The Regulations Of Tax Laws Essay

2033 words - 8 pages

The Regulations of Tax Laws Introduction

Tax laws rules and regulations change mostly every year and people in
the business need to keep up with the fast pace of those changes.
Usually, when congress wants to set a rule, they start by issuing it
for a limited set of time. The latest try out of congress is section
164 (b) (5), which gives taxpayers who elect to itemized their
deductions an option to take their state and local general sales
taxes, in lieu of state and local income taxes. As the law is expiring
in December 2005, congress needs to decide whether the law should be
extended or not. The purpose of this paper is to present an argument
against extending section 164 (b) (5).

Whose entitle to explore that option?

Proponents of extending section 164 (b) (5) contends that this is a
benefit for taxpayers because they have an option to take what benefit
them the most: state and local general sales tax deduction or take
their state and local income tax deduction. We on the other hand,
opponents of extending it, believe that even though it looks like a
benefit, we should also take into account whether or not taxpayers is
going to take advantage of this so called “choice”. As pointed out
earlier, only people who are taking an itemized deduction could be
entitled to choose among state and general sales taxes or state and
local income taxes, which means that people who elect to use the
standard deduction will not going to be affected by that law. In 2002,
out of 130 million tax filers only 46 million chose to itemize their
deduction that means in the 2002 tax year 84 millions taxpayers took
the standard deduction (foot point needed). To elaborate, only about
33% of taxpayers will be able to explore that option and this
percentage will further diminishes as we will explain later in the
paper.

Keeping all receipt, who does that?

Out of the 33 % taxpayers who elect to itemize most of them need to
keep their receipts in other to benefit from that law. This new
optional sales tax deduction certainly affects a taxpayer’s year-end
planning and may pose a challenge for some taxpayers who failed to
retain receipts for many of their prior 2004 and 2005 purchases. The
IRS will allow taxpayers to bypass standard deduction and calculate
the total themselves. Conversely, computing your sales tax is a bit
more complicated. If you saved all your receipts and can total your
sales tax paid for the year, then it is easy. However, if you failed
to save your sales tax receipts you probably have other issues in this
situation.

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