Tax laws:
Tax is the United States is a very complicated affair. The law included several entities such as municipal, township, district etc along with state and federal Government.
The Federal Tax law begins with Internal Revenue code enacted by the Congress in title 26 of the U.S code (26 U.S.C).
The major purpose of tax law is to provide revenue to the federal government. It is also used for public policy reasons.
The tax laws are not only applied for generating revenues but also for other purposes than collecting taxes. The code is also enacted for the feedback process of amending the code.
The code is criticized for having so many activities at a time. It is often criticized that the IRS code has been lacking consistency. There has been interplay between the IRS amendments and regulatory changes. Suppose IRS brings a new ‘deductions’ to encourage a particular type of activity, the taxpayer who were not involved in such activity starts to a re-order their business, and the purpose of the IRS is distorted.
But still IRS has been successful generating revenues for the U.S so far.
Tax planning:
Tax planning is an intelligent method adopted by the taxpayers to reduce the tax liability by availing various incentives, allowances, rebates and relief as provided by the Act. One thing that needs to be kept in mind is that there is distinction between Tax planning and tax avoidance. Tax avoidance is an exercise by the taxpayer to ease the burden of tax by taking advantage of loopholes or lacuna. Tax avoidance is not illegal but immoral whereas tax planning is both legal and moral.
All taxpayers want to pay minimum amount, while the IRS is determined to extract as much as they can. A proper tax planning is resorted to by the taxpayer in conformity with the express provisions of the tax laws, the chances of litigation are certainly minimised.
Proper tax planning also resorts to the investment in the country which will give a future return to the taxpayer and economy will grow healthy.
Asset Protection:
Asset protection is a technique to protect the assets of individuals and business from civil judgements. The Asset protection is implemented by the United States federal Bankruptcy laws. The Employee Retirement Income Security Act of 1974 (ERISA) also exempts some assets from the creditors. The laws protect assets of corporation, limited liability partnership along with Limited Liability Company. U.S laws also provide protection for the assets of a trust against its beneficiaries.
On one hand when there is law to protect the asset of the debtor, there is also laws which is made in the favour of the creditor. There are federal and state fraudulent law which lets a creditor have a claim on the assets.
One needs to have knowledge about all the relevant laws such as U.S Bankruptcy laws, Federal and state exemption laws, tax laws. Apart from these one also need sufficient knowledge about trusts, estates and business entities.
There has been conflict among people about asset protection. Some feels it is moral right to protect the assets whereas another school of thought feels it to be a way of evade tax. However we are committed to give information to you about the asset protection, so we have elaborated the strategies of Asset protection in details in the next section.