Federal Tax System Analysis

Few people like paying taxes. In fact, some individuals go to extreme lengths to avoid paying taxes – legally or otherwise. During the Civil War, one guilt-ridden American triggered the move by the U.S Treasury to enhance an already-established fund, in which citizens could voluntarily remit payments for unpaid or back taxes. Since its inception in 1811, up to 1987, The Conscience Fund had collected over 5 million dollars – thanks in part to the guilty conscience of one American citizen.

After the passage of the 16th Amendment, the nature and process of taxation changed many times. An author for the Virginia Law Review wrote in 1972, “Developing and maintaining an appropriate tax structure for a nation as economically complex and dynamic as the United States is a mammoth task” (Graetz, p. 1401). Because of this complexity, the nature of the Tax Code would need to be altered to keep up with what the country requires at a given time. Several significant changes have been made to the Tax Code, but none more significant than the passage of the Tax Reform Act of 1986 (TRA 86). TRA 86 was one of the most polarizing changes in tax law and where the current Code gets its name (Spilker et all., 2016, p. 2-11). It brought about more revisions than most people and businesses could keep up with, and it brought to light the deficiencies in implementing amendments to the Code, namely a disturbing lack of awareness from taxpayers of the alterations. Many businesses benefited from the changes—mostly large, well-established firms, but small mom-and-pop stores who have less stake in tax planning suffered (Scholes, Wilson, Wolfson, 1992, p.181). This negative effect would have been avoided if taxpayers had taken precautions and been aware of the impending changes in tax laws and if those changes had been communicated clearly to them.

John Cheek an airline pilot willfully failed to file federal income tax returns. Mr. Cheek clearly admits that he has not filed his returns, he maintains that he had not because he genuinely believes based on his association what a group believing that the federal tax system is unconstitutionally enforced and that his action was lawful. Cheek also produced a letter from an attorney stating that the sixteenth amendment did not authorize a tax on wages and salaries but only on gain or profit.

In January of 2005, President George W. Bush appointed a bipartisan committee to propose new income tax policies; they were referred to as the “President’s Advisory Panel on Federal Tax Reform”. The goal of the panel was to advise new options in an attempt to make filing of the United States personal income tax simpler. The made a statement about the difficulty that normal citizens have when filing their tax returns, “For millions of Americans, the annual rite of filing taxes has become a headache of burdensome record-keeping, lengthy instructions, and complicated schedules, worksheets, and forms – often requiring multiple

The IRS (Internal Revenue Service) is the government that handles the collection of individual taxes and tax related concerns in the US. The IRS urges its people to perform their obligation in paying their taxes on a regular basis by permitting them to pay in instalments. An overlooked payment leads to penalty and a few interest of approximately 8-10% yearly to taxpayers.

Mistakes increase when a person fills out tax returns without software or a professional. It's too risky to follow the instructions on the form due to yearly tax changes, typos, and mathematical errors. Online tax preparation websites, downloaded tax preparation software, tax accountants, tax lawyers, and tax services (HR Block, Jackson-Hewett, etc.) are the preferred suggestions for successful tax filing. Fewer mistakes occur when one or more options are in your

The United States tax system is in complete disarray. Republicans and Democrats agree that the current tax code is complex, unfair, and costly. The income tax system is so complex; the IRS publishes 480 tax forms and 280 forms to explain the 480 forms (Armey 1). The main reason the tax system is so complex is because of the special preferences such as deductions and tax credits. Complexity in the current tax system forces Americans to spend 5.4 billion hours complying with the tax code, which is more time than it takes to manufacture every car, truck and van produced in the United States (Armey 1). Time is not the only thing that is lost with the current tax system; Americans also lose

Many U.S citizens disagree with the Internal Revenue Code when it comes to the percentage they must pay out of their earned and unearned income; as a result, many of them might use some type of strategy in order to report less income to the Internal Revenue Service (IRS) and don’t pay that much in taxes. For example, many taxpayers decide to use tax planning strategies such as timing strategies, income-shifting strategies and conversion strategies to reduce their before tax income. All these strategies mentioned before are an example of tax avoidance, which is a legal way to minimize tax liability. On the other hand, there are also some strategies that fall within the scope of tax evasion, which is the illegal

