tax season

8 Facts About Tax Laws and Regulations You Didn’t Know

Taxes are something that has been an integral part of our lives since we became adults. Although no one likes to pay taxes, both because of the money and because of the time that has to be spent on the whole process, it is still something that is inevitable. On average, every citizen of the USA pays about 5 thousand dollars a year in income tax, which is not a small amount of money at all.

But what creates additional stress is whether you do everything right and on time since it is very common for people to miss due date. So it is best to learn as much as possible about the tax season because then it will all be much less stressful for you. To help you, we will tell you what are the facts about tax laws and regulations you didn’t know.

Source:accountingweb.com

1. Code is extremely long

When the Revenue Act re-established a federal income tax in 1913, signed by then-President Woodrow Wilson, it had about 400 pages and it was certainly possible to read it in a reasonable time. But since then, the number of pages has increased by about 200 times. This brings us to the fact that the tax code is incomparably longer than the Bible and the Statute of Independence combined. That is why it is practically impossible to read everything, and especially to remember.

This leads to a lot of stress in people because it is clear to them that they don’t know enough about that complex topic. That is why more and more people are hiring professionals when the tax season comes or even dedicate time to education, attending seminars and webinars like cpehours.com run by IRS experts, to be able to do everything without error.

Source:pbs.org

2. It existed before 1913

Although most only know about the aforementioned Revenue Act, the first income tax appeared during the Civil War, so that the state would have more money at its disposal. From then until 1913, several types of taxes changed and with it various payment rules.

3. Constant changes

If you thought that everything was established a long time ago and that there were no changes, you are wrong. There have been thousands of changes in the last decade alone. This is necessary because jobs and everything else is constantly changing, so the tax code must stay up to date. That is why professionals are constantly being educated because things are changing at a great speed.

4. IRS is far from perfect

Source:accountingtoday.com

While many imagine the IRS as the perfect agency, this is nowhere near true. According to various studies we read, mistakes made by IRS employees result in a loss of several billion dollars each year. Imagine 10 billion dollars more in the federal budget if mistakes are significantly reduced. Not all the blame can be put on the employees, because they have too much work and the rules and laws are constantly changing so they are facing an uphill battle every year.

Also, it is not so rare that it is noted that IRS agents deliberately cheated, in order to avoid paying taxes and the like, for a period of several years. And what is strange is that most of them were not fired as consequence. While this is not a very common cause, it certainly happens and has a bad impact on the image of the IRS.

5. You can end up in prison if you don’t pay

Although it is much rarer nowadays for someone to end up in prison for avoiding to pay for taxes, it can still happen. Debtor’s prison is a thing of the past and there is usually another way for you to pay your debts. However, if IRS agents estimate that you have been deliberately evading taxes for years, they may charge you with tax evasion. As it is a criminal offense, imprisonment is certainly one of the possible punishments. However, confiscation of property and similar methods of forced collection most often occur.

6. Many do not pay taxes

Source:thenationalnews.com

Although it first occurs to you that many are trying to defraud the IRS, which is certainly the case, when we say that many do not pay taxes we mean that many are exempt from that obligation. The reasons are mostly too low incomes, so the state does not aim for people to be poor because of taxes and then it happens that many are exempt from paying taxes. We find information that the average US resident needs more than 100 days a year to earn taxes, so if someone needs 150 or 200 days, for example, they may be exempt or reduced.

7. The amount varies

Although most people generally pay a similar amount each year in taxes, this can vary. If you have a regular income, the amount will be almost the same or the same from year to year. But if you start earning much more, that is, if IRS notice that your income has increased greatly, then the amount you have to pay may become higher. That is why it is important to pay close attention when filling out the documents so that you can predict if a tax increase awaits you, otherwise you may run into a financial problem if you have not calculated everything in the right way.

8. The first tax season was chaos

Source:forumdaily.com

If you think that now IRS agents are making mistakes and that there are problems, believe us that today everything is perfect compared to the first tax season ever that happened in 1914.

The Revenue Act passed in the fall of 1913 and the tax season was March 1, 1914, which caused two problems. First, it was Sunday so they had to move by a day, and then it was too short a deadline for everyone to submit a report, as well as for all those who had to review all those reports because there were too many of them in a short period of time and of course they did not have the help of a computer.

We hope that the next tax season will be easier for you now that you have learned new information.