100th Birthday of the U.S. Federal Income Tax

Feb 01, 2013, 14:04 ET from California Society of Enrolled Agents

Enrolled Agents: America's Tax Experts

SACRAMENTO, Calif., Feb. 1, 2013 /PRNewswire-USNewswire/ -- The first known written record of taxes dates back to ancient Egypt when grain, livestock or oils were used instead of money to pay what was owed to the government.  Even then, the surviving hieroglyphic tablets record how people complained about high taxes.  Some things never change.

(Logo: http://photos.prnewswire.com/prnh/20101220/DC20267LOGO)

February 3, 2013 is the 100th birthday of the 16th Amendment, which is the recognized birth of U.S. Federal Income Tax.  The history of the 16th Amendment actually dates back to 1861 during the civil war, when Congress passed the Revenue act of 1861. This act included a 3 percent tax on personal incomes over $800 to help pay war expenses.  Ten years later, in 1872, this act was repealed. The idea stuck around though, and in 1894 Congress enacted a 4 percent tax on income over $4,000. The U.S. Supreme Court immediately struck this down in a 5-4 decision.  In 1909, Congress tried again with the idea of an income tax. This time, however, it stuck, and on February 3, 1913 the 16th Amendment was ratified stating "The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration."

In 1913 the first Form 1040 was documented. Congress placed a 1 percent tax on net personal income over $3,000, with an additional tax on those who had net income in excess of $20,000 of between 1 and 6 percent, depending upon income. The first year no taxes were collected; the IRS only checked the forms for accuracy. During World War I the income tax rose to its highest point at 77 percent to help finance the war. Improvements to the system were made during World War II when Congress introduced payroll withholding and quarterly tax payments.

The Alternative Minimum Tax (AMT) is another type of federal income tax that was enacted in 1969. This tax was established so that any taxpayer who wasn't paying their fair share due to deductions and credits would still have to pay an income tax.

The deadline for filing taxes wasn't always April 15. When the 16th Amendment was first enacted, the deadline was March 1. In 1918 that date was pushed back to March 15, then to April 15 in 1955. 

Today, the IRS collects more than $1.2 billion in taxes and processes more than 133 million returns annually.  And of course, people still complain about high taxes.

About Enrolled Agents
Enrolled agents (EAs) are America's tax experts. They are the only federally-licensed tax practitioners who specialize in taxation and also have unlimited rights to represent taxpayers before the IRS. While attorneys and certified public accountants are also licensed, only Enrolled Agents specialize exclusively in taxes. Enrolled Agents are required to complete many hours of continuing education each year to ensure they are up-to-date on the constantly changing tax code and must abide by a code of ethics. To locate an Enrolled Agent in your area, go to the "Find an EA near you" directory at www.CSEA.org or call (800) 777-2732 for additional information.

About CSEA
CSEA is a nonprofit 501(c)(6) organization with approximately 4,000 active Members. It is a professional association dedicated to serving EAs in California and abroad, enabling them to grow, prosper, and lead as The Tax Professionals while serving taxpayers in a dynamic, rapidly changing environment with integrity and trust.

Available Topic Expert(s): For information on the listed expert(s), click appropriate link.

Jean Nelsen, EA
ProfNet - http://www.profnetconnect.com/jean_nelsen_ea

Lonnie Gary
ProfNet - http://www.profnetconnect.com/lonniegary/  

Kathy Rocha, EA
ProfNet - http://www.profnetconnect.com/kathy_rocha_ea

Kim Kastl, EA
ProfNet - http://www.profnetconnect.com/kim_kastl_ea

SOURCE California Society of Enrolled Agents