- - Thursday, January 30, 2014


Because the income-tax amendment didn’t become effective until late February 1913, it meant that the first filing in 1914 was based upon only 10 months of income (March through December), not the entire year of 1913.

The federal government, trying to economize, printed forms and instructions that would be good for subsequent years and didn’t emphasize that Americans only needed to calculate their amount owed for a shortened year. Taxpayers were irate, but they had a full plate of other complaints. For example, the tax packet consisted of four pages, including the last, an instruction page.

The problem was that Pages 2 and 3 had to be filled out before Page 1, with the information from the former delineated on the front page. That seemed to be a backward exercise.

Worse was the treatment of married couples. Each taxpayer got a $3,000 personal exemption; married couples, however, received a total of only $4,000. So if each spouse had an income and filed separately, the total was still $4,000 and had to be split between them. The question was: How do you divide it?

Fortunately, very few Americans met the minimal level of income required to file (only one in 271 adults). This meant, though, that audits were more likely for the unlucky few, and the penalties were stiff. “False or fraudulent” returns resulted in a doubling of the tax due, with an additional penalty of up to $2,000, a year in jail, or both, together “with the costs of prosecution.”

The penalty for not filing a return ranged from $20 to $1,000, but no information was provided in terms of how these amounts (or anything in between) would be determined.

The instructions required each taxpayer to file a return “with the Collector of Internal Revenue for the district in which the individual resides if he has no other place of business, otherwise in the district in which he has his principal place of business.”

What if the individual held the position of a salaried employee (was that a type of business?) and lived in one district with a filing office and worked in another district with its own filing office?

Questions barraging the IRS were so numerous that taxpayers had to wait for clarifying statements. By Feb. 21, 1914, the government threw up its hands, stating that no more explanatory announcements would be issued. The IRS made one concession, however. Because the filing deadline of March 1 fell on a Sunday, the deadline was extended to March 2.

Talk about unfairness. Congress, in writing the implementing law in late 1913, exempted from taxation the president of the United States, Supreme Court justices and all other federal judges, the theory being that, under separation of powers, one branch of the federal government couldn’t regulate the other.

By 1932, however, lower federal judges lost their exemption, and the president and Supreme Court justices voluntarily started to pay taxes. Seriously.

Local and state government employees got a free ride, but not federal workers: “In computing net income, there shall be excluded the compensation of all officers and employees of a State or any political subdivision thereof, except when such compensation is paid by the United States Government.”

As for pension income, “United States pensions shall be included in income.” Did this mean only U. S. government pensions or all pensions in the nation? Perhaps the worst part of the tax-filing rite was that the whole shebang “must be made under oath or affirmation.

Affidavits may be made before any officer authorized by law to administer oaths. If before a justice of the peace or magistrate: not using a seal, a certificate of the clerk of the court as to the authority of such officer to administer oaths should be attached to the return.”

Nor could the taxpayer expect much help in deducting a casualty loss. The form specified only three types of such losses: “fires, storms, or shipwreck.”


Thomas V. DiBacco is professor emeritus at American University.

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