The 16th Amendment to the Constitution was championed by President William Howard Taft, and its ratification was an effort to make sure more higher-income people paid taxes, and that the government wasn’t wholly dependent on tariffs and taxes on goods.
We thought you would enjoy viewing the very first income tax return that US Citizens were required to fill out in 1913. What is interesting to read are the instructions on the 1040 Form.
1. This return shall be made by every citizen of the United States, whether residing at home or abroad, and by every person residing in the United States, though not a citizen thereof, having a net income of $3,000 or over for the taxable year, and also by every nonresident alien deriving income from property owned and business, trade, or profession carried on in the United States by him.
2. When an individual by reason of minority, sickness or other disability, or absence from the United States, is unable to make his own return, it may be made for him by his duly authorized representative.
3. The normal tax of 1 per cent shall be assessed on the total net income less the specific exemption of $3,000 or $4,000 as the case may be.
(For the year 1913, the specific exemption allowable is $2,500 or $3,333.33, as the case may be.) If, however, the normal tax has been deducted and withheld on any part of the income at the source, or if any part of the income is received as dividends upon the stock or from the net earnings of any corporation, etc., which is taxable upon its net income, such income shall be deducted from the individual’s total net income for the purpose of calculating the amount of income on which the individual is liable for the normal tax of 1 per cent by virtue of this return. (See page 1, line 7.)
4. The additional or super tax shall be calculated as stated on page 1.
5. This return shall be filed 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; or in case the person resides in a foreign country, then with the collector for the district in which his principal business is carried on in the United States.
6. This return must be filed on or before the first day of March succeeding the close of the calendar year for which return is made.
7. The penalty for failure to file the return within the time specified by law is $20 to $1,000. In case of refusal or neglect to render the return within the required time (except in cases of sickness or absence), 50 per cent shall be added to amount of tax assessed. In case of false or fraudulent return, 100 per cent shall be added to such tax, and any person required by law to make, render, sign, or verify any return who makes any false or fraudulent return or statement with intent to defeat or evade the assessment required by this section to be made shall be guilty of a misdemeanor, and shall be fined not exceeding $2,000 or be imprisoned not exceeding one year, or both, at the discretion of the court, with the costs of prosecution.
8. When the return is not filed within the required time by reason of sickness or absence of the individual, an extension of time, not exceeding 30 days from March 1, within which to file such return, may be granted by the collector, provided an application therefor is made by the individual within the period for which such extension is desired.
9. This return properly filled out 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.
10. Expense for medical attendance, store accounts, family supplies, wages of domestic servants, cost of board, room, or house rent for family or personal use, are not expenses that can be deducted from gross income. In case an individual owns his own residence he can not deduct the estimated value of his rent, neither shall he be required to include such estimated rental of his home as income.
11. The farmer, in computing the net income from his farm for his annual return, shall include all moneys received for produce and animals sold, and for the wool and hides of animals slaughtered, provided such wool and hides are sold, and he shall deduct therefrom the sums actually paid as purchase money for the animals sold or slaughtered during the year. When animals were raised by the owner and are sold or slaughtered he shall not deduct their value as expenses or loss. He may deduct the amount of money actually paid as expense for producing any farm products, live stock, etc. In deducting expenses for repairs on farm property the amount deducted must not exceed the amount actually expended for such repairs during the year for which the return is made. (See page 3, item 6.) The cost of replacing tools or machinery is a deductible expense to the extent that the cost of the new articles does not exceed the value of the old.
12. In calculating losses, only such losses as shall have been actually sustained and the amount of which has been definitely ascertained during the year covered by the return can be deducted.
13. Persons receiving fees or emoluments for professional or other services, as in the case of physicians or lawyers, should include all actual receipts for services rendered in the year for which return is made, together with all unpaid accounts, charges for services, or contingent income due for that year, if good and collectible.
14. Debts which were contracted during the year for which return is made, but found in said year to be worthless, may be deducted from gross income for said year, but such debts can not be regarded as worthless until after legal proceedings to recover the same have proved fruitless, or it clearly appears that the debtor is insolvent. If debts contracted prior to the year for which return is made were included as income in return for year in which said debts were contracted, and such debts shall subsequently prove to be worthless, they may be deducted under the head of losses in the return for the year in which such debts were charged off as worthless.
15. Amounts due or accrued to the individual members of a partnership from the net earnings of the partnership, whether apportioned and distributed or not, shall be included in the annual return of the individual.
16. United States pensions shall be included as income.
17. Estimated advance in value of real estate is not required to be reported as income, unless the increased value is taken up on the books of the individual as an increase of assets.
18. Costs of suits and other legal proceedings arising from ordinary business may be treated as an expense of such business, and may be deducted from gross income for the year in which such costs were paid.
