Business

In Saudi Arabia, taxes are a subject of the religion and not a government responsibility. A complex problem occurs in situations whereby taxes are utilized for religious purposes. There is a probability of a conflict between religious taxes and the normal laws of taxation. If trade laws are held as firmly as they are in the American federal system, then the problem arises when dealing with the subject with the uninformed part of the population in America (such as foreigners visiting the country from Islamic backgrounds). Such is therefore the case with Saudi Arabian taxation system since it is based on their religion. Religious tax has a number of biased elements in the favor of the Moslems. This problem with fragmentation causes a lot of conflict between tax and the global trade system. The religious tax system provides an excellent example of the tax fragmentation problem. In such a situation, where taxation and revenue authority allows a particular behavior but the trading system does not, there are four fragmentations in total the international tax law, Islamic law, international trade law and the Saudi Arabian tax and constitutional law. The problem of religious taxes is not only found in Saudi Arabia but among all the Muslims (Althunayan, 1992).

 However, the companies in US use the tax returns and the employment taxes in their tax system. The tax authority has put in place strict measures that ensure that the taxation laws are followed to the letter, in an effort to ensure that there is no tax evasion in the country. Being an international student from Saudi Arabia were taxation does not apply, it has been challenging and quiet difficult to adopt and understand the taxation laws and procedures that are employed by the company, especially the tax returns and the employment taxes which are key in the companys taxation procedures. This internship paper addresses the work being done by the intern and the difficulties being experienced and the lessons learnt from the companys returns on taxes and the employment taxes (Moorthy, 2009).

The knowledge acquired from the tax system
This internship program has provided a major opportunity for learning and understanding the operation, the facts underlying and the importance of the tax returns and employment taxes as applied in the company. Mostly, the understanding of the system in the US for remittance of taxes and the payment of the taxes by the individual taxpayers has been facilitated through practical learning and application of the taxes into the companys system. The application of the tax returns and the employment taxes are as discussed hereunder.

The tax returns
Tax returns refer to the general term for the form used for filing taxes due to a local or federal government. Incorporated on tax return are items like the allowable deductions, gross income, tax due and tax credits. Taxpayers (individual) usually file on calendar-year base using form 1040, due  31D 2 months  following the income tax year. Corporations file Form 1120 on either calendar-year basis or a fiscal year. It is usually due 21D 2 months subsequent to the levy year. Tax returns are as well prepared for affiliations such as partnerships estates and gifts. Tax returns comprise all the necessary formalities that go along with the transmittal of taxes to the government agency, generally the Internal Revenue Service (IRS). IRS gives out approximately 650 different taxpayers forms to use while calculating or paying taxes. Every form is relevant to a different purpose or situation (Law Society, 2009). Tax returns in U.S. are reports which are filed with the Internal Revenue Service (IRS) or local tax collection agency or with the state such as the California Franchise Tax Board containing the information used in calculating taxes (Moorthy, 2009)

Employment taxes
Employers are responsible for a number of state, local and federal taxes. Being an employer, one must withhold definite taxes from the pay checks of the employees. Employment taxes in the United States comprise Federal income tax withholding, Social Security and Medicare taxes and Federal unemployment tax act (FUTA). With the Federal Income Tax Withholding, businesses ought to usually withhold federal income tax from employees wages on either monthly or on the annually accumulative values. Social Security and Medicare taxes pay for the benefits that employees and family members obtain under Federal Insurance Contributions Act (FICA) (Ferguson, 2010).

Social security tax usually pay for benefits under the old-age, survivors, and disability insurance part of FICA. Medicare tax pays for the benefits through the part of FICA that deals with hospital insurance. Employers withhold a fraction of the taxes from the employees pay checks and pay a corresponding sum themselves. The Federal unemployment tax act (FUTA) on the other hand is a division of the state and federal program through Federal Unemployment Tax Act (FUTA) which pays joblessness compensation to employees who lose jobs. An individual usually reports and pays FUTA separately from the Medicare taxes,   Social Security, and the withheld income tax FUTA tax is paid from an individuals personal funds. There are three basic types of federal employment systems which include the Employee Only System, the Employer Only System and the Employer and Employee Federal System. In the Employee Only system, every employee is subjected to the Federal Income Tax (FIT) and must file their personal income tax return. The Employer Only System stipulates that every employer is liable to pay Federal Unemployment Tax (FUTA) on the beginning 7,000 of wages per annum for all employees. The efficiency rate of FUTA is usually 0.8per cent subject to specific state unemployment insurance needs. Finally, the Employee and Employer System exists where both the employer and employee are responsible to FICA tax (Ferguson, 2010).

The difficulties encountered with the tax system
The major difficulty involved embracing the tax system as the role of the internal revenue system rather than the role of the religion. Being a Saudi Arabian, taxation issues and the companys application of taxes for its employees appear to be improper.  This is a challenge that has been overcome through adaptation into the new environment and the company policies. In addition, since the taxation system was completely a new system, a lot of study was involved by basically studying through the basics of taxation all through to the laws and applications, given limited time. Considering that laws have gone through several major revisions over the past two decades, it has been especially difficult to find relevant study material that contains the latest taxation laws in the country. Some of the revisions have also been considerably inaccurate resulting to errors and misrepresentations when calculating tax payable by the employees or the company to the IRS. Another difficulty involved the harmonization of the entire tax returns to ensure that they were compatible with the systems in the internal revenue system of the United States. The rules and laws of taxations also provided another challenge since they differ from state to state and are also revision or completely changed frequently. This means that one has to keep consistently updating the rates that are applied in calculating the tax payables and these therefore creating confusion and inconstancy at work. Due to the changing of the taxation rates, it calls for regular adjustments to reflect the same figures as in the internal revenue system (Perez, 2010)
The importance of the tax system

It is essential for the small business proprietors to preserve an individual understanding of tax-related subject so as to save money. Whether they use a proficient accountant or bookkeeper, small business proprietors should maintain careful checks on their tax preparation so as to capture the advantage of any possible opportunity for tax savings and deductions. The internal tax system is also important to the state and the federal government to ensure that there was no tax evasions or avoidances that occurred during the collection of the taxes at the end of the year. It also facilitates the refunds of any excess taxes paid by the company to the internal revenue system either by the claims made by the company or through acknowledgement by the system itself (Perez, 2010)

The principal function of tax returns is to facilitate the calculation of tax liability of a business or an individual to the Internal Revenue Service (IRS). In case it is determined by the IRS that it has excess taxes withheld from an individual or a business from previous taxation year, IRS will refund the excessive taxes. Different types of tax returns subsist, depending on the person filing and their income source. For instance, individuals usually file personal taxes with Form 1040 while any person getting investment returns files Form 1099 (Law society, 2009). In accordance to IRS, one must file personal tax returns not later than April 15. Corporations and businesses are supposed to file their taxes on quarterly rather than annual (Law society, 2009).Online programs  likes TurboTax make the filing of  tax returns simplified since they are equipped with the tax knowledge for  assisting an individual to document deductions and perfectly file the tax return (Law society, 2009).

From all this experience, it is obvious that the duration as an intern for me has been quite challenging but the most important thing is that I have learnt much.