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the amount of the income tax of such taxpayer for the year or years for which such incorrect credit was granted. The amount of tax, if any, due upon such redetermination shall be paid by the taxpayer upon notice and demand by the collector. The amount of tax, if any, shown by such redetermination to have been overpaid shall be credited against any income, war-profits or excess-profits taxes, or installment thereof, then due from such taxpayer under any other return, and any balance of such amount shall be immediately refunded to him.14

14 Reg. 45, Art. 384.

CHAPTER 34

RETURN OF INCOME

For the purpose of assessing the tax, a return of income is required, showing specifically the items of gross income and the deductions and credits allowed by law. This chapter deals with the general provisions relating to returns of income, and does not cover the annual or special returns required with respect to withholding at the source, information at the source or other matters. For a discussion of such returns attention is directed to chapters on the respective subjects.

By Whom Filed. The law requires the return of income to be filed by every individual having a net income for the taxable year of $1,000 or over, if single or if married and not living with husband or wife, or of $2,000 or over if married and living with husband or wife.1 A return is required of every fiduciary (with the exception of receivers appointed by authority of law in possession of part only of the property of an individual) for the individual, estate or trust for which he acts (1) if the net income of such individual is $1,000 or $2,000 as indicated above or (2) if the net income of such estate or trust is $1,000 or over or if any beneficiary of such estate or trust is a non-resident alien.2 The term fiduciary is defined by the Revenue Act of 1918 to mean a guardian, trustee, executor, administrator, receiver, conservator, or any person acting in any fiduciary capacity for any person, trust or estate. Minors

1 Revenue Act of 1918, § 223. 2 Revenue Act of 1918, § 225. 3 Revenue Act of 1918, § 200.

are now required to make their own returns but the return of an incompetent must be filed by the committee of such incompetent. A return is required from every partnership, corporation and personal-service corporation subject to the tax regardless of whether or not it has been in receipt of any income during the taxable year.4

Accounting Period. The return of a taxpayer is made and his income computed for his "taxable year," which means his fiscal year, or the calendar year if he has not established a fiscal year.5 The Revenue Act of 1918 defines the term "fiscal year" as meaning an accounting period of twelve months ending on the last day of any month other than December. No fiscal year will, however, be recognized unless before its close it is definitely established as an accounting period by the taxpayer and the books of such taxpayer were kept in accordance therewith. The taxable year 1918 is the calendar year 1918, or any fiscal year ending during the calendar year 1918.7 A taxpayer must make his return for the taxable year 1918 on the basis of his annual accounting period (fiscal or calendar year) even though a part of such accounting period was included in a period for which he had previously made return. Thus, an individual whose accounting period ended June 30, 1918, and who had previously made a return for the calendar year 1917, should make a complete return in accordance with the provisions of the law for the twelve months ending June 30, 1918. A taxpayer making his first return for income tax must make such return on the basis of his annual accounting period. Except in the cases of a return for the taxable year 1918 and of a first return for income tax, a taxpayer must make his return on the basis (fiscal

4 Revenue Act of 1918, §§ 224 and 239. The term "taxable year" means the calendar year, or the fiscal year ending during such calendar year, upon the basis of which net income is computed.

5 Reg. 45, Art. 25.

6 Revenue Act of 1918, § 200.

7 Revenue Act of 1918, § 200.

8 Reg. 45, Art. 25. Revenue Act of 1918, § 226.

or calendar year) upon which he made his return for the taxable year immediately preceding unless, with the approval of the Commissioner, he has changed the basis of computing his net income.

CHANGE IN ACCOUNTING PERIOD. If a taxpayer changes his accounting period, he is required as soon as possible to give written notice to the collector for transmission to the Commissioner of such change and his reasons therefor. The Commissioner will not approve a change of the basis of computing net income unless such notice is given (a) at least thirty days before the due date of a taxpayer's return on the basis of his existing taxable year, and (b) at least thirty days before the due date of his return on the basis of the proposed taxable year. If the change in the basis of computing the net income of the taxpayer is approved by the Commissioner, the taxpayer must thereafter make his returns upon the basis of the new accounting period.9

Returns When Accounting Period Changed. No return can be made for a period of more than twelve months. A separate return for a fractional part of a year is, therefore, required wherever there is a change, with the approval of the Commissioner, in the basis of computing net income, or wherever a taxpayer makes his first return of income on the basis of a fiscal year.10 If the change is from calendar year to fiscal year, a separate return must be made for the period between the close of the calendar year for which return was made and the date designated as the close of the fiscal year. If the change is from one fiscal year to another fiscal year, a separate return must be made for the period between the close of the former fiscal year and the date designated as the close of the new fiscal year. If the taxpayer making his first return for income tax keeps his ac-. counts on the basis of a fiscal year, he must make a separate return for the period between the beginning of the calendar

9 Reg. 45, Art. 26. See Revenue Act of 1918, § 226. 10 Revenue Act of 1918, § 226; Reg. 45, Art. 431.

year in which such fiscal year ends and the end of such fiscal year.11 The requirements with respect to the filing of a separate return and the payment of tax for a part of a year, are the same as for the filing of a return and the payment of tax for a full taxable year closing at the same time.12

Individual Returns. The individual return is made on form 1040 (revised), except that it may be on short form 1040A (revised) where the net income does not exceed $5,000 and the net income subject to the normal tax, that is, after applying the personal exemption and other credits, does not exceed $4,000. The forms are provided by the Commissioner and may be had from the collectors of the several districts. In the case of a person owning State, municipal, or United States bonds, his return must contain a statement showing the number and amount of such obligations owned by him, the income received therefrom, and the other information called for in the form.13

HUSBAND AND WIFE. A husband and wife living together may make a single joint return. If a husband and wife, living together, have separate estates, the income from both may be reported in one return, but the amount of income of each, and the full name and address of both, must be shown in such return. Ordinarily, the husband, as the head and legal representative of the household, and general custodian of its income, should make and render the return of the aggregate income of himself and his wife. Unless the wife files a separate return of income or joins with her husband in a return which sets forth her income separately, her husband should include in his return the income accruing to the wife from services rendered by her or the sale of products of her labor.14 If, however, the wife does not disclose her income to the husband, each may make a return, in which case the personal exemption may be divided be

11 Revenue Act of 1918, § 226.

12 Revenue Act of 1918, §§ 226 and 239; Reg. 45, Art. 431. 13 Revenue Act of 1918, § 213 (b) 4; Reg. 45, Art. 401.

14 Reg. 45, Art. 401.

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