The Internal Revenue Code of 1986 governs tax laws in the US and covers almost all types of monetary transactions. It was created to modernize the tax system and has been modified every year since. The code is incredibly long and complicated, leading to criticism from some who say it is almost impossible to understand.
The Internal Revenue Code of 1986 (IRC) is the main document that governs tax laws in the United States of America. A substantial addition to the initial tax documents, the 1986 IRC was created as part of an Internal Revenue Service (IRS) review aimed at modernizing the tax system. It is generally considered to be an extension of a 1954 version of the same code; Although few original provisions were changed, many additional elements were added, clarified, or expanded.
This document covers the taxes and legal process of almost all types of monetary transactions that the country could face. Areas described include gift and property taxes, tobacco, firearms, alcohol, trust funds, employment, self-employment, pension plans, gambling, and estate. Naturally, the document ended up being incredibly long, leaving room for many members of Congress to object to the literal size of the tax code. Interestingly, few members of Congress who have commented on the length agree with the actual size; Estimates given in congressional speeches range from 2,000 pages to 2.5 million pages.
Complicated as it may be, the IRC implemented and modified many policies in an attempt to cope with the changing financial world of the late 20th century. One important change was the restriction of deductions from the Individual Retirement Account (IRA). Before the change, anyone could have universal IRA contributions deducted from their taxes, even if the taxpayer had other pension plans through employers or had significant personal wealth to support them through retirement. After the 1986 Internal Revenue Code, deductions could only be taken by certain people, particularly those who had no other pension plans.
Another important change was the elimination of federal taxes for those who are below the established poverty line. This helped taxpayers who were already struggling to survive, particularly in the high-inflation climate of the early 1980s. The removal of this tax, along with several provisions that closed off tax haven avenues for wealthy taxpayers, helped draw support from congressional Democrats for the document.
Since the original passage of the Internal Revenue Code in 1986, Congress has modified the document virtually every year to reflect changing needs and a fluctuating financial system. Although no change has been large enough to call for the document to be renamed again, the length and provisions continue to increase. Some critics of the tax code complain that the document is now so long that it is almost impossible to understand and leads to contradiction, confusion and lost revenue due to important provisions of the code.
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