Answer
The proposals to simplify the Federal Tax Laws and the filing procedures are as follows:
1. Decreasing the number of dissimilarities.
2. Eliminating some of the itemized deduction from the tax code.
3. A data- retrieval system.
4. A pro-forma return system
Work Step by Step
Tax law covers the policies, laws, and rules that oversee the process of tax which includes the charges on transactions, estates, income, licenses, property, and more by the government. It also involves the duties on imports and other necessary levies imposed on the individual for the advantage of the state by the government.
The Federal tax law is administered by the IRS (Internal Revenue Services). The IRS is a bureau of the U.S Treasury. The tax provisions are interpreted by the IRS through IRS regulations, which offer the guidance on the tax law application. Every tax code does not have a regulation. So, the IRS uses the revenue procedures, revenue rulings, and letter rulings. The government collects the payroll taxes, income taxes, real estate taxes and sales taxes from the companies as well as individuals. Some deductions are also allowed by the government.
The income taxes are collected throughout the year. At the end of the year, the tax return must be filed by every person to know whether the government collected adequate tax or government owes a refund for paying more tax.
Filing the tax return enables the taxpayers to calculate their schedule tax payments, tax liability, or demand for the refund in case there is an over payment of the taxes. The tax returns must be filled annually for a business or an individual with the reportable income. Some of the income include wages, capital gains, dividends, interest, or other profits. The procedure for filing the tax return is cumbersome and time-consuming.
The proposals to simplify the Federal Tax Laws are as follows:
1. Decreasing the number of dissimilarities among the economic activities and the personal characteristics of the taxpayers would result in simplifying the tax code as it will reduce both the administrative costs for the government and the compliance costs for the taxpayers.
2. Eliminating some of the itemized deduction from the tax code. There are many itemized deductions with its own rules and regulations and they are associated with specific policy goals. However, they are a poor vehicle in attaining such goals.
The proposals to simplify the filing procedures are as follows:
1. A data- retrieval system: Under this system, the government would provide the taxpayer with the access to the reports of the third party it has received. This will enable the taxpayer to download the data. The taxpayer would be then responsible for adding any essential information which is needed by the government but not mentioned or correcting any error and calculating the tax due.
2. A pro-forma return system: Under this system, the government would make use of the data provided by the third party together with the information of the tax return of the prior year of the taxpayer with the tentative present year tax return. Thus, this will make the taxpayers responsible for confirming the accuracy of the information and bringing necessary changes if required.
