Getting up to speed with the US tax code

by Josh Biggs in Finance on 10th March 2020

While talking about taxes isn’t particularly exciting or joyful, it’s necessary. So, there’s no point in trying to avoid the topic. From filling out the correct tax forms to complying with all the various rules, there’s a lot to consider, with the US tax code being far from easy to navigate. Indeed, many people joke it has more than 70,000 pages. And, while this is somewhat of an exaggeration, the code has grown considerably in length since it was first published in 1926. So, here’s a quick guide to help get you up to speed.

What exactly is the US tax code?

The Internal Revenue Code – or the ‘tax code’ to make life easier – contains the official, legally-binding tax rules set by Congress. This federal government document contains thousands of pages detailing the rules businesses and individuals must follow in remitting a percentage of their incomes to the federal or state government. These rules can be found in Title 26, Subtitle A of the U.S Code which set out the official laws of the United States. As we live in an increasingly digital age, this information can also be found online.

As the Internal Revenue Code is an official government document, you can be sure that it’s correct, up-to-date and hasn’t been modified by an outside source. That said, the tax code covers many long and difficult points that you might not understand which is why many people turn to official interpretations by the Internal Revenue Service (IRS). These are free and relatively concise in comparison. The IRS is also responsible for enforcing the code.

Understanding the structure of the Internal Revenue Code

The Internal Revenue Code is broken down and organized into subtitles, chapters, subchapters and parts which cover various topics. This means you can simply skip to the part that interests you which is a good job considering the document’s length. Related sections are often cross-referenced to each other too. So, once you know the structure of the IRC, it’s actually pretty easy to find your way around.

The listed subtitles of the US tax code include:

A – Income Taxes

B – Estate & Gift Taxes

C – Employment Taxes

D – Misc. Excise Taxes

E – Alcohol and Tobacco Excise Taxes

F – Procedure & Administration

G – The Joint Committee on Taxation

H – Financing of Presidential Campaigns

I – Trust Fund Code

J – Coal Industry Health Benefits

K – Group Health Plan Benefits

Navigating to the information you need

If you head to the US tax code online and click on the first subtitle Income Taxes, you will then see various chapters such as Chapter 2 – Tax on Self-Employment Income. You can then head to a specific section such as ‘Rate of Tax’. This then details all the information you need to know. When broken down in such a way, the tax code seems far easier to manage.

What can be a little frustrating, however, is that the tax laws passed by Congress are often short with general principles. This means that a particular section of the code may only be a few sentences long. To help aid your understanding of what the laws mean, it’s wise to turn to the Department of the Treasury who interpret each code section with much longer, clearer explanations and specific examples.

While there’s no denying that the tax code is tedious, knowing the fundamentals will prevent tax violations and keep you on the right side of the law.

Categories: Finance