The use of judicial doctrines to curtail tax avoidance is pervasive in the area of income taxation. There are several reasons for this phenomenon: central among them is that courts believe that if the Internal Revenue Code (“Code”) were read literally, impermissible tax avoidance would become the norm rather than the exception. No matter how perceptive the legislature, it cannot anticipate all events and circumstances that may unfold, and, due to linguistic limitations, statutes do not always capture the essence of what is intended. Judicial doctrines fill the void left either by the legislature or by the words of the Code. Another reason for the popularity of these doctrines is that courts do not want to appear duped by taxpayers…” (Jay A. Soled, Use of Judicial Doctrines in Resolving Transfer Tax Controversies, 42 B.C. L. Rev 587, 588-589 (2001).)
Barber Conable, who served for many years as a Republican leader on the House Ways and Means Committee, said, ” As a former Congressman, I can tell you that people are always writing to their legislators to say there ought to be another law to do this or that. They are always suggesting new ways in which government should be useful.” (Conable 94) In other words, these laws and regulations were enacted because of perceived failures and deficiencies in the private sector. These laws were passed because constituents felt there were problems that needed to be corrected and private enterprise wasn’t about to correct the problems because it wouldn’t be in their best interest to initiate actions which would increase their costs without also increasing their revenue.
Not everyone thinks the tax code should be used to achieve desired social aims through tax preferences. Stanley Surrey was a Harvard Law School professor who believed “… our income tax system should be used only to raise revenues and that the rate of taxation should be highly progressive.” Surrey felt that tax preferences “…eroded revenues otherwise available to the government.” He wanted to simplify the tax system and he thought the wealthier taxpayers should shoulder a proportionally higher cost of government operations. (Witte 8)
The more taxable income you have the more it moves into higher tax rate brackets – increasing the average overall tax you pay for ‘income’ tax.
Year-End Income Tax Relief Tip #3: Are your subcontractors really self-employed independent contractors or are THEY employees? While you may be a true self-employed independent contractor, you need to establish whether your subcontractors are self-employed independent contractors or employees. According to IRS Summertime Tax Tip 2009-20, “the cost of misclassification to employers in additional taxes, as well as administrative time, or the loss of tax-favored status for employee benefit plans, can be steep.” If you’re not sure, contact a tax attorney or tax resolution specialist to get tax help immediately.
One of the best ways to create substantial tax deductions is by owning and running a small business from your home. By having a home based business you can start claiming deductions on things and activities that are considered of a personal nature by others.
Income tax is both immoral and impractical, and when it gets out of control, it destroys the very basis of any thriving economy. It also creates demand for creative accounting services, to mitigate such high taxes, and the demand for tax havens and offshore bank accounts – where a productive and hard-working person may seek some respite from the clutches of the tax man. There are a number of systems that could be put in place to fund the activities of government – all of which would be better than an income tax. And here’s a few ideas just for starters.
Income tax is normally charged as a percentage of the income earned. The percentage of the tax may vary depending upon the different types of incomes. In some cases, there may be no tax at all. The tax rate may be progressive or flat. With a progressive tax rate, taxes are payable differentially based on how much income has been earned by a person. On the other hand, a flat tax rate treats all incomes the same. An income tax system may allow losses from one type of income to be deducted against profits or gains from another. For example, a loss on the stock market may be deducted against income earned from a business or profession.
Tax payers must file two separate income tax returns. One income tax return goes to the federal government and the other goes to the state government that a particular taxpayer resides in. The majority of taxpaying Americans are able to fill out a Form 1040A: U.S. Individual Income Tax Return. Individuals that do not have any children or other qualifying dependents are able to file an federal 1040EZ form. This form is also referred to as the Income Tax Return for Single and Joint Filers With No Dependents. The 1040EZ is basically a shorter version of the 1040A form; however, taxpayers must meet certain requirements before filing a 1040EZ form.
Free income tax software provides a more convenient data entry procedure to individuals. Manually entering relevant tax data may result in errors at times. Such errors can be reduced through the use of income tax software that you can download for free. Most software programs make use of different data collection methods to input the required data for your income tax return. Most makes use of virtual interviews that asks you to answer pertinent questions that the software programs then use to fill out the appropriate forms and will automatically calculate your income tax return.