(FNI) – Weekly Wrap-up 19th Jan 2011 to 26th Jan

This week we discussed the Sixteenth Amendment and the impact it has had on the income tax in the United States. We also studied Marriage Penalties in detail and the way tax is impacted if a joint return is filed. Most experts believe that tax penalties are a thing of the past and the aim of the government should be to create simple tax laws. It is advisable to allow people to file returns separately irrespective of whether they are married or single to do away with the confusion and create an easier to understand tax code.

The difference between tax avoidance and tax evasion was spelt out. It can be safely commented that tax avoidance is relatively easy due to the ambiguity in tax laws in different parts of the world. There are numerous loopholes in the existing tax laws and the smart person or organization utilizes and exploits them to pay the least amount of tax and these are extensively used in all parts of the world.

The types of income and tax liabilities were also discussed. According to tax laws, it is mandatory to file income tax returns by April 15th. IRS allows people who earn less than $56,000 to file electronically without any charges to significantly reduce pressure on post offices. Last year about 57% people filed their taxes electronically.

The next day we discussed the implications of wage garnishment and the best ways to pay unpaid taxes to the IRS. I have often stressed the fact that the best way to save money is to pay taxes on time and ensure that there are no unpaid IRS taxes. This should be inculcated as a habit as it has numerous benefits but the fact is that people try to save money in the short run and are not aware of the consequences. There are a lot of unpaid IRS taxes and the best ways to pay them off and lead a normal life.

We also discussed the three situations in which the IRS accepts compromises. These are the only cases in which an individual or an organization can negotiate the amount of tax payable.

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