Tax Law and Accounting Every person, organization, corporation or non-profit organization is subject to income tax. Income tax refers to those taxes imposed on money earned during a calendar year. The government taxes our income so that we can have enough money to pay for the things we all need. To comply with tax laws and regulations, it is necessary to achieve a good understanding of federal tax law, its sources and purposes, as well as its relationship to the accounting profession. The Congress and the President of the United States are responsible for drafting and approving tax laws. They are also responsible for the federal budget. The budget is how much the government intends to spend on various programs and services. The Internal Revenue Service (IRS) is responsible for enforcing tax law, collecting taxes, processing tax returns, issuing tax refunds, and delivering the collected money to the U.S. Treasury. Thus, the Treasury is responsible for paying various government expenses. The income tax was first developed during the Civil War, when the first income tax was imposed. The purpose of the tax was to acquire money to pay the war debt. After the war, the income tax was declared unconstitutional by the Supreme Court in 1895 because it was not apportioned among the states in accordance with the Constitution. With the passage of the Sixteenth Amendment to the Constitution in 1913, Congress was authorized to impose a non-apportionment income tax. Thus, the result was a revenue law that taxed both individual and corporate income. "In 1918, during World War I, the top income tax rate rose to 77 percent to help finance the war effort. It fell dramatically in the postwar years, to 24 percent in 1929, and rose again during the Depression. During World War II, Congress introduced payroll withholding and quarterly tax payments." (“A Brief History of the IRS,” para. 3). In October 1986, the president signed the Tax Reform Act of 1986 into law. This was perhaps the most massive reform of the U.S. tax system since the introduction of the income tax. With this act, Congress promised individuals and businesses lower tax rates on their income, provided they waived or reduced many popular income tax deductions. (“An Outline of the American Economy,” par. 6) The Taxpayer Relief Act of 1997 made further changes to the tax code providing a modest tax cut.