Tax Law and Accounting objectives are defined by modern income tax statues. Comparisons and contrasts between tax accounting and Generally Accepted Accounting Practices (GAAP) will be included with explanations as to why they are different, and the differentiations between tax avoidance and tax evasion will be explored.
The federal income tax administered by the Internal Revenue Service (IRS) is the prominent form of taxation in the United States. Both individuals and corporations are subject to these regulations and taxes. In 1895, the Supreme Court ruled that taxation by apportionment among the states in proportion to their populations was unconstitutional. The sixteenth was enacted by congress and ratified in 1913.
Establishing criteria for a good tax structure was first attempted back in the late 1700's with four "canons of taxation"-equity, certainty, convenience, and economy are still used today when tax issues are discussed. Some also add a fifth cannon of simplicity.
Whenever changes to the Internal Revenue Code (IRC) are made, these canons are used, the old language is deleted, and the new language is added. Simplicity is used in this way so that a single document may be used so a tax advisor does not have to wade through previous information to find the most current law.
The primary objectives of the federal tax laws are to raise revenues for government operations and in recent years have broadened its use to accomplish various economic and social objectives. Supposedly, the federal income tax laws are used as a fiscal policy tool to stimulate private investment, and mitigate the effects of inflation on the economy.
The federal tax law attempts to stimulate and encourage certain activities, specialized industries, and small businesses such as credits for research and developmental costs, with special incentives to the oil and gas industry through percentage depletion...