Tax Accounting

Running Head : Tax Accounting

Tax Accounting

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12 July 2008

a . Summarize the sources and objectives of modern income tax statutes The sources of the modern income tax statutes include the Internal Revenue Code as written by US Congress , the US Constitution , Internal Revenue Service (IRS ) interpretations of the tax laws , the Federal Court opinions or decision on tax cases brought to court , and the treatises which the government has entered into with other countries . The objectives of modern

income tax statutes include basically revenue raising objectives for government operations . Another objective is economic where the government uses taxation to stimulate private investment . Still another objective is social policy like when the government gives tax credits to business that operate in rural or economically suffering areas in to help the unfortunate ones while stimulating the economy (Pollack , S . 1996 b . Compare and contrast GAAP and tax accounting . Explain why they are different

Both generally accepted accounting principle (GAAP ) and tax accounting require the use of accounting terminologies and basically use the double entry bookkeeping system in their recording . Hence the accounting elements are present under the two methods . These include assets , liabilities , owners ' equity or stockholders ' equity which are found since both have financial statements as part of the process

Since they differ in objectives , they differ in treatment of revenues and expenses . GAAP accounting essentially makes use of accrual accounting over cash accounting but tax accounting sometimes makes use of cash accounting over accrual accounting

Since the purpose of GAAP accounting is the fair presentation of the financial statements , the standards followed are those prescribed by Financial Accounting Standards Board (FASB (Business Editors , 2002 . On the other hand , the purpose of tax accounting is to raise revenues for the government to defray its expenses . There are therefore expenses that are considered by GAAP accounting but may not be allowed by tax accounting because of some requirement for deduction under tax statutes .c . Differentiate between tax avoidance and tax evasion

Tax avoidance is a legal way to minimize taxes . It requires therefore thorough knowledge of the various tax laws and choosing the best option under which tax may be minimized as allowed by the tax rules and regulations . Tax evasion is a deliberate way of not paying taxes with knowledge that the tax on income is imposed by the government or its agencies (Albinet , 2008 . Tax evasion is therefore a crime since it is illegal References

Albinet (2008 ) Differences between Tax Avoidance and Tax Evasion www document URL http /albinet .com /articles /offshore-company /taxes Accessed July 12 ,2008

Business Editors (2002 , Government Accounting Standards Board Issues Exposure Draft on Budgetary Comparisons That , Business Wire , Norwalk CT , USA www document URL http /www .allbusiness .com /company-activities-management /management-risk /5696031-1 .html , Accessed July 12 ,2008

Pollack , S (1996 ) The Failure of U .S . Tax Policy : Revenue and Politics www document URL http /www .questia .com /library /book /the-failure-of-us-tax-policy-revenue -and-politics-by-sheldon-d-pollack .jsp , Accessed July 12...