In today’s financial world, preparation and reporting of income taxes has become one among the other main reasons why individuals and businesses are keeping and maintain their financial records. However, there has been some controversy between tax laws and accounting under the General Accepted Accounting Principles (GAAP). Simply because IRS is not always agrees with GAAP’s principles and thus creates its own tax laws. This paper will discuss the objectives of modern income tax statutes, compare and contrast the GAAS and tax accounting, and differentiate between tax avoidance and tax evasion.
Objectives of Modern Income Tax Statutes
The primary objective of the modern income tax statutes was to amend the U.S. Constitution to permit the passage of a federal income tax law in order to collect enough revenues for supporting all government operations (Anderson et. al., 2008, p.1-2). Simply because before this amendment, it was ruled by the Supreme Court in 1895, that the tax was in violation of the U.S. Constitution and people were taxed only when the government was in a huge need for more resources (Anderson et. al., 2008, p.1-2).
In addition, there are three more objectives of modern income tax statutes. First one is the economic objective that is mainly concerned with stimulation of private investment, reducing unemployment, and mitigate the effects of inflation on the economy (Anderson et. al., 2008, p.1-14). Another objective, was a governments attempt to increase certain activities such as creating a good opportunities for opening specialized industries and small businesses. The opportunities included the allowing to write-off all business expenses and paying taxes of the net income. Moreover, the businesses were expected to pay the reduced corporate tax rates in addition to all individual tax deductions and exemptions, which help individuals and businesses to avoid suffering the tax increases due to the inflation increases.... [continues]
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