INCOME TAX CHART Based on the War Income Tax Law and the Income Tax Law, as amended October 3, 1917 (Chart shows the tax payable by a married person, but does not take cognizance of the $200 exemption for each dependent child) 1,480 1% 7% 8% 20,000 320 360 2,280 2% 10% 12% 740,300 15,000 " 20,000 250 500 1,180 20,000 " 40,000 1,600 2,100 3,580 40,000 " 60,000 2,400 4,500 6,780 60,000 " 80,000 3,400 7,900 10,980 80,000 " 100,000 4,400 12,300 16,180 100,000 " 150,000 13,500 25,800 31,680 150,000 " 200,000 15,500 41,300 49,180 69,680 300,000 21,000 80,800 92,680 500,000 92,000 172,800 192,680 66 750,000 125,000 297,800 327,680 1,000,000 137,500 435,300 475,180 66 1,500,000 305,000 66 COLLECTION OF TAX Additional taxes under the War Tax Law shall be levied, assessed, collected and paid in the same manner as similar taxes imposed by the Income Tax Law of September 8, 1916. (Sec. 3.) EXEMPTIONS For the purpose of the assessment of the additional war tax, the specific exemption allowed to married persons or heads of families shall be $2,000, and for single persons, $1,000. (Sec. 3.) By the amendment to Section 7, Act of September 8, 1916, it is provided that the head of a family shall be entitled to an additional exemption of $200 for each child dependent upon him or her, if under eighteen years of age, or if incapable of self-support because mentally or physically defective. (Page 12.) RETURNS Annual returns for taxes are required for net incomes of $1,000 or over, in the case of single persons, and $2,000 or over, in the case of married persons or heads of families. (Sec. 3.) DEDUCTION AT SOURCE Deduction of tax at the source on interest derived from tax free bonds shall not apply to the additional normal tax of two per centum until after January 1, 1918, and thereafter only one two per centum normal tax shall be deducted. Any further normal tax, for which the recipient of such income is liable, shall be paid by the recipient. (Sec. 3.) ADDITIONAL TAX CORPORATIONS In addition to the tax of 2% now assessed on net earnings of corporations, under the act of September 8, 1916, the War Tax Law provides for a further tax of 4%, making the total income tax on net earnings now 6%. (Sec. 4.) COLLECTION OF TAX The additional tax shall be levied, assessed, collected and paid in the same manner as the tax imposed by the Act of September 8, 1916, as amended. (Sec. 4.) DIVIDENDS For the purpose of the assessment of the additional tax, the income of a corporation shall be credited with the amount received as dividends upon the stock or from the net earnings of any other corporation, which is taxable upon its net income for the additional tax. (Sec. 4.) EFFECTIVE DATE OF LAW The additional taxes provided for shall be assessed for the calendar year 1917 and each year thereafter. If a corporation has fixed its own fiscal year, the additional tax imposed for the fiscal year ending during the calendar year 1917 shall be assessed, collected and paid only on that proportion of its income for such fiscal year which the period between January 1, 1917, and the end of such fiscal year bears to the whole fiscal year. (Sec. 4.) PORTO RICO AND THE PHILIPPINE ISLANDS The provisions of this title do not extend to Porto Rico or the Philippine Islands, and the legislatures of Porto Rico and the Philippine Islands are given power to amend, alter, modify or repeal the income tax laws enforced in Porto Rico or the Philippine Islands. (Sec. 5.) Income Tax Amendments TAX ON DIVIDENDS Changes in the law of September 8, 1916 INDIVIDUALS Dividends paid from earnings acquired subsequent to March 1, 1913, are taxable. The amendment of the Income Tax Law provides that dividends shall be deemed to have been paid from the net income of the year in which paid, or from the most recently accumulated surplus, and shall constitute income of the shareholder for the year in which received, but be taxed at the rates prescribed for the year in which earned by the corporation. The above provisions do not apply to distributions made prior to August 6, 1917, out of profits accrued prior to March 1, 1913. (Sec. 1211.) Stock dividends are to be considered income to the amount of surplus, undivided profits and earnings so distributed. (Sec. 1211.) For example, if a corporation issues a stock dividend of one hundred shares, having a par value of $100 each, and transfers to capital an amount of surplus and undivided profits equal to the value of the stock distributed, the par value of the stock received shall be returned as taxable income. INTEREST ON GOVERNMENT BONDS Interest on United States bonds issued after September 1, 1917, is exempt from taxation only to the extent provided in the Act authorizing the issue. (Sec. 1200.) GENERAL DEDUCTIONS The law relating to general deductions is changed with respect to deductions on account of taxes and deductions on account of interest on indebtedness. Interest on indebtedness incurred in the purchase of obligations or securities, the interest upon which is exempt from income tax, may not be deducted in determining net income. Taxes paid on income and excess profits will also not be permitted as a general deduction. This applies to both citizens and residents of the United States and to nonresident aliens. (Secs. 1201, 1202.) Contributions or gifts within the year for religious, charitable, scientific, educational or humanitarian purposes, to an amount not in excess of fifteen per centum of the taxpayer's taxable net income, when verified under prescribed regulations, shall be allowable as deductions. (Sec. 1201.) General deductions allowed non-resident aliens (Sec. 6) will be permitted only in case a true and accurate return filed of all income received from sources corporate or otherwise within the United States. (Sec. 1202.) SPECIFIC EXEMPTION Under the law as amended an additional exemption of $200 for each dependent child, if under 18 years of age, or if incapable of self-support because mentally or physically defective, is allowed. This additional exemption operates only in the case of one parent in the same family. (Sec. 1203.) The provision of the law permitting the specific exemption to non-resident aliens is repealed. (Sec. 1203.) RETURNS PARTNERSHIPS Partnerships, when required to file return, shall have the same privilege of fixing and making returns upon the basis of their own fiscal years as is accorded to corporations. (Sec. 1204.) |