Tax Law Lawyer

If you are an adult, you would have surely heard about taxes. In a nutshell, taxes are the fees the government charges its citizens for doing their job and maintaining the country's public infrastructure. Taxes are levied on everything from the goods you purchase to the real estate you buy and sell and the income you earn. In fact, according to a survey, American citizens spend almost 30% of their income on paying a variety of taxes at the federal, state, and local levels. Irrespective of whether you are self-employed or an owner of a business, you will be required to pay taxes to the government. Because tax laws are complicated, they can confuse you as well as your accountant. In such instances, you may end up in trouble for falling short or failing to pay the dues to the Internal Revenue Service (IRS). Therefore, it is in your best interest to consult a tax attorney when filing taxes or to deal with the IRS.

What Are Tax Laws?

Technically, tax is defined as involuntary fees levied on corporations or individuals enforced and collected by government entities – whether federal, state, or local. The fees collected by the government are used to finance the building and maintenance of the public infrastructure of the company. Taxes are of two types:

  1. Direct Taxes: These taxes are paid directly by the individual or corporation and are levied on income, real estate, personal property, or land owned by an entity and are paid directly to the government.
  2. Indirect Taxes: These taxes are levied on articles consumed by the citizens of a country, such as products and services. Unlike direct taxes, an intermediary collects these types of taxes, such as a retailer who indirectly pays it to the government.

Tax laws and regulations are legal procedures that dictate how federal, state, and local governments calculate the taxes you owe them. These laws explicitly govern how taxes on varying goods, products, services, sales, etc., are calculated. A majority of these laws are drafted and enforced by the US Congress and state legislators.

Federal Tax Laws and Regulations

The Internal Revenue Code – Title 26 of the US Code forms the basis of the federal tax laws across the country. Its 11 different subtitles cover and dictate how different types of taxes are calculated and collected. The code also regulates the administrative and procedural rules that the citizens of the United States and the Internal Revenue Service (IRS) need to follow.

In addition to the IRC, the regulations issued by the Department of Treasury form the universal set of federal tax laws implemented in the United States. The Department of Treasury issues detailed regulations explaining each code mentioned under the IRC with examples. The IRS must acknowledge and enforce the tax laws following these regulations.

State and Local Tax Codes

Like federal tax codes, the states have an independent set of legal procedures used to determine the taxes to be collected. While not every state collects income taxes from individuals, all states have tax codes for calculating and collecting taxes on real estate, sales, etc. These tax codes serve the same purpose as the IRC on the state level. Moreover, tax codes can be created at county and city levels as well.

Types of Taxes

The taxes collected in the US can be broadly classified into three basic categories:

Taxes on Income

The category can be further divided into the following categories:

Income Taxes

Besides the federal government, as many as 43 states and numerous local and city municipalities collect income taxes from individuals and businesses. The percentage of taxes levied on income is progressive, meaning the higher the income, the higher the tax rates. The taxable income is divided into two categories:

Earned Income

The earned taxable income category includes:

  • Salary
  • Tips
  • Commissions
  • Sick pay
  • Bonuses
  • Unemployment benefits
  • Some fringe benefits
  • Wages

Unearned Income

Income tax is also levied on other sources of income that are not connected to the work you do. These include

  • Interest
  • Rent
  • Royalties
  • Alimony
  • Winnings from gambling
  • Dividends
  • Profit earned on the sale of assets
  • Farm and business income

Both state and federal laws have provisions that allow you to trim your taxes by applying and availing deductions and allowances.

Payroll Taxes

The US federal laws mandates employers to deduct a part of their employees’ income in each pay cycle and then submit the amount to the government. These deductions are payroll taxes or FICA taxes as they are authorized under the Federal Insurance Contribution Act. The proceeds generated from these taxes are funneled into the Social Security and Medicare systems. Self-employed people residing in the United States are also liable for paying these taxes.

Capital Gains Taxes

As stated above, the money you receive from the sale of assets is taxable. This is known as capital gains tax. Sales proceeds received from the sale of assets such as stocks, bonds, and real estate are subject to capital gains taxes.

Estate Taxes

Estate taxes are imposed during the transfer of the ownership of a property upon the owner's death. The taxes were created to prevent the prolonged accumulation of tax-free wealth within the affluent families in the country. While estate taxes are levied on the federal level, states collect an inheritance tax based on the same lines.

Taxes on Property

Property Tax

Also known as ad valorem tax, these taxes are levied on the current value of the real estate you own. The city or local council collects the tax. These taxes fluctuate based on the location, condition, and market value of the property in question. In addition to real estate, some states levy taxes on personal items such as automobiles, boats, airplanes, and other recreational vehicles. Some states also have different tax codes for charging business properties such as wharves, factories, etc.

Taxes on Goods and Services

Sales Taxes

Sales taxes are a common revenue-generating methodology used by states and local authorities. The price of the goods and services you pay includes a percentage that goes to the authorities. The tax brackets are decided on the local level and are different for different products and commodities.

Excise Taxes

Both federal and state authorities levy these taxes. Excise taxes are calculated based on the quantity of the item bought by a customer and not its value.

User Fees

These taxes are levied on various services that include air travel tickets, toll, rental cars, licenses, utilities, hotel rooms, and other financial transactions.

Why Hire a Tax Attorney?

Hiring a tax attorney will benefit you in the following ways:

  • Tax lawyers have a comprehensive understanding of the federal, state, and local tax laws. Hiring and consulting a seasoned tax attorney can help you get significant deductions on tax.
  • If you have failed to pay a significant amount of taxes to the federal, state, or local government, a tax attorney can help you formalize an agreement with the authorities.
  • If you have received a notice for an audit or feel there is a possibility, a tax attorney can ensure the audit is carried fairly and all the IRS agents do not behave unlawfully.
  • If you plan to launch a business or have recently started your own company, a tax attorney will help you avail of deductions and trim your tax bills. Besides this, a tax lawyer will also guide you on properly filing your returns and avoiding audits.
  • If you own any taxable assets, it is best to hire and consult a tax lawyer. Because tax lawyers understand the intricacies of the federal, state, and local tax codes, they can help you save a significant amount on capital gains and property taxes.
  • If you have a business spanning across international boundaries, you will be dealing with different taxation laws implemented in different countries. A tax attorney will help you manage international contracts, taxes, and other legal business matters.

Are you facing any challenges with your taxes? Fill in the form provided alongside, and we will help you find the best tax attorney who will aid you make the best possible decisions for your case.