Hi All,
Interesting discussion. The tax nerd in me has to put in my two cents.
First, my tax firm will be visiting to prepare offer services to Expats in April. If you are reasonably confident in tax law and in your ability to prepare, then I gree with these posts - Turbo Tax and TaxAct offer the best deals around.
The most basic myth of tax protestors is that there is simply no law mandating the payment of income taxes. Frequently one can observe anti-tax types to say something like, “if only someone would show me the lawthat says that I have to file a tax return and pay taxes, I’d be happy to do it.” I have a strong suspicion that people who say that are not serious, but I’m going to take them at their word. Here are the laws that (a) impose an income tax on you, (b) require you to file an income tax return, and (c) require you to pay taxes:
The federal tax laws are contained in the Internal Revenue Code, also known as Title 26 of the United States Code, which is the compilation of laws passed by the Congress (“Title” basically means “Volume” when applied to the U.S. Code as a whole, so Title 26 is what might more casually be called Volume 26).
The Internal Revenue Code is the law that requires people to pay taxes (and yes, the Internal Revenue Code is the law -- for more detail on this point click here).
The most important statutory provision with regard to income taxes is section one of the tax code, 26 U.S.C. § 1. This is the section that actually imposes the income tax. It’s very simply written. If you are unmarried, the relevant provision is § 1(c), which states:
There is hereby imposed on the taxable income of every individual . . . who is not a married individual a tax determined in accordance with the following table.
followed by a table specifying the tax rates on various income amounts. If you are married, you are covered by the similar provision at § 1(a). There are also a couple of other possible filing statuses covered elsewhere in § 1 (such as “head of household”), but the basic point is that section 1 imposes an income tax.
Section 1, it will be observed, imposes the tax on your “taxable income.” How do you know what that is? Section 63 of the Code, 26 U.S.C. § 63, defines “taxable income” to mean “gross income minus the deductions allowed” by chapter 1 of the Code, so now we need to know what “gross income” is. So we turn to section 61 of the Code, 26 U.S.C. § 61, which provides the critical definition:
[G]ross income means all income from whatever source derived, including (but not limited to) the following items:
(1) Compensation for services, including fees, commissions, fringe benefits, and similar items;
(2) Gross income derived from business;
(3) Gains derived from dealings in property;
(4) Interest;
(5) Rents;
(6) Royalties;
(7) Dividends;
So, between sections 1, 61, and 63, we see that the tax code passed by Congress imposes a tax on your taxable income, which includes all your income, from whatever source derived, less the deductions allowed by the tax laws. So the tax laws do impose a tax on you.
Now, how do you know that you have to file a tax return and actually pay the tax?
Section 6151 of the code, 26 U.S.C. § 6151, says:
[W]hen a return of tax is required under this title or regulations, the person required to make such return shall, without assessment or notice and demand from the Secretary, pay such tax to the internal revenue officer with whom the return is filed, and shall pay such tax at the time and place fixed for filing the return (determined without regard to any extension of time for filing the return).
So according to this section, if you are required to file a tax return, you are required to pay the tax owed, to pay it at the time you file your return, and to pay it to the internal revenue officer with whom you file the return.
But who says you’re required to file the return? Turn back to section 6012(a) of the code, 26 U.S.C. § 6012(a), which provides
Returns with respect to income taxes * * * shall be made by the following:
(1)(A) Every individual having for the taxable year gross income which equals or exceeds the exemption amount * * *.
The “exemption amount” is defined in 26 U.S.C. § 151(d) as $2000, adjusted for inflation since 1989. You can see the exact amount for the current tax year in the IRS instructions to form 1040. If you have more income than this amount, section 6012 requires you to file a tax return (except that if you’re married, section 6013 gives you the option of filing a joint return with your spouse).
So there it is:
Sections 1, 61, and 63 impose the tax,
Section 6012 requires you to file a tax return if you have income of more than the exemption amount, and
Section 6151 requires you to pay the tax at the time and place fixed for the filing of your return.
If you're not drooling on your keyboard, then kudos! I hope you find this helpful. I look forward to hearing others' opinions, but let's keep this light and friendly.
