BUSINESS TAXATION 2
Running head: BUSINESS TAXATION 1
Business taxation
Name
Institution
Business taxation
Business is taxed basing on the form of its operations. In most cases, many tax provision deals with the relationship between the owner and the business entities. The importance of owner-business transactions have an impact on taxation, in this regards issues to do with double taxation and how to increase assets in business without tax consequences. Whereas all companies must pay income tax returns, partnerships are exempted and instead fill an information return. Besides, the nature of the business structure will also have an impact on transactions and taxations. For instance, in partnership formation, the partnership and partners do not recognize gains and loss from the contribution in exchange for a partnership interest. The purpose of this provision is to allow taxpayers a neutral ground in choosing a business form.
To ensure tax efficiency, an analysis of a tax plan is necessary. Through tax planning, all elements of a tax plan work most efficiently thus reducing tax liability. Strategies in tax planning may include avoiding income recognition and maximizing deductible incomes. Meanwhile, the primary goal of tax administrators is to enforce policies that promote taxpayers compliances and cost-effective administration that does not exceed revenue collected. The internal revenue service’s sole aim is to enforce federal tax laws, raise revenue and regulate the economy. IRS conducts audits in the form of correspondence audit, and field audits by using mathematical formulae to inspect a small percentage of returns filed. From the reviews, revenue agent reports generated provide a basis for determining if the tax was underpaid, overpaid or correctly taxed and in governing statutes of limitations.