In my current job as a Payroll Specialists, I am faced with many personnel challenges every day. We are hiring more and more employees from different countries and assisting them with our onboarding process can be difficult at times. One of my biggest challenges are tax forms. Employees from other countries do not fully understand the tax laws in the United States and it can become frustrating and stressful. Based on the tax laws, I am given the task to determine which taxes an employee must pay or if they are required to pay taxes will in the U.S; tax forms are complicated for most employees, but even more for non-residents. The verification process is time consuming and complicated. I have to complete a process through the IRS website that

The tax preparation industry services millions of customers each tax season. Among the industry participants there are tax preparation franchises and independent tax preparation firms. The values illustrated by a tax professional; depends upon the individual or firm that is providing the service. However, most customer complaints are against tax preparation franchises like HR Block and Jackson Hewitt. Therefore, these complaints indicate that there is a lack of principle and values within this industry as a whole.

Liturgy, the voluntary contribution from affluent citizens to public goods and services, was in ancient Greece a prevalent practice. Citizens provided ‘unselfish citizenship’, although they were not obliged to by law (Adams, 2001, pp. 65-69). Nowadays, the tax gap culminates in a sum of £34bn (HMRC, 2015), causing significant inequity between tax complying and tax evading citizens. Murphy (2014) provides an even greater tax gap estimate of £119.4bn. Her Majesty 's Revenue and Customs (HMRC) approach to tackle tax evasion focuses mainly on pursuit and deterrence (HMRC, 2014a), resulting in a

Why do so many businesses and people pay their taxes? The reason businesses and people pay their taxes is because of tax morale, or the willingness to pay taxes whether they consider taxation to be morally justified or not. There are many ways people evade paying taxes, for instance the black market. The black market is an illegal trafficking or trade in officially controlled or scarce commodities (Merriam Webster). The services and commodities range from sex to drugs, to even the iPhone

“As to the astuteness of taxpayers in ordering their affairs so as to minimize taxes, the very meaning of a line in the law is that you intentionally may go as close to it as you can if you do not pass it. This is so because there is no public duty to pay more than the law demands: taxes are enforced exactions, not voluntary contributions.” (Case 1)

The individual income tax is complicated, and it violates transparency standards through created loopholes (or tax preferences) which allow some to pay less than their fair share of taxes (Mikesell, 2011). In 2005, more than 70 percent of individuals filing taxes had tax preparers complete their returns because of confusing rules and regulations that could penalize taxpayers for qualifying for certain legal tax preferences (Mikesell, 2011). This transparency problem exists because citizens are really unaware of how to determine their tax liability except at the end of the year. Income taxes are collected annually through the Internal Revenue Service (IRS), and there are constant complaints about the IRS not willing to assist taxpayers

Duke of Westminster, Lord Tomlin observed in respect of T ax Avoidance that: "Everyman is entitled, if he can to order his affairs so that the tax attaching under the appropriate Acts is less than it other wise would be. If he succeeds in ordering them so as to secure this result, then however in appropriate, the commissioner of Inland Revenue or his fellow tax payers may be of his ingenuity, he cannot be .compelled to pay an increased tax".8 Thus in spite of the generally held opinion that tax avoidance is unpatriotic and anti-social, it is clear that it is not a moral or legal issue unless the legislature expressly prohibits it. Tax Evasion on the other hand is the deliberate refusal or failure to pay one's tax or the reducti9n of ones tax liability through illegal or fraudulent returns or failure to make a return or pay tax on time.9 Implicit in the definition is that Tax Evasion apart from being a moral wrong also amounts to a breach of the tax law. Perhaps the distinction between Tax Avoidance and Evasion will be better understood and appreciated from the vivid illustration of the Royal Commission on "Taxation of profits and Income”.10 The Commission distinguished as follows: "The latter (that is evasion) denotes all those activities which are responsible for a person not paying the tax that the existing law charges upon his income. Exhypothesis, he is in the wrong, though his