse the effects of inflation on the economy.The federal income tax law also attempts to stimulate and encourage real activities, specialized industries, and small backinges. Social Objectives The tax law attempts to encourage or discourage certain socially desirable or undersirable activities. For example Special tax-favored pension and profit-sharing plans have been created for employees and self-employed individuals to supplement the social tribute retirement system. Compare and contrast generally accepted history principles and tax history. Explain why they are different.GAAP story records all pecuniary transactions cash, accrual, investment, expenses, tax and all other expenses and deductions that may or may not have to be reported on your yearly tax form. This form of accounting is governed by strict standards and rules and may show actual income that is different from taxable income. GAAP accounting is a set of standards provided by policy boards and commonly accepted systems of recording financial information that gives consistency to any type of financial reporting.Tax based accounting is used by most CPAs, and the majority of certified financial statements come from tax based accounting. The focus of this type of accounting is on tracking your taxable income as it builds throughout the year. Tax accounting is a method of producing financial statements that uses the same methods that will apply to your tax return. Features GAAP accounting provides a means for a business to have a complete over view of the reality of its operations by tracking all monetary relationships, investments and expenditure.Tax accounting provides a focus on business or person-to-person expenses that pertain to tax records only. Benefits GAAP accounting is more involved then tax accounting and provides more details about the monetary reality of daily operations that may or may not pertain to your tax needs. It also provides an accurate statement of your liabilities and assets. Tax based accounting has less rules and passs it easier to see where you stand at any given point of the year with taxable income, it does not, however, dependably report all liabilities and assets.Considerations When choosing which form of accounting to use for your personal or business needs at that place are several points to consider. If your business must issue financial statements to investors, GAAP provides greater consistency in the reporting, as it is guided by industry standards and not subject to the many change s that occur in tax requirements on a yearly basis. If you are newly in business, or if you are just solution to use an accounting method in your personal life, you may want to utilize GAAP standards, as it will allow ou to begin to see how money is used in all areas of your life and business. If you are established in your business and do not need to issue financial statements, or your personal budget is adequate and realistic to your living needs, the simpler tax accounting methods may be better for you as your focus will remain on what is needed to successfully file taxes at the end of for each one year, and you do not need the masses of data associated with tracking every financial transaction that occurs during the year. good InsightTax accounting, also known as OCBOA (Other Comprehensive Basis of Accounting), also includes a method of accounting known as cash basis. It is rare that any business can succeed basing its accounting on cash. The intricacies of financial transact ions and the necessity of looking for non-cash based deductions come tax time make cash based tax accounting impractical. Note that all standards for accounting are set by the IASC (International Accounting Standards Commission). Differentiate between tax dodging and tax escape valve.Since the passage of the first income tax law, tax accountants, lawyers, and business persons have concerned themselves with choosing among the various forms a transaction may take. Tax planning is the attend of arranging an individuals transactions in such a manner as to maximise the individuals after-tax income. This process is called tax avoidance, and it is a legal and legitimate pursuit. Some persons choose to rationalise their obligations and the clear provisions of the law, and their actions often result in Tax Evasion.Tax evasion involves fraudulent or criminal behavior as well as conduct involving deception, concealment, or destruction of records. Tax evasion occurs when the taxpayer avoid s payment of taxes that are legally due and owed under tax laws, either through underreporting income or form of address deductions to which they are not entitled. The English precedents were relied on repeatedly by Indian courts as well. Tax avoidance was thus seen as a permanent right of assessees. Then came the turbulence, temporary though.The Supreme Court, in the McDowell Co Ltd vs CTO (1985 154 ITR 148 SC) grounds, said that time has come to depart from the old thinking. It said even tax avoidance is braggart(a) and deserves condemnation. The apex courts justification for this being, the House of Lords, the highest judicial forum of English, has given a go-by to the principle laid garbage down by the British courts (in Duke of Westminster case). Since tax avoidance as a legal route was rejected by the very country of origin, it does not merit any better treatment in India, the Supreme Court held.The adverse legal consequences of this judgment for taxpayers were enormous. First, it came from the highest court of the land and, therefore, binding on all lower courts and Tribunals. Two, the McDowell case blurred the distinction between avoidance and evasion. The Department, of course, welcomed the ruling. It repeatedly tried applying this case, as only the Supreme Court can undo the McDowell case, if at all. And fortunately the apex court did reverse the findings in the McDowell case in Union of India vs Azadi Bachao Andolan (2003 132 Taxmann 373 SC).It was argued before the Supreme Court that the McDowell case had changed the face of fiscal jurisprudence in the country. Therefore, for any tax planning, the court must strike down what is intended to and results in avoidance. Rejecting this argument, the apex court upheld the legitimate rights of taxpayer in tax avoidance. In the process, it found that the McDowell ruling was nothing elisional but only an exception to the well-settled law.