The word “tax” is derived from the Latin term “taxo.” A tax is a compulsory financial levy or a type of financial charge that is imposed upon a taxpayer (whether an individual or a corporation) usually buy government organizations. Money obtained from tax is used to fund various public projects. When we say “public” we mean the state, that is the country. In a sense you could say, tax is the money used to run a state. Due to the fact that tax is a compulsory levy, the failure to pay either by underpaying or complete avoidance is punishable by law. Tax can be direct and indirect. For example, some products we purchase already have V.A.T (value-added tax) even before we purchase it, that is an indirect tax payment. In some situations tax can be paid with money or labor. In modern times, most tax is paid with money. Most countries have a standard taxation system. For some, it’s a flat percentage rate on personal income. This means that perhaps everyone pays ten percent of their personal income as tax. While other countries scale tax, this is a sort of progressive tax. There is no fixed percentage. The tax is scaled based on annual income amounts. Some countries even tax annual and corporate income separately.
The history of taxation goes as far back as 3000BC to Ancient Egypt. Ancient Egyptian taxes were collected either as “tithe”, which is a flat percentage rate and corvée which is labor. Interestingly, the ancient Egyptian words for tax and labor are synonyms and were used interchangeably. Earlier in this article, we mentioned how tax could be paid with labor. Although that practice has gone out of style, it was the norm for peasants in ancient Egypt who could not afford to pay taxes with money. The Biblical definition of the tithe is one-tenth (10% percent) of a person’s wages/earnings but evidence has shown that some Pharaohs collected as much as twenty percent (20%). A more sustainable taxation system was invented by Darius I the Great in 500BC. After that, revisions were continuously made which brings us to present-day taxation systems.
The US runs a three-tier tax system with tax being collected at the federal, state and local governments. Taxes are placed more on labor income over capital income. The US also collects taxes from non-residents. The US tax system is a progressive one which means as income rises so does the tax percentage. There is no flat rate. Taxpayers fall into one of the following percentages based on their income. There are seven percentages and they are: 10 percent, 12 percent, 22 percent, 24 percent, 32 percent, 35 percent and finally 37 percent. These percentages are called “tax brackets.” For a more detailed explanation on tax brackets and which one you fall into it please go here.
Now, you may be asking where does the IRS comes in or what even is the IRS. With taxation comes a system, a body to regulate that system and another set of people who make sure that the body is acting according to the law(tax lawyers). “IRS” is an acronym for Internal Revenue Service. The IRS is, simply put, the revenue service of the federal government of the United States. They are an administrative unit of the Department of the Treasury, the department that handles state money. The Department of the Treasury prints the currency collects all federal taxes through the IRS gives advice on fiscal policy, manages debt instruments and a host of other things. The IRS is responsible for collecting all tax revenue and administering the main body of tax law which is the Internal Revenue Code. The IRS also helps taxpayers and resolves errors in tax filings or fraudulent tax filings.
The IRS was first founded during the American Civil War (1861-1865). The office of the Commissioner of Internal Revenue was created when Congress and the then president, President Abraham Lincoln enacted a temporary income tax to help pay for the war. This was passed in the Revenue Act of 1862. The Act was a success and by the end of the war, an estimated 21 percent of the war revenue was gotten from this temporary tax. It was a temporary war act but the Civil War Income tax did not expire until 1872. This is because there were a lot of accumulated damages that occurred as a result of the war, therefore, funds were needed for reconstruction. In 1913, the tax reform happened and it stated that Congress reserved the right to impose tax on income without apportionment in regards to the individual state census or population. This same year the first copy of the 1040 IRS form was introduced and it stated that those with an income above 3,000 dollars (about 75,000 dollars in 2017) were required to file, however, the IRS didn’t collect tax till 1915. The IRS has changed as the years have passed, one of the most important being computerization.
The IRS has had some major scandals concerning tax returns and this has grabbed the attention of several tax lawyers. Tax returns can be calculated by the individual or by the IRS. Tax returns are gotten by comparing the money withheld for federal income tax and the federal income tax you’re meant to pay Some employers automatically remove tax so if you deduct the tax you’re meant to pay from the money that was withheld and paid for you, you will arrive at your tax return. It could be that the government owes you some money which in that case you are legally qualified for tax returns or you owe the government some money. You can arrive at your estimated income tax by referring to the tax brackets we discussed earlier.
Tax lawyers often work hand-in-hand with taxpayers to handle legal, technical and often complex tax issues. It is possible to reach out to a tax lawyer after the issue arises but it is safer to consult tax lawyers in advance to avoid these problems. The IRS has had several scandals so it is important to be prepared in advance with the services of a tax lawyer. A huge scandal like the hacking of IRS systems which led to over 700,000 thousand stolen citizen details. Details include their social security numbers and other sensitive information. The Taxpayer Bill of Rights was passed in July 1998 due to several complaints filed concerning the aggressive tactics of the IRS. This bill shifted the “burden of proof” to the IRS only in certain situations in order to give greater protection to taxpayers and tax lawyers disputing the IRS.
The IRS targeting controversy is a huge scandal that rocked the US. In 2013, the IRS first revealed that they had been subjecting political groups that were applying for tax exemption to intense scrutiny based on their names and political themes/side. They admitted that most of the groups being scrutinized were conservative groups. To date, there are arguments on this controversy. This is a huge problem. The IRS is a government body that is meant to be neutral. They are protected by a sort of independence which demands that they should not be partial to any side. This is why you need a tax lawyer. The IRS has shown itself to be unreliable so you need protection from tax lawyers. Whether you have received an IRS notice or your tax return isn’t complete, Cumberland Law Group, LLC in Atlanta is here to get you justice. If you’re in Atlanta, give us a call today for a consultation or for justice.
