Tax Law

The federal tax system is made up of several kinds of taxes, including income taxes (both state and federal), employment taxes, sales taxes, excise taxes, gift taxes, and estate taxes. There are very specific laws concerning how these taxes are to be paid, of course, but there are also provisions for ways to exclude and deduct these taxes. Those who run into tax law problems are those who either don't understand the requirements of the laws or who become financially overwhelmed by them.?

All income is taxable and therefore subject to tax law. This includes income derived from sources such as:

? Wages from employment or other compensation
? Commissions, fees for services, bonuses
? Income from self-employment and business activities
? Pensions, annuities, other retirement income
? Rental income, royalties
? Interest, dividends
? Unemployment benefits
? Alimony
? Discharge of debt
? Income from interest in an estate or trust

Sometimes a tax is imposed (believe it or not) when you give something away! This is the case with gift taxes. When you give a gift to an individual that has a value of over $12,000 it is subject to gift tax. You may give up to that amount to as many people as you want throughout the year tax free, and gifts transferred between spouses are 100% tax free.?

Other taxes are imposed when certain activities are performed. This is another area of taxation that gets people into trouble when they are uninformed about tax law. Excise taxes are an example of this. When an individual engages in certain activities for occupations, for obtaining certain licenses, or for the purpose of being granted a privilege by the government, an excise tax is imposed. An example of such a scenario would be in the case of manufacturing or retailing activities, certain business entities, group plans (such as health plans), or licenses and permits you may obtain.

Real property is also subject to taxation. Property taxes are typically based on the assessed value of real property – usually the most recent purchase price paid is used as the base, and a percentage is determined from that.?

Sales tax is another area of taxation you need to know about if you are a business owner. Resale businesses aren't the only ones who have to deal with sales taxes. When you are in business and perform a service for customers that results in the creation of a tangible product, you are expected to collect sales tax from your customers for that work. You are then responsible for paying that tax in the correct amounts to the State Board of Equalization on a regular and timely basis. Again, this can become a serious problem area for the uninformed (to put it mildly!). If these amounts are not paid correctly and on time, you will be charged the additional taxes, along with the penalties and interest, which really gets costly. As always, it pays to be informed.

The tax laws can be confusing and complex, and at times, even intimidating. When in doubt, it's always wise to consult a tax attorney for advice on tax matters. A tax attorney is a legal advocate who can represent you in all matters having to do with taxation and tax law. Those who typically seek the counsel of a tax lawyer need relief from IRS seizures, wage garnishments, payroll tax issues, and other tax problems that all too often arise from a lack of knowledge or inadequate understanding of the tax laws.?

We hope you have found the information written here helpful. The following links may provide you with additional help and information.

http://law.freeadvice.com/tax_law/

http://www.boe.ca.gov/sutax/faqpurch.htm#1