The IRS And The Tax Code In A Nutshell

September 9, 2019

When Congress decides to make changes to tax rates, that’s when they occur and the frequency at which this happens is hard to predict. Most recent changes were back in 2001, thanks in part to the Economic Growth and Tax Relief Reconciliation Act, which reduced tax rates for both individuals and businesses. So, Congress writes the tax laws, but the IRS are responsible for implementing them and helping to explain how the new rules can be applied to specific situations. Treasury Regulations and Revenue Rulings are the written regulations and procedures in which the new tax codes will appear, and they are almost four times as long as the tax code itself! Here’s a little more about the relationship between the IRS and the tax code:


How the IRS interprets actions made by Congress:

Based upon the actions of Congress, the IRS issue rules and regulations, and occasionally, temporary changes are made to allow for special credits or taxpayer deductions. One particular time when this might happen, is in the wake of a natural disaster or some other such occurrence, when an urgent need for economic relief may be there.


How do the IRS communicate changes to tax rates?

A bulletin is published by the IRS in the event of a change to tax rates, and such changes are also reflected in tax preparation software and are incorporated in the calculation of a taxpayers obligation.


Who enforces tax laws and regulations?

It’s the primary role of the IRS to do this, but while paying taxes isn’t a choice, it’s a necessity, filing and paying income tax is essentially, voluntary. Confusing isn’t it? The IRS allows individuals and businesses to calculate their own taxes and what they owe, but Title 26 of the U.S. code states very clearly that those taxes must be paid. However, every year thousands of Americans opt out of paying the taxes that they owe, and the IRS are usually hot on their tails and busy initiating collection processes. This begins with a bill sent by mail, and any failure to pay, file for an extension or set up an instalment plan results in collection agents sent by the IRS, arriving at your door to seize any assets that you might have.


If the IRS discover irregularities or errors in your tax filing, then an audit of your financial Records are usually initiated, with each taxpayer having the right to argue any final decisions made by the IRS, in a U.S. Tax Court.


Those who are trying to exploit the tax system for criminal gains will be pursued rigorously by the IRS, and special agents working for the IRS Criminal Investigations division will do their utmost to unravel any unlawful tax avoidance.


The tax code and the workings of the IRS may seem like a foreign language to you, in which case why not book a consultation with a tax professional, and have them explain it all in laymen’s terms to you?


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