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Tax Laws and Accounting

In: Business and Management

Submitted By assured
Words 1448
Pages 6
Tax Law and Accounting
University of Phoenix/ACCT 483
July 20, 2009

Tax Law and Accounting The history and time line of federal, state, and local tax systems within the United States follows events in history that have shaped the current tax laws of today. Today the law is almost inconceivable with so many interpretations and loopholes. In today’s business world not only are companies governed by federal income tax laws, but also accounting guideline established by the national framework of generally accepted accounting principles (GAAP). Due to the complexity of the guidelines and tax laws, many questions arise with regard to the interpretations. Taxpayers may ask are the practices used to reduce taxes, tax avoidance, or tax evasion.
History of Income Tax
Income taxes can be traced through history, in colonial times; individual taxpayers had nothing to do with the federal taxing authorities. The government, instead, received income from excise taxes, tariffs, and custom duties. Prior to the Revolutionary War, colonies held more responsibility; therefore, needing greater access to revenues. Post Revolutionary War, in 1781, the Articles of Confederation was adopted. The article gave full rights to each State as an entity allowing the state to levy tax as each state saw fit. The idea of central government was still strongly rejected [ (Unknown, n.d.) ].
In 1789, the Constitution was adopted. At this time in history, the governing powers recognized that a need for resources was necessary from other sources other than government; therefore, Federal Government was granted, the ability to raise taxes. Still, the collection of taxes was left to the State governments. Next, in 1861 when the Civil War began Congress passed the Revenue Act of 1861, which for the first time imposed a tax on individual’s incomes. In 1862, many taxes were raised, changed, and

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