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Since 1986, the tax code has been amended several times. Over the time, income tax has become not only a means of increasing or obtaining revenue necessary to run the government, it has also become a method of setting policies, directing our economic system and our social and political behaviors in an attempt to attain specific results. That is why a tax professional must have a good understanding about the sources of the rules of tax law. The primary sources of tax information include pronouncements from all three branches of government: legislative, executive and judicial.

In their book, Hoffman, Smith and Willis (2006) describe that the legislative process originates in the House of Representatives, who approve or disapprove tax bills. Approved tax bills are forwarded to the Senate and then, if both bodies accept the bill, they are referred to the President for approval or veto. The administrative sources of the Federal tax laws are issued by either the U.S. Treasury Department of the IRS and can be grouped as: Treasury Department Regulations, Revenue Rulings and Revenue Procedures, and other administrative pronouncements. Judicial sources of the tax law are the Federal courts. Any tax dispute is first considered by the court of original jurisdiction or trial court. There are four trial courts: Federal District Court, the U.S. Court of Federal Claims, the U.S. Tax Court, and the Small Cases Division of the U.S. Tax Court.

One of the objectives of the modern income tax laws is 'not only to obtain funds for running the government, but also to influence specific economic or political goals.' ('Accounting for Income Taxes', para. 2). Additionally, income tax policies provide the necessary sources of tax information to solve many of the tax related problems. The Internal Revenue Code and the Treasury Regulations are the most common sources for Reference in order to resolve many of the basic problems. Additionally, it is important to assess the validity of the tax law source. 'Proper assessment involves careful interpretation of the tax law with consideration given to its relevance and validity. In connection with validity, an important step is to check for recent changes in the tax law.' (Hoffman, Smith, & Willis, 2006, p. 2-2).

Corporations and individuals must follow tax regulations when reporting income taxes. This, sometimes, is a little complex for business and corporations as Generally Accepted Accounting Principles (GAAP) and tax regulations differ. In fact, financial statements are not the same as income tax returns. The purpose of GAAP financial statements is to provide financial information for making decisions while the purpose of income tax accounting is to calculate tax to be paid to various governmental jurisdictions. Income tax accounting does not follow GAAP standards at all. Thus, the amount of taxes payable to the IRS will differ from the amount that a company reports as tax expense. 'When viewing an income statement prepared in accordance with GAAP, a line entitled ‘Pretax Income' or ‘Income Before Income Taxes' will be seen. This amount is not the same as the ‘Taxable Income' found on an income tax return.' ('Accounting for Income Taxes', para. 3). Taxable income is determined according to the Internal Revenue Code and Pretax Financial income is determined according to GAAP where financial statements will reflect not only the tax that is currently due, but