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THE UNITED AMERICAN
JANUARY, 1925
The Federal Income Tax Law, Its Application and Administration
[In answer to the many inquiries re
ceived for information regarding the
federal income tax law, the United
American has collected some pertinent,
data from the collector of internal reve
nue for Oregon, Mr. Clyde Huntley, who
is the authority for the following in
formation which, we believe, covers
practically all the phases of the federal
income tax law that is of any relevancy
to the public in general and to the in
dividual whose earnings are sufficient to
place him in the class of those who are
subject to payment of such taxes.
— The Editor. ]
WHILE MANY matters of local and
national scope are attracting
general attention, while voices from
the state and national legislative halls
are heard in a discordant medley, and
legislative proposals of every conceiv
able kind cloaked in language of dark
and hidden meaning are engaging the
attention of the more or less uneasy,
figetive and nervous populace, some
attention should be given a very concrete
matter — the Federal Income Tax, which
is now due for payment and will be
delinquent after the fifteenth of March.
Some essential points of information
'which have just been issued by Clyde
G. Huntley, collