A tax return explains your eligibility for various credits and deductions. It also allows you to claim tax withholding, which lowers your overall bill by withholding an amount from your paycheck or other income sources.
The decision of whether to centralize or decentralize tax administration has technical implications for the efficiency and effectiveness of revenue collection. Countries can organize taxation by centralized administration, revenue sharing, or tax assignment. Read on Florida PEO to learn more.
A key concern with multilevel tax administration is the ability to impose and collect taxes on mobile tax bases, such as income and indirect business taxes. To avoid administrative complexity, it is recommended that only one level of tax administration be responsible for collecting these types of taxes. This may be done by establishing an income tax collected by the central government with a transfer to the provinces, or by using revenue-sharing or tax assignment arrangements based on some objective formula (Casanegra de Jantscher, 1972 and 1991).
In order to facilitate efficient tax administration, it is important that the level of government in charge of collection of particular taxes be as large as possible. This allows for the benefit of administrative economies of scale and a high degree of automation in data collection and information processing. It also makes it more feasible to promote voluntary compliance by ensuring that the risk of being caught is relatively high for any noncompliant taxpayers (Rubinfield, 1983).
Another issue with multilevel tax administration is the need to ensure that the levels of government involved can perform their duties and are not overwhelmed by excessive workloads. This may be facilitated by introducing an organizational structure that places clear lines of authority for all tax departments so that staff at all levels understand their responsibilities and are aware of the rules and procedures that must be followed. This can also be achieved by setting up a body of subnational tax administrators that meets regularly to perform coordinating and information-dissemination functions.
Tax administration includes the functions of collecting, assessing, auditing and analyzing tax payments. Taxpayers can face difficulties with their tax administration, including a number of different rules and rates that can change year after year. The number of exemptions and deductions can also increase or decrease, and the resulting tax amounts can be difficult to understand for ordinary citizens. Taxpayer services can help these individuals understand their tax obligations and submit accurate returns.
The effectiveness of a country’s tax administration depends on its ability to foster voluntary compliance through enforcement and education programs. This is more challenging for tax administrations that collect taxes from multiple sources. These departments can benefit from the formation of an organization, such as the Federation of Tax Administrators, which performs a variety of coordinating and information-disseminating activities.
It is also important to provide uniform services to taxpayers, irrespective of their place of residence. This can be achieved by ensuring that the tax authorities have access to the same data on all taxes for which a taxpayer is liable. This can facilitate verification of tax payments, as well as the assessment and collection of penalties.
One of the major challenges of tax administration is dealing with mobile tax bases. This is particularly common for taxes such as VAT, income taxes and excise duties. When a central government retains responsibility for these taxes, it can take advantage of administrative economies of scale and ensure that tax administration costs are kept as low as possible.
When tax administration responsibilities are devolved, this creates additional complications. A key challenge is the need to equip subnational tax offices with adequate capacities. For example, the knowledge and skills required to administer a property tax are very different from those needed to administer an income tax.
Another challenge is the ability of tax administration to communicate effectively with other levels of government and business. This requires that tax offices have the authority to exchange data with other agencies. For instance, if the federal tax agency finds a violation of federal tax law, it must notify the state and vice versa.
Whether the goal is to collect revenue from individual taxpayers or businesses, tax administration is a complex operation reliant on information. To provide quality service, it is essential that staff have access to reliable data and are able to use this information effectively (Bagchi, Bird, and Das-Gupta, 1995). Data processing systems enable taxpayers to quickly respond to tax notices and file returns, and tax authorities can track the progress of their collections.
Collection is one of the most important functions of a tax administration, and weak performance in this area can compromise development, growth, and trust in government. However, despite the importance of this function, many governments have yet to achieve strong and efficient tax collection systems. In addition to reducing collection costs, an effective system should be able to provide high-quality customer services and enforce compliance.
One way to improve collection efficiency and effectiveness is to centralize tax administration. This allows a single organization to oversee all processes and procedures, while eliminating redundant or inconsistent practices. It also ensures that there are clear lines of authority so that staff understand what they must do. Finally, it allows tax administrators to monitor the collection of different types of taxes through a single process and standardizes forms and documents.
Other ways to improve collection include using a centralized or regional system of tax returns and withholding for employees and providing training for local collectors. Taxpayer records can then be easily consolidated into a master file, stopping unregistered or fraudulent filers. The number of staff can be kept at a minimum because all tax collectors are trained in the same areas, such as procedural and administrative law, investigative methods, computer technology, economics, and management.
Another issue is the choice of whether to rely on revenue sharing or tax assignment when collecting taxes at the local level. With revenue sharing, the central government shares a proportion of revenues with subnational governments based on some objective formula. However, this can create problems with compliance for withholders who have to verify residency and pay the correct tax rate for each jurisdiction in which they live.
The IRS Independent Office of Appeals (Appeals) settles tax disputes that cannot be settled through other means. The Appeals process is designed to be less formal than a court trial. Taxpayers have the right to choose to be represented by a representative of their choice. Appeals officers are impartial and strive to resolve tax disputes in a fair manner.
Appeals offices are located in most cities. Local Appeals representatives are available for a free consultation. The Appeals staff is composed of professionals with expertise in different fields. Appeals employees can provide help and assistance with a wide range of problems, such as tax deficiencies, collections, offers in compromise, jeopardy assessments, and collection due process reviews.
In fiscal year 2010, Appeals resolved over 2,172 cases for taxpayers. Appeals is the only function within the IRS authorized to consider settlements of tax controversies and it is tasked with resolving such disputes without the need for litigation as much as possible.
Taxpayers can request a conciliation conference through the Appeals online system, or by completing a form. More than 98% of all protests are resolved through this method. In some cases, a taxpayer may need to file a lawsuit for a more in-depth review of their case. If you are considering filing a lawsuit, it is important to consult with an experienced tax attorney first to understand your options.
Generally, a hearing is held before an impartial Appeals officer who hears arguments and evidence presented by the taxpayer and the Department’s attorney. Each party has the opportunity to recall witnesses, introduce additional exhibits, and offer rebuttal. The taxpayer can also present closing arguments to summarize his or her legal positions.
Appeals officers are required to follow strict policies when making decisions on behalf of the IRS. As a result, the process of reaching an appeals decision can take months to complete. Appeals is currently reducing its backlog through the use of new technology, and has implemented measures to reduce processing times. In addition, the IRS is working to improve communication between Appeals and the public by conducting outreach programs.