An Introduction To The Most Confusing Parts Of The Income Tax Code

The Internal Revenue Code and its accompanying regulations are voluminous. Of course, many of these rules affect the ordinary individual American taxpayer. There may be no more daunting component of federal law than the Tax Code and the volumes of regulations that detail it. Many provisions are confusing, to say the least, and may require certain additional paperwork such as a long worksheet or form.

It’s no surprise that a substantial number of provisions of the Tax Code have a history of high taxpayer error and fraud. When you add to the equation the fact that law, especially tax law, is constantly evolving, a taxpayer’s confusion related to the interpretation of tax regulations may be significant and require the assistance of an experienced tax professional.

The basic 1040 instruction booklet is now almost 180 pages in length. Most taxpayers will never read this entire publication. And these are just the basic instructions for filing a Form 1040! What’s the most confusing provision in the Tax Code? In 1986, in an effort to implement tax reform, Ronald Reagan cited the following passage, § 509(a):

For purposes of paragraph (3), an organization described in paragraph (2) shall be deemed to include an organization described in section 501(c)(4), (5), or (6) which would be described in paragraph (2) if it were an organization described in section 501(c)(3).

Even with tax reform, President Reagan was unable to remove this sentence from the Tax Code.

Of course, statutes must make many cross-references by their very nature. They may be complex based upon multiplicity, volume, and other factors. It would be foolish, cumbersome and inefficient to repeat the text of each reference, which would create a remarkably long provision that would be no less confusing.

Hopefully, this multi-part article will shed some light on these complicated and confusing provisions. When dealing with the Internal Revenue Code, it is always wise to enlist the services of an experienced and knowledgeable tax professional. The series will cover the following confusing areas of the Tax Code:

1. Most Confusing Parts Of The Income Tax Code, Part 1: Passive Activity Loss Rules
2. Most Confusing Parts Of The Income Tax Code, Part 2: Alternative Minimum Tax
3. Most Confusing Parts Of The Income Tax Code, Part 3: Retirement Accounts
4. Most Confusing Parts Of The Income Tax Code, Part 4: Education Tax Incentives
5. Most Confusing Parts Of The Income Tax Code, Part 5: Earned Income Tax Credits
6. Most Confusing Parts Of The Income Tax Code, Part 6: Taxes On SS Benefits
7. Most Confusing Parts Of The Income Tax Code, Part 7: Green Tax Credits
8. Most Confusing Parts Of The Income Tax Code, Part 8: Homebuyer Tax Credits

Please stay tuned to the Thorgood Law Firm website for further installments in this series. If you are an individual or business in the New York City metropolitan area and have any question about taxes, especially in planning ahead for the next filing season, call THE TAX EXPERTS at the Thorgood Law Firm www.thorgoodlaw.com. For a FREE consultation call 212-490-0704.