Take care,
Brad
Interesting discussion. The tax nerd in me has to put in my two cents.
First, my tax firm will be visiting to prepare offer services to Expats in April. If you are reasonably confident in tax law and in your ability to prepare, then I gree with these posts - Turbo Tax and TaxAct offer the best deals around.
The most basic myth of tax protestors is that there is simply no law mandating the payment of income taxes. Frequently one can observe anti-tax types to say something like, “if only someone would show me the lawthat says that I have to file a tax return and pay taxes, I’d be happy to do it.” I have a strong suspicion that people who say that are not serious, but I’m going to take them at their word. Here are the laws that (a) impose an income tax on you, (b) require you to file an income tax return, and (c) require you to pay taxes:
The federal tax laws are contained in the Internal Revenue Code, also known as Title 26 of the United States Code, which is the compilation of laws passed by the Congress (“Title” basically means “Volume” when applied to the U.S. Code as a whole, so Title 26 is what might more casually be called Volume 26).
The Internal Revenue Code is the law that requires people to pay taxes (and yes, the Internal Revenue Code is the law -- for more detail on this point click here).
The most important statutory provision with regard to income taxes is section one of the tax code, 26 U.S.C. § 1. This is the section that actually imposes the income tax. It’s very simply written. If you are unmarried, the relevant provision is § 1(c), which states:
There is hereby imposed on the taxable income of every individual . . . who is not a married individual a tax determined in accordance with the following table.
followed by a table specifying the tax rates on various income amounts. If you are married, you are covered by the similar provision at § 1(a). There are also a couple of other possible filing statuses covered elsewhere in § 1 (such as “head of household”), but the basic point is that section 1 imposes an income tax.
Section 1, it will be observed, imposes the tax on your “taxable income.” How do you know what that is? Section 63 of the Code, 26 U.S.C. § 63, defines “taxable income” to mean “gross income minus the deductions allowed” by chapter 1 of the Code, so now we need to know what “gross income” is. So we turn to section 61 of the Code, 26 U.S.C. § 61, which provides the critical definition:
[G]ross income means all income from whatever source derived, including (but not limited to) the following items:
(1) Compensation for services, including fees, commissions, fringe benefits, and similar items;
(2) Gross income derived from business;
(3) Gains derived from dealings in property;
(4) Interest;
(5) Rents;
(6) Royalties;
(7) Dividends;
So, between sections 1, 61, and 63, we see that the tax code passed by Congress imposes a tax on your taxable income, which includes all your income, from whatever source derived, less the deductions allowed by the tax laws. So the tax laws do impose a tax on you.
Now, how do you know that you have to file a tax return and actually pay the tax?
Section 6151 of the code, 26 U.S.C. § 6151, says:
[W]hen a return of tax is required under this title or regulations, the person required to make such return shall, without assessment or notice and demand from the Secretary, pay such tax to the internal revenue officer with whom the return is filed, and shall pay such tax at the time and place fixed for filing the return (determined without regard to any extension of time for filing the return).
So according to this section, if you are required to file a tax return, you are required to pay the tax owed, to pay it at the time you file your return, and to pay it to the internal revenue officer with whom you file the return.
But who says you’re required to file the return? Turn back to section 6012(a) of the code, 26 U.S.C. § 6012(a), which provides
Returns with respect to income taxes * * * shall be made by the following:
(1)(A) Every individual having for the taxable year gross income which equals or exceeds the exemption amount * * *.
The “exemption amount” is defined in 26 U.S.C. § 151(d) as $2000, adjusted for inflation since 1989. You can see the exact amount for the current tax year in the IRS instructions to form 1040. If you have more income than this amount, section 6012 requires you to file a tax return (except that if you’re married, section 6013 gives you the option of filing a joint return with your spouse).
So there it is:
Sections 1, 61, and 63 impose the tax,
Section 6012 requires you to file a tax return if you have income of more than the exemption amount, and
Section 6151 requires you to pay the tax at the time and place fixed for the filing of your return.
If you're not drooling on your keyboard, then kudos! I hope you find this helpful. I look forward to hearing others' opinions, but let's keep this light and friendly.
Take care,
Brad
