Milford chronicle., 1921-12-16
INCOME TAX PUZZLE
OFFICIALLY SOLVED
MARRIED MAN WITH SIS, 900 net EARN
NGS AND TWO DEPENDENTS WILL
PAY S68iTAX.
DROP FROM SIO4 LAST YEAR
$500 EXEMPTION FOR HEAD OF FAM
lily, WITH $4OO FOR EACH CHILD
OR OTHER:HELPLESS PERSON.

The enactment of the Revenue act
has resulted in a flood of letters TO
collectors of internal revenue con-
cerning the workings of the income
tax under the new law. These deal
largely with questions of exemptions
and deductions under the Revenue act
of 1921 compared with the act OF 1918.
David H Blair, Commissioner OF In
ternal Revenue, has ordered a series
of informative articles telling the tax
payer in detail how to make his re-
turns for this year, which are due
March Is.
probably the most important
change affecting the man of moderate
MEANS" said a statement, lis in the
exemptions. Under the 1921 act mar
ried man with a net in come of $4,000
and less is entitled to an exemption
of S2,5OO. Under the Revenue act of
1918 this exemption was limited to
$4,000. The Revenue act of 1921 also
provides for each person dependent
upon the taXpayer-if such person is
under 1S years of age or incapable OF
self-support because mentally or
physically defective-an exemption of
S4OO, The exemption under the Reve-
nue. act of 1918 was 5000 for each
such dependent. Thus, a married man
with two dependents whose net in
come for 1921 was $4,000 will pay this
year a tax of $6S, compared with $1O4
on the same income for 1920.
"a head of a family, as defined by
present Treasury regulations is "a
person who actually supports and
maintains in one household one or
more individuals who are closely con-
nected with him by blood relationship,
relationship ymarriage or by adOp-
tion, or whose right to exercise fam
lily control and provide for those de-
pendents is based upon some moral
or legal obligation
1.-THE normal rate of taxi per cent
on the first $4,000 of net income above
the exemptions and per cent on the
remaining net incOme-remainS un-
changed. This applies to citizens and
residents of the United States. Alien
non-residents are taxed to the full 8 |
per cent on income received from |
sources within the United States. Nom
resident aliens are allowed only |
single personal exemption of $1,000. |
To overcome the disparity in the
amount of normal tax in the case of
two taxpayers, one of whom is just
within the lower $4,000 exemption,
the other being just within the high
er $2,500 exemption, the act provides
that the reduction of the personal ex-
emption from $2,500 to $4,000 shall not
operate to increase the tax which
would be payable if the exemption
were $2,500 by more than the net in
come in excess of $4,000. For example,
a married man or head of family
has a net income for 1921 of 5000.
Assuming that he has no dependents,
his tax, if he were allowed only the
$4,000 exemptions, would be $120.40.
Under the benefits of the above pro-
vision, however, bis tax is $110, per
cent on the amount of his taxable in
come of $2,500, or $100 plus the
amount by which his net income eX-
ceeds $4,000.
Many inquiries are received rela-
tive to the surtax rates. Taxpayers in
the preparation of their returns should
be careful to note that the surtaX
rates for the calendar year 1921 re-
main unchanged. The surtaX rates on
incomes for 1921 range from 1 per
cent on the amount of net income be-
ween $4,000 and $4,000 to IS per cent I
IN the amount of net income in ex- l
cess of $1,O00,00O. For the calendar 9
year 1922 and each calendar year
the surtax ranges from 1 l
Ter cent on the amount of net income I
between $4,000 and $4,000 to so per T.
,ent by which the amount of net in
,ome exceeds 100000.
Returns are required of every .
ingle person whose net income for i
921 was $1,000 or over, every mar q
led person not living with husband
r wife whose net income was $1,000, u
nd every married person living with
husband or wife whose net income e.
yas $4,000 or over. Every person Il
hose gross income for the year was u
5 900 or over must make a return e'
egardless of the amount of net in ST
ONE. This requirement was not II
in the Revenue act of 1918. n
very married couple living together
Iust make return, either separate 7
r joint as desired, if their aggregate -
ct income was $4,000 or over, or if Vi VI
leir aggregate gross income was $5, ",
)C or more. -
"Gross income includes practically ~.
Tery dollar the taxpayer received ~
lring the year 1921. Net income is 49,
'oss income less the exemptions and NC m
sductions specifically provided for by 0 0Oo
e act" a. a.
TO