Sample Essays on Tax Law Knowledge towards Financial Planning

Tax Law Knowledge towards Financial Planning


            The law is very clear with regards to payment of taxes and the consequences therein in tax evasion. There is a great significance in the knowledge of tax law for the purpose of aiding in financial planning and ensuring compliance among all the parties involved. In the United States, all state parties are liable to tax payment regardless of their supposed class, racial background, sex or religious affiliation. This paper therefore delves deeper in tax law, giving insight on the importance of the laws with regards to financial planning and financial freedom.


            The purpose of financial literacy is to gain knowledge of the tax benefits that may ensure towards keeping vigil with the tax regulation and exemptions. Tax benefits which are most at times received from tax deductions only depends on the marginal tax rate with regards to a particular tax payer. The benefits realized thereof as a result of the tax credit are independent of the marginal tax rate of the taxpayer. In the case of the non-refundable credits, there is only an annual excess provision of the carryover, this is to mean that should a non – refundable credit exceed the liability of the taxes, the excesses that are realized are automatically lost. Therefore, in the case of a non – refundable credit only current tax liability can be offset.

However, in the case of a refundable credit, there is a provision for the payout should the amount of credit exceed the tax liability. This scenario is called withheld taxes or earned income credit, they comprise many business credits which are synchronized into one. Further, the limited to net income tax has the ingrained tendency of reducing by the greater of a minimum tax which is considered to be tentative and a regular tax liability that exceeds a particular amount depending on its percentage. Mostly, an unused credit is usually forwarded 20 years after being carried back by one year. There has to be a knowledge of these respective tax credits for the purpose of financial literacy and accuracy of the individuals(Kim Joo-suk 397-423). The lack of knowledge of such credits coupled with benefits, places an individual at a proximal position to exploitation by fraudsters or law offenders. In the case of an individual aiming to minimize taxes, the best option would be to combine all the taxes into one in the form of a refundable credit.

Work opportunity tax credit is one which applies to the first twelve months of payment to people within such groups as; a percentage of $ 6,000 wages which are payable per each eligible employee, individuals with high rates of unemployment, and individuals with high rates of welfare benefits from family(Kim Jihyun 423-466). The work opportunity tax credit has its merits in the deduction of wages which are subsequently reduced by the amount of credit. The work opportunity tax is important in the sense that it places into perspective individuals who are highly unemployed and do not have an advantage of receiving a regular salary.

A quick overview of the tax system reveals a greater consideration of individual income. Simply, an individual pays as they earn with the highest taxpayers being the rich and companies that are top notch in the country. The consideration of an individual income is vital toward showcasing to the society that the tax regulation system is not meant to extort the citizenry but work as a team toward achieving some desirable level of balance between the financial distribution between the rich and the poor. For an individual seeking financial planning and literacy, the knowledge of these tax exemptions along with the credit brings about the merits of knowledge of manipulating the system to their advantage and not failing to embrace opportunity where is.

Vital to the individual taxpayer is the understanding of the criteria that is normally used in the selection of the tax structure. Adam Smith is particularly remembers for the development of the particular tax structure which financial planners should gain knowledge of. First, there is a consideration of the equality of the taxpayers. Each individual ought to pay taxes with regards to the amount that they receive as regular income/ salary (Hoffman, Smith & Boyd, 4). Any amount paid as tax which is not in due consideration of the level of income earned is pure usury and extortion. Second, convenience which dictates that the administrative laws of collecting taxes should be convenient. The current withholding system is a merit to the taxpayers because it involves the pay as you go type of a system which is proving to be very convenient(Hoffman, Smith and Boyd, 4).

More importantly, the certainty of the tax system ought to be assured, individuals aiming to achieve financial economy have to know the tax implication of a particular business transaction or venture. Finally, a tax system is meant for only nominal collection costs which prove to be economic in nature. The government’s economy in taxation and the selection of the desired personnel is important for the purpose of transparency and accuracy in tax collection. However, misappropriation must always ensure at some point thus calling for vigilance and accountability for the purpose of attaining efficacy(Hoffman, Smith and Boyd, 15).

The major types of taxes such as property taxes, transaction taxes, and general sales taxes must be put into considerations and the impetus of such taxes with regards to an individual earning must be set clear. It is thus unadvisable to purchase a property bearing large transaction taxes during purchase as well as sales taxes that proves hard for a client with regards to financial planning. The most probable angle to take as far as taxes is concerned is to engage in transactions that have the prospects of bringing returns other than using up entire savings for purchasing and tax evaluation.


Ethics must be considered in tax payment with the client refraining from committing tax fraud. This is because the impact of being identified by the IRS or other bodies can be life changing. Moreover, financial freedom comes about with much transparency and financial literacy. It is thus important to stay transparent and avoid circumstances that can deny one financial freedom. Freezing of assets is yet another disturbing tax measure which comes with tax fraud. Ethics in tax collection and transactions has to be factored in for the sole purpose of creating a better world for all. Financial literacy and freedom is a path of constant update requiring the gain of new knowledge, skills and professional expertise. As a lawyer, it is important to state the earnings from the cases and make payments to clients promptly, engaging in tax fraud can cost jobs.

         Work Cited   

Hoffman, William H, James E Smith, and James H Boyd. Individual Income Taxes. Stamford, CT: Cengage Learning, 2015. Print.

Kim Jihyun,. “Review Of 2012 Corporate Tax Act Law And Income Tax Law Cases”. Seoul Tax Law Review 19.1 (2013): 423-466. Web.

Kim Joo-suk,. “Review Of 2011 Corporate Tax Law And Income Tax Law Cases”. Seoul Tax Law Review 18.1 (2012): 397-423. Web.