Tax Law 101

Tax law is the body of legal rules that authorize governments to levy taxes on people and businesses. Tax laws are found at the local, state, regional and national levels of government.

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ABA-accredited law schools offer specialized master of law (LLM) programs in taxation. These programs are designed for students with backgrounds in accounting and business.

Definition

Tax law is a subset of law that deals with the rules and policies that oversee the taxation process. Taxation is a governmental assessment upon property value, transactions, estates of the deceased and licenses granting a right, as well as duties on imports from foreign countries. Typically, these contributions are collected to fund the public good.

In the United States, taxes are largely determined by the Internal Revenue Code. This code contains 11 subtitles that govern the various types of federal income, estate and gift taxes. It also defines the rules for the IRS to use to determine a taxpayer’s tax liability. This is an important part of the legal system because it establishes how tax laws are enforced and interpreted.

While tax laws are usually a part of the sphere of public law, there are often constitutional, traditional or political limitations that restrain the legislature’s power to charge taxes. These constraints are particularly important when determining the extent of one’s income-tax jurisdiction, which depends on the residence and source of taxable assets or income.

The IRS and other governmental agencies oversee the enforcement of tax laws in addition to courts that handle any disputes between the taxpayer and the government. These courts include a special trial court called the U.S Tax Court, which is based in Washington and has 19 presidentially appointed judges that travel to preside over trials in designated major cities. Rulings by this court can be appealed to a district court of appeals and ultimately the U.S Supreme Court.

Types

Tax laws are the legal “rules” for how much your state, local and federal governments can charge you in taxes each year. These laws cover a broad range of topics, including income, estate, excise, luxury and property taxes.

The specific tax laws in each country are unique, but there are many similarities among nations’ systems. For example, most countries have an income tax that levys rates on people’s personal income, with higher rates for higher levels of income. Another common type of tax is a sales tax, which levies a percentage of a product’s price at each stage in the supply chain, from manufacturing to sale. These taxes are called regressive because they hit poorer people harder than richer ones.

In addition to income, sales, property and inheritance taxes, there are also special tax breaks for certain people or businesses. These may include deductions for things like 401k contributions and home mortgage interest, or exemptions for high medical bills or the cost of raising children.

The law of taxation is a highly complex field. JD students who study it focus on deep exploration of statutory law, asking why legislators drafted particular provisions the way they did and whether they achieve their intended policy objectives. In addition, JD students take courses on international tax law, which addresses the myriad problems that arise when an individual or business has activities in several countries.

Taxpayers

The taxation process can be administered by a variety of entities, from local governments, such as cities and towns, to the state level, including counties, municipalities and district offices, and to the federal government. Taxpayers can also file appeals with a federal agency or court, and may have to appear in person to present their case before a tax tribunal.

Most democratic societies guarantee, to varying degrees, a set of taxpayer rights. These rights are essential to ensuring an effective and reasonable taxation process.

Moreover, the international community has been working toward an articulated Model of Taxpayers’ Rights (TBOR) to guide best practice in tax administration and governance. IBFD has been involved in this effort since 2015, with a particular focus on monitoring global trends in the practical protection of these rights through an Observatory for the Protection of Taxpayers’ Rights.

A career in tax law is challenging and rewarding. It requires a strong background in legal research and analysis, as well as an interest in complex mathematical issues. A tax lawyer’s job involves advising clients, litigating cases and preparing for trials. Depending on the size of the firm and the industry, tax attorneys can work on different teams handling different types of disputes. They can also pursue advanced degrees in taxation, such as a master of laws (LLM). To become a tax attorney, you must first complete an undergraduate degree and take the Law School Admission Test (LSAT), which most schools require as a prerequisite to enrollment.

Appeals

The Appeals process allows taxpayers to disagree with decisions by local IRS revenue agents without going to court. If the taxpayer wishes to appeal a decision, they must file with the Appeals office in writing and explain why they think the tax determination is incorrect. This is called filing a protest. The Appeals officer may decide to settle the dispute or to issue a written decision.

The taxpayer may also request that a conference be held to discuss the case informally with an Appeals officer. This is a less adversarial setting than a trial before a judge, and Appeals officers are allowed to be represented by practitioners who are licensed to practice before the IRS (such as attorneys and certified public accountants).

In the 2009-2010 fiscal year, the Appeals Tribunal sustained the deficiency or other action asserted by the IRS in 71.7 percent of cases; cancelled the deficiency or other action in 13.0 percent of cases; and remanded the case to an Administrative Law Judge in 6.8 percent of cases. During the Appeals process, a taxpayer is entitled to reasonable attorneys fees and costs if they prevail.

Unlike a Federal court’s unreviewable decision regarding the constitutionality of a tax statute, which is available to all taxpayers, a settlement reached at Appeals is not generally made public. However, some Appeals resolutions are publicly available by way of summary decisions in “small” cases, and through a process known as the Rapid Appeals Process.