Tax season is well-known for being hectic, and in the midst of its chaos, sometimes we find ourselves glossing over important information and details. Tax season can also be stressful and demanding, which makes it all the more difficult to keep track of everything, particularly changes in tax law. In this post, we’ll bring you up to speed on all you need to know about tax law, and how to navigate its changes after you’ve filed.
What is Tax Law? Understanding Taxation in the United States
Before we dive into some of the specifics surrounding tax law, let’s first answer an important question. What is tax law? To define tax law, we first have to understand how taxation operates in the United States. Taxes are mandatory contributions that individuals and businesses pay out to the federal government. Nearly every country on earth requires their citizens to pay income tax, but here in the United States, taxes are typically categorized in one of two ways, federal or state. From there, even more distinctions can be made, for instance, depending on where you live, you may be accountable for certain taxes at the local or county level.
Income taxes are used to fund some of the United States’ most important programs including national defense, health care, social security, infrastructure, education, research, national parks, and more. So, while the process of paying taxes can often feel like a nuisance, it helps to remember that taxation is what helps to keep essential programs and developments afloat.
Without going too far down the rabbit hole, let’s briefly discuss the different types of taxes. While income taxes are a universal requirement of citizens around the globe, in the United States, there are a handful of different tax categorizations. These include taxes such as income, estate, sales, payroll, and so on and so forth.
Why is it important to know about the different tax categorizations and distinctions? Because if you’re not sure about the specific taxes that you’re responsible for paying, tax law can only be so helpful. This is why every year, prior to filing, one should carve out a bit of time to review their tax requirements and verify that they’re covering all of their bases.
The Relationship Between Tax Laws and The Various Branches of Government
Law, including tax law, does not exist in a vacuum, meaning, our country amends legislation based on the influence of economics, culture, and politics. Tax law can change to help raise or lower government revenue, redistribute wealth and resources, incentivize, or discourage certain behaviors or activities, correct market failures, or, respond to crises and emergencies like natural disasters.
Changes to tax law often begin in the legislative branch of the federal government which consists of Congress and the President. As part of their duties, congressional representatives pass bills for the purpose of establishing new law or amending current laws. Proposed tax law changes are then assessed by courts, be it the Supreme Court or those that rank lower. Courts can interpret the meaning and constitutionality of tax laws, ensuring that they make sense in the greater context of the constitution and don’t infringe on individual rights. In some cases, the Supreme Court also intervenes to help resolve disputes between taxpayers and the government.
Finally, tax law can be changed in the executive branch of the federal government, which consists of the President and their respective administrative agencies. The executive branch also houses the Internal Revenue Service (IRS), the main agency responsible for overseeing taxation in the United States. As part of its functions, the IRS issues regulations, rulings, notices, and other guidance. The IRS also issues audits, investigations, and collections against taxpayers who have failed to comply with tax law.
How to Ensure You Don’t Miss Important Changes in Tax Law
Before, during, and after every tax season, laws are bound to change. This is why, even if you’ve been filing taxes for decades, you should never assume that a law cannot be changed or overturned at any point in time. Even laws that have been on the books for decades are subject to undergoing changes both small and large.
Now that you understand the how and the why behind tax laws and tax law changes, let’s transition into discussing how to stay on top of changes and subsequently, how best to navigate tax laws when they are amended. First and foremost, a good way to ensure you’re not missing any major changes is to pay attention to news and current events all year long. Generally speaking, major tax amendments and changes will be broadcast to Americans through major media outlets, especially if they affect the vast majority of taxpayers.
Another way that you can keep track of tax preparation changes is through the IRS website. When it comes to researching information about tax law, the IRS should always be the first place that you look because it will contain the most up-to-date and accurate information available. Other reputable resources include the Congressional Research Service, the Joint Committee on Taxation, and/or verified tax publications, journals, and blogs. Keep in mind that you should be tracking tax law changes that are relevant to the taxes that you, specifically, are accountable for. For instance, if you’re a small business owner in Charlotte, North Carolina, make sure that you’re tracking both local and federal tax laws that are relevant for business owners. Tax law can get very specific at the state level, especially for businesses, which is why you have to cover all of your bases.
Why Professional Tax Firms Still Reign Supreme in the Digital Age
While it’s true that technology has made it much easier for the average person to file taxes using online programs, tax firms are still plentiful and necessary. For example, firms like McGrant Tax & Bookkeeping located in Charlotte, North Carolina, that have operated for decades, prove that having professional tax help is often invaluable. If changing tax laws is a concern for you, especially if you are the type of person who has complicated tax requirements, definitely consider seeking the help of a professional. Sure, you might forfeit some extra funds upfront, but the time and security that accompanies having a professional on your side will far outweigh the initial investment. If changing tax laws is of grave concern to you, know that professionals are here to help, and the best of them have an abundance of experience tracking amendments to tax law and tax legislation.
McGrant Tax & Bookkeeping has been successfully operating for more than 27 years, and we have established ourselves as a firm that Charlotte’s personal and professional tax filers have trusted and relied on for decades. To learn more about the ways that we can help you with tax preparation services in Charlotte NC, feel free to contact us today at any of our two locations or visit our website https://mcgranttax.com and book an online or physical appointment.
This post is to be used for informational purposes only and does not constitute legal, business, or tax advice. Each person should consult his or her attorney, business advisor, or tax advisor concerning matters referenced in this post. McGrant Tax and Bookkeeping assumes no liability for actions taken in reliance upon the information contained herein.
