What Is a Tax Code?
In the United States, federal and state governments impose a variety of taxes under their respective tax laws, often referred to as tax codes. An income tax code is a law that prescribes the rules that individuals, businesses, and other entities must follow in remitting a portion of their incomes to the
government of the jurisdiction where their income is sourced.
- The U.S. income tax code, the Internal Revenue Code, is a federal law, numbering thousands of pages, that prescribes the rules that individuals, businesses and other entities must follow in
remitting a portion of their incomes to the federal or state government.
- The U.S. Congress enacts the tax laws that set the rules for the federal income tax
and other taxes.
- The Internal Revenue Service (IRS) interprets and implements the statutory rules in
regulations that have the force of law, as well as in official revenue rulings and private letter rulings.
How the US Tax Code Works
In the United States, the U.S. Congress enacts the tax laws that raise revenue for the federal government. These rules constitute the official US Internal Revenue Code (IRC). The Internal Revenue Service (IRS) implements the statutory rules in accordance with Treasury Department regulations that prescribe how they apply in different scenarios. At the state level, tax laws are set by state, local, and county government authorities. Many states model major provisions of their income tax laws on the federal tax code’s substantive rules, but impose different rates and often provide different exemptions and exclusions.
The Internal Revenue Code contains thousands of numbered sections that provide specific
definitions, rules, and levies. The regulations issued under the tax code by the Treasury Department
contain more detailed rules that prescribe the code’s application in specific circumstances. These regulations are legal requirements that taxpayers must follow. They are published in Title 26 of the Code of Federal Regulations (26 CFR).
In addition to income taxation, the tax code and regulations cover the tax treatment of estates, gifts, and retirement and benefit plans; set Social Security, Railroad Retirement, and unemployment taxes; prescribe excise taxes; and establish administrative, procedural, penalty, withholding, and other rules. For example, sections 1 through 5 of the Internal Revenue Code impose the federal income tax on the taxable income of individual U.S. citizens and residents, section 11 imposes the corporate income tax, and section 641 taxes estates and trusts. Subsequent provisions encompass a broad range of topics, e.g., alcohol, tobacco and other excise taxes begin with section 5001, and rules on crimes and criminal penalties start at section 7201.
Title 26—Internal Revenue Code
Subtitle B—Estate and Gift Taxes (sections 2001 to 2704)
Subtitle C—Employment Taxes (sections 3101 to 3512)
Subtitle D—Miscellaneous Excise Taxes (sections 4041 to 4982)
Subtitle E ---Alcohol, Tobacco, and Certain Other Excise Taxes (sections 5001 to 2872)
Subtitle F—Procedure and Administration (sections 6012 to 7874)
Subtitle G—The Joint Committee on Taxation (sections 8001 to 8023)
Subtitle H—Financing of Presidential Election Campaigns (sections 9001 to 9042)
Subtitle I—Trust Fund Code (sections 9500 to 9602)
Subtitle J—Coal Industry Health Benefits (sections 9702 to 9722)
Subtitle K—Group Health Plan Requirements (sections 9801 to 9834)
Tax Guidance Resources
Most individual taxpayers with typical sources of income do not need to research the
technical intricacies of the federal tax code and regulations. Each year the IRS
issues tax forms and instructions that show taxpayers how to complete and file their
The IRS also issues publications that provide individuals with guidance in ordinary language for both common situations, for example, sale of a home, and less frequent circumstances. Similarly, IRS publications for business taxpayers explain how to handle capital investment, expenses, and income. Other publications describe the special rules for charities and other organizations. IRS publications are freely available in print or online from the IRS website. These IRS resources enable taxpayers to handle their own returns, or, for complicated returns, help them better understand the issues that they take to advisors.
What Is a Tax Code?
A tax code is a law that prescribes the levies imposed by a government on individuals, businesses, other entities and on transactions, such as property sales, that are subject to its jurisdiction, to fund its operations. In the United States, federal, state and local governments have enacted tax codes of varied scope and design.
What Tax Codes Apply to Individuals?
The U.S. government and most state and local governments have income tax codes that
are the principal tax obligation for most individual taxpayers. State and local jurisdictions also impose a variety of taxes that in some cases create substantial costs for individuals, e.g., sales and use and real property taxes.
Where Can You Find the US Income Tax Rules?
The U.S. income tax code, officially the Internal Revenue Code, contains the statutory rules enacted by the U.S. Congress to determine taxable income and the amount of tax due on that income. Regulations issued by the Department of the Treasury provide more detailed rules based on the Code; these regulations also have the force of law. Taxpayers can obtain guidance on tax compliance in clear, ordinary language free of charge on the IRS website. The site provides articles on common tax topics and also offers links to IRS publications that contain more detailed guidance generally understandable by a non-technical reader.
The Bottom Line
The Internal Revenue Code contains a broad range of federal tax levies. Taxpayers
are obligated to comply with both the code and the regulations issued under it.
Many tax rules are highly technical and complex, but for most individual
taxpayers the IRS provides readily accessible, clear guidance free of charge.
Both the Internal Revenue Code and the tax regulations in the Code of Federal
Regulations (CFR) can be consulted online. The National Archives’ electronic
version of the CFR is continuously updated. However, most
individuals will find adequate information in the topical income tax guidance on
the IRS website, In addition, the IRS publications accessible through the links on the site offer clear, useful assistance in ordinary language.
Many commercial tax preparation software programs, as well as the free online program
that the IRS offers for individuals with modest and low incomes, provide helpful
instructions. For more complex situations, expert tax advice may be necessary.