July 12, 2018
The tax code, officially titled the Internal Revenue Code, has been written by Congress and has an average of 3.7 million words…at this present time, at least! It’s a compilation of tax laws that have been written and passed by Congress since the ratification of the Constitution way back in 1788.
Who gives Congress the power to levy taxes?
Congresses power to levy taxes for the collection of revenue, is given by the Constitution, and is to enable them to collect funds for the common defence and general welfare of the United States. In 1939 the first compilation of The Internal Revenue Code was created, with major revisions being made in 1954 and 1986.
Why is the tax law so long?
The length of the tax code and the reason why it is so complex, is because it includes absolutely every tax law that has been designed to help promote certain causes or benefits, such as social welfare – including tax breaks for low cost housing construction - or to try and stimulate the growth of the economy by making deductions more readily available for businesses.
Why are so many changes made to tax laws, and so often?
As mentioned above, changes to tax laws can be made for various reasons such as to try and benefit social welfare or economic growth, but some changes are made as political rewards for certain groups who pledge their allegiance to congressmen during their election campaigns. There are also various demands made on the American budget each year, with the nature of finance always fluctuating. This can mean that one year may be a good one in financial terms, and less revenue from taxes is required, compared to another year in which more is demanded from people in the form of taxes. Concerns about national security may also see tax laws changing and may increase the need for a financial safety buffer.
The last significant change to U.S. tax laws was as a direct result of the Economic Growth and Tax Relief Reconciliation Act of 2001, and introduced reduced taxes for individuals and businesses, while lowering estate taxes.
From time to time, temporary changes to tax laws are made such as in the wake of a national tragedy or act of God, and special credits or deductions can be made for taxpayers. In the aftermath of Hurricane Katrina, for example, the Katrina Emergency Tax Relief Act of 2005 was created to allow charitable donations to be 100% deductible if they were to provide direct relief to the hurricanes’ survivors.
To know more and to stay up to date with current changes to existing tax laws – whether as an individual or a business owner – please seek professional help to ensure that you remain in compliance with the IRS.
Most small businesses trying to manage without a bookkeeper will struggle, irrespective of how much they may enjoy that aspect of running a business, or even how proficient they believe themselves to be at it. The simple fact of the matter is that good bookkeeping requires time, patience and more time! Some busy business owners may be prepared to dedicate a good...
April 16th may feel like a joyous occasion for small business owners and an excuse to throw down the tax towel and shake off the tax blues for another year, but this kind of approach can be dangerous, to say the least!
Ditching tax talk for the rest of the year after filing, can land you in big trouble when the next tax season...
All small businesses will go through a series of ups and downs, and solving some of the problems that can arise, takes time and patience. Most owners of small businesses complain of not having enough time to do everything that is required of them, but finding time to update the books so that their bookkeeper can do their job efficiently, is one thing business...