Evening star., 1919-12-15
FEDERAL INCOME AND EXCESS
PROFITS TAXES ARE EXPLAINED
yonascted BY DIR. JOSEPH J. KLEIN,
G. r. A.
Copyright. 1919. by Joseph J. Klein.)
ARTICLE ].


z Copyright 1919. by Joseph J. Klein.)
ARTICLE j.
= The time is rapidly approaching
called upon to account to the govern
-ment for their profits and earnings
curing the past year.
= Daniel C. Roper, commissioner OF
internal revenue. expects all public
ity agencies to cooperate with MIN
10 the end that all taxpayers be al
Iorded an opportunity to secure COM
-plete knowledge regarding their duties
and responsibilities under the revenue
act.
The general plan of procedure will
he to offer short, concise articles deal
ing with special phases of the law;
In addition to presenting a practical
problem, and in solving 1t to eluc1date
she specific problems with which the
great majority of taxpayers must
heal Finally, questions from readers
will receive attention, and these will;
==be answered in these columns
- General Points.
l. Every person is charged with the1
knowledge of the law: ignorance OF
the law excuses no one.
. A married person living with his
wife Tor her husband) must render al
return If his net income for 1919 isl
equal to or exceeds $4,000 Every
other person must render such a re-.
turn N MS lHCOUlt 1S tqudl " VI
ceeds $1,000.
.. Net income is almost synonymous
with net profits In terms OF the stat
ute, it is the difference between ErosS
income" and allowable deductions"
4. Gross income, in general, consists
of salaries wages, profits and earn
ings.
5. Allowable deductions from in
come, in general, consist of necessary
business expenses and costs.
g. Later. in studies, we Sha y.
learn that not all receipts are a part
of gross income because certain re-
ceipts are specifically exempted from
taxation. For example, interest from
municipal bonds and certain comper-
;sations for military or naval services
are exempt from taxation.
:. Later on we shall also learn tha t
all items which would ordinarily lie
called expenses are not allowable dc
ductions. For example. income taxes
paid to the federal government are
not allowable as deductions.
g. AS we have said before, taxable
from gross income the allowable de-
auctions.
9. Certain exemptions are allowed
from net income. Thus. for example. a
married man living with his wife rs
allowed a so-called specific exemption
of $4,000. A person who is head of
the family is also allowed the specf ic
deduction of 81, o0o- An unmarried p4T-
with husband or wife, is allowed a
specific exemption of 81, 200. A specific
exemption of $500 is allowed for es ch
dependent child under eighteen ye4xrs
of age, or for each dependent PERI on
over eighteen years of age under Ger
tain restrictions.
10. individuals are subject to inca N e
taxes broadly divisible into two
classes. (a) Normal taxes; Cb) sur
taxes.
Normal Taxes.
II. Normal taxes are calculated as
follows: From the total taxable net
income there is deducted the speCific
exemption (see No 8. above), which
Is free of normal tax. The next $4,000
is subject to a normal tax of per
less specific exempti0p and $4,000, is
9ubject to a normal tax of 8 per cent.
Thus, for example, a. married pei rson
with two children unI1er eighteen
wears of age whose taxable net in
come is 5000. is subject to a nor
NAL tax of S6SS, ascertained as fol-
lows:
81 400 specifce exemption at per
cent SUtU
s 4,00O at per cent. ............4 160
$500 at per cent. .. .........-..-..l 52S
$4,000 Total normal .$6SS
H. The surtax is determined by
means of a graded scale based upon
the total taxable net income in excess
of $1,000. Thus. the taxpayer in
question, with a total taxable net in
come of $4,000, would be subject to
a surtax on the excess of 5,0NO of
such taxable net income. or on $S 600.
The amount of surtax is determined