19. An unmarried individual or a married individual not living with wife or husband shall be allowed an exemption of $3,000. When husband and wife live together they shall be allowed jointly a total exemption of only $4,000 on their aggregate income. They may make a joint return, both subscribing thereto, or if they have separate incomes, they may make separate returns; but in no case shall they jointly claim more than $4,000 exemption on their aggregate income.
20. 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.
Kat Jennings, TaxConnections, CEO and Founder and Advisory Team provides three areas of services: 1) Internationally recognized, retained executive search services for multinational corporations, public accounting firms, and law firms; 2) Introductions of sellers to buyers of small and medium size accounting firms; and 3) Provide brand building and education services that support and prepare accounting firm owners to buy/sell an accounting practice. We focus on educating the journey to sell a practice and how to increase firm revenue prior to any sale. Our program ensures you start years prior to a sale by learning what is expected of you during the selling process, and introducing firm Partners to cross selling opportunities that are easy to implement and reduce your workload at the same time. We introduce you to value added connections to smartly grow revenue in your accounting practice.
Kat Jennings has been retained by organizations worldwide to locate tax professionals with highly specialized tax knowledge and expertise. She has a thorough understanding of the tax business community, with a proven record of stellar performances matching professionals with organizations. Bringing two parties together to work successfully is the art of understanding personalities, cultural fit, expectations by both parties, flexible or inflexible work environments, understanding what drives and motivates each party, and revolves around the personality and ethics of each executive team.
Kat is a widely recognized expert in high level, tax executive search, as well as connecting buyers and sellers of accounting firms. TaxConnections provides and educates small to medium size accounting firms owners and Partners how to prepare and sell their firms so they can build a succession plan for their retirement. With larger firms seeking to acquire smaller accounting practices, there is a real need to help firm owners prepare to be acquired. Most firm owners are unaware they are not ready to sell when they decide to retire. TaxConnections educates firm owners’ what they need to do years in advance of selling an accounting firm practice.
Senior tax executives expect the utmost privacy when being introduced to multinational organizations about a new tax opportunity under consideration. Having said that, companies searching for a new head of tax expecting tax executive candidates to submit their resume through a resume portal, will never see a full slate of outstanding tax executives available due to a candidates’ desire for greater privacy. This is why privacy focused Uber Tax Recruiters consistently outperform in-house recruiters on tax executive searches.
We offer our clients a Performance Retainer Agreement arrangement so their HR department can still recruit and compete with the tax candidates we present on Head of Tax searches. The client pays us a partial fee upfront, and if they find a candidate they deem better than we introduce to them, we forfeit the final fee. Most of the time, they love and prefer our private introductions to tax executive candidates better than what they source through their own resume portals.
When we represent selling/buying small to medium-sized firms, firm owners/partners also demand greater privacy when considering the sale of their practice. TaxConnections provides a safe place to discuss their business needs, elevate their practices’ online reputation, and increase revenue through new streams of business development by outsourcing work and partnering with other firms. Over three decades, we have worked tirelessly to build relationships between firm owners most organizations rarely have access to in the world of tax. There are numerous possibilities you may never have considered previously to bolster the value of your practice and service offerings.
As a globally recognized consultant to multinational organizations, accounting firms, and law firms searching for tax expertise, Kat has been retained by public accounting firms, law firms, and corporations worldwide including Apple Computer, AC Neilson, Accenture, Agilent Technologies, Allergan, Alza, American Express, American Media, Aon, Baker & McKenzie, Barclays Bank, Bechtel, Cargill, Carl Zieuss Vision, Century Aluminum, Chevron, Clorox, Citigroup, Commercials Metals, Constellation Energy, Countrywide, Del Monte, Deloitte Touche, DFS, DLA Piper, E&J Gallo Winery, Electronic Arts, Ernst &Young, Fox Entertainment, Fremont Investments, General Electric,General Motors, Herbalife, Hewlett Packard, Hyatt, Intel, Jones Lang LaSalle, Kimco Realty, KLA Tencor, Koch Industries, KPMG, Levi Strauss, Liberty Mutual, LKQ, Loews, Logitech, Lucas Film, Maersk, McKesson, Nalco, Newell Rubbermaid, Nissan, Oracle, Orbitax, Pacific Gas & Electric, PwC, QAD, SAIC, SanDisk, Sanmina, Sempra Energy, SONY, Synopsys, Ticketmaster, Trimble Navigation, Toyota, Univar, Wal-Mart, Wells Fargo, Vertex, Yahoo, Xilinx, and many more not listed here.
Contact Kat at 858,999.0053 Office/858.232.4415 Cell or kat@taxconnections.com to request a private consultation regarding the sale of your practice, adding top talent to your organization, or merging your practice with another firm owner with a book of business. The possibilities are endless; if you have a dream of a new vision for your professional life; we will scout opportunities throughout the market to make it happen.
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