Orgnizational Tax Research and Planning

ORGANIZATIONAL TAX RESEARCH AND PLANNING Name Institution Affiliation Course Date of Submission Organizational Tax Research and Planning Tax payment is a legal requirement that is required by any person who owns property that is worth tax according to the tax authorities. The revenue department is concerned with this vital role hence works towards accomplishing the role of government revenue collection for the purpose of redistribution. Parents are always advised to pay tax for the duties owed to the revenue department to avoid loss of some property after their death when the executors are playing their role of distributing their wealth. There are various penalties which are associated with failure to pay for the tax. The Internal Revenue Service calculate the all the penalties and accompanying interest amount owed and totals to ask for the required amount as a result in addition to the initial amount of tax. There are three penalties involved and they include: Failure to file penalty, failure to pay penalty and finally interest which is also a form of penalty. Each of the penalties is accounted for differently (Internal Revenue Service, 2012). One, failure to file penalty is counted right from the time of deadline of tax return. The deadline includes even the extension period. The penalty is 5% each month that tax return is late. The total maximum that can be paid as penalty is 25% that is, five months beyond which no the balance is multiplied by 25% to get the figure to be paid. Second one is the failure to pay penalty. This is calculated depending on amount of tax was supposed to pay. The penalty is that is given here is 0.5% for each and every that is not paid in full. The penalty has no maximum limit. The penalty is calculated right from date of the deadline until the total balance is fully settled. The interest is the last penalty. The tax that one owes is the base of calculation. The current rate is 4% per year and it is calculated every day that tax is underpaid. With the above penalties in mind, the best and efficient of avoiding taxes upon death. The are other measures apart from penalty avoidance that will be discussed later in this discussion but to mention they include the tools of estate tax reduction such as lifetime gifts, private annuities, transfer to minors and spouse among others. If parents apply the above criteria they will end up escaping the harshness of the estate tax (Kaufman, 2011). The proposed legislations will somehow impact negatively to the beneficiaries and the trust. However, the legislation proposal on estate tax seems a positive. The proposed changes outline that there is tax exemption for the property worth $ 3,500,000 and there after estate tax is 45%. This is fair as the value of property exempted from tax exemption has duly increased. As outlined, after 2012 it was set that the tax exemption was only for the property worth $1,000,000 and the corresponding federal estate tax rate will rise all the way to 55%. Comparing the proposal and the set exemption after 2012, it shows that the value that is given exemption has fallen. The federal tax has also fallen from 55% to 45%, a ten percent benefit to the beneficiaries as they are going to be taxed less. This proposal will give the parents and other people wishing to pass their property to beneficiary an advantage of passing more valued property. The change may be effected into the tax law by first giving the legislature time to evaluate where advantages will be evaluated. The revenue department should also outline their view based on the proposal as it is the department that will be concerned with the taxing (Internal Revenue Service, 2012). If such a regulation will be of benefit to the both the beneficiary and the government hence it is incorporated into the tax law. The proposal will assist in increasing the value of property passed with less tax being paid. The tax percentage reduction seems also as a form of waiver. The proposal will also assist to reduce the negative impact that would have resulted from the institution of the previous 55% which would have actually been a 22% rise in the federal tax payment. This would have been a huge property value deduction. The $2.5 million increase in the value of tax free property is actually a big value that will ensure that more property is passed to the beneficiaries. Passing of property to the beneficiary and the property to be highly valued is one of the basic aims of the parent. Estate taxes have huge impact on the tax that is left behind once it is paid. One impact is that it the taxes affect the distribution of the estate or breaking up of dynasty wealth. The individual wealth is cut by a big portion which prompts individual to rethink about the issue of wealth accumulation. Many persons result to alternatives of either passing it as gift or they fail to work hard as they know their wealth will almost be swallowed by the tax. Other individuals consume most of their wealth to avoid the tax. The heirs thereby will get just but a little portion of the total wealth. The other impact is that it leads to individuals making or giving their wealth to charity to avoid the issue of their wealth being taxed. The charity giving is always accompanied with the aspect of al...