When it comes to taxes, there are a lot of ins, outs, details, and loopholes that can confuse the average American citizen.
If you don’t have someone in the know to help you out – such as us at Guardian Tax Law – it can be hard to know what all the little itty-bitty details are!
One of these details that might be unfamiliar to you, especially if you’ve only just started paying taxes, is the personal tax code.
You might have seen it on documents or in articles that are trying to prepare you for Tax Day 2022.
We’re here to help you demystify one of the important elements of your tax situation, so read on to get the mystery cleared up.
What’s the Personal Tax Code?
A tax code is a federal government document, usually numbering thousands of pages, that details the rules individuals and businesses must follow in remitting a percentage of their incomes to the federal or state government.
Luckily, your tax code isn’t something that you ever have to figure out yourself. Although the taxing situation In the United States is very confusing, this – at least – isn’t as bad as it otherwise could be.
In the United States, the U.S. Congress writes the tax laws and sets the rules at the federal level in an attempt to level the playing field, as it were.
To this end, the IRS implements the set rules and explains how they apply in different scenarios through the tax code.
The code that you’re provided will give you information on how much you should be taxed and also tell your company how much you should be taxed.
It’s a checks and balances system that will help to keep everything above board so that tax fraud doesn’t occur.
How A Tax Code Works
In the United States, the U.S. Congress writes the tax laws and sets the rules at the federal level. The IRS then takes those laws that Congress has written and begins widespread implementation.
Congress implements the set rules and explains how they apply in different scenarios through the tax code.
At the state level, these laws are set by a state, local, or county government that uses tax codes to authorize any taxation voted and agreed on.
In effect, the tax code, which is sometimes referred to as the Internal Revenue Code (IRC), is a collection of tax laws enacted by the federal, state, and local government authorities.
Perhaps you’ve heard of the tax code called the IRC rather than the tax code – whatever you and your business call it, it’s the same thing!
Each tax law passed is assigned a code that is added to the collection of existing tax laws in the IRC publication.
Since the tax code is not easily understood by the average person, the IRS provides detailed instructions that break down each code and how it should be applied.
What To Do with It?
The information is all there if you’d like to look for it. However, again, parsing that information can be difficult for the average citizen.
As such, it’s best to reach out to someone in the know – such as us at Guardian Tax Law – to help clear up the entire situation for you.
Returning to tax codes for a moment, all tax rates, exclusions, deductions, credits, pension, and benefit plans, personal exemptions, etc., provided by the IRS are taken from the federal tax codes.
The tax codes aren’t here to make you feel bad. They’re also not out to get you. Having said that, it can feel like that sometimes!
All that matters is that you understand the basics of the tax code so that you can know that you’re not getting swindled or taken for your money.