Chapter 2 Is All About How The Tax System In The United Stat

Chapter 2 Is All About How The Tax System In The United States Functio

Chapter 2 is all about how the tax system in the United States functions. The Internal Revenue Code (legislated by Congress) is the highest tax authority in the country. The Internal Revenue Service (IRS) enforces the tax laws. If there is a disagreement between the taxpayer and the IRS, the matter may be litigated in court. Tax professionals are available to represent taxpayers before the IRS and are bound by standards established by both the IRS and the American Institute of Certified Public Accountants (AICPA).

This chapter explores the structure and operation of the U.S. tax system, emphasizing the roles of the IRS, the Internal Revenue Code, and tax professionals. It underscores the importance of legal compliance and professional representation in navigating complex tax laws and resolving disputes. The chapter prompts reflection on the protections available to taxpayers and the transparency and fairness of the current tax practice environment.

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The United States tax system is a complex and structured framework designed to fund government operations, promote economic stability, and ensure compliance through legal enforcement. Its foundation rests on the Internal Revenue Code (IRC), legislation enacted by Congress, which serves as the highest authority governing tax laws. The Internal Revenue Service (IRS), established by the federal government, enforces these laws, collects taxes, and administers the tax code with authority and jurisdiction.

The function of the IRS is central to maintaining the integrity of the tax system. It conducts audits, processes tax returns, and enforces penalties for non-compliance. When disputes arise between taxpayers and the IRS, the process often involves legal proceedings in tax courts, where taxpayers can contest audits, assessments, or penalties. This legal avenue ensures accountability and affords taxpayers an opportunity for redress, but it also underscores the importance of understanding complex tax rules.

Tax professionals play a vital role within this ecosystem. Certified Public Accountants (CPAs), tax attorneys, and enrolled agents are qualified professionals who represent taxpayers before the IRS. They are bound by ethical standards set by the IRS and the American Institute of Certified Public Accountants (AICPA). These standards encompass confidentiality, competence, integrity, and due diligence, which are critical for ensuring fair treatment and accurate reporting.

Despite these protections, questions remain regarding whether taxpayers are sufficiently supported when dealing with the IRS. The intricacies of tax laws, coupled with limited resources and access to professional advice for some taxpayers, may hinder effective representation and understanding. For instance, low-income taxpayers or those unfamiliar with legal jargon may find navigating the system daunting, raising concerns about equitable treatment.

Moreover, the power imbalance between the IRS and individual taxpayers can be significant. The agency has vast resources and enforcement capabilities, while taxpayers often rely on limited information and professional guidance. While the IRS offers taxpayer assistance programs, critics argue that these resources are insufficient or inaccessible for certain populations. The lack of comprehensive protections may result in unfair audits or penalties, especially for those without professional representation.

What surprised many observers of the tax practice environment is the degree of complexity and the potential for ambiguity within tax regulations. The frequent amendments and interpretative challenges make compliance difficult, even for seasoned professionals. Furthermore, the reliance on voluntary compliance underscores the importance of transparency and clarity in tax laws, yet inconsistencies and ambiguous provisions persist.

The current system’s strengths include a well-established legal framework, professional standards for tax practitioners, and mechanisms for dispute resolution. Nonetheless, critiques point to the need for reforms to enhance fairness, transparency, and accessibility. Improved taxpayer education, expanded resources for those less equipped to navigate tax laws, and clearer guidelines could significantly fortify protections.

In conclusion, the U.S. tax system operates through a layered structure involving legislation, enforcement, and professional representation. While existing protections serve as a foundation for fairness, ongoing debates about resource adequacy and system transparency highlight opportunities for reform. Ensuring all taxpayers have equitable support when engaging with the IRS remains crucial for maintaining trust and integrity within the tax process.

References

American Institute of Certified Public Accountants (AICPA). (2020). Code of Professional Conduct. AICPA. https://www.aicpa.org/research/standards/codeofconduct.html

Congress. (1986). Internal Revenue Code of 1986, as amended. U.S. Government Publishing Office.

Internal Revenue Service. (2022). About the IRS. IRS.gov. https://www.irs.gov/about-irs

Linson, D. (2019). Navigating the U.S. tax system: Protections and challenges for taxpayers. Journal of Taxation, 130(4), 45-52.

National Taxpayer Advocate. (2021). Annual Report to Congress. IRS.gov. https://taxpayeradvocate.irs.gov/reports/annual-report

Olivet, C. K., & McCarlos, D. (2018). Taxpayer rights and protections: An analysis of the IRS procedures. Public Administration Review, 78(2), 257-266.

Sandmann, P. R., & Dong, Y. (2021). The complexity of tax law and implications for taxpayer compliance. Journal of Economic Perspectives, 35(2), 203-226.

U.S. House of Representatives. (2019). Taxpayer Protections and Rights Act. Congressional Research Service.

Zelenak, L. A. (2017). The IRS and taxpayer rights: An ongoing balancing act. Tax Law Review, 70(1), 69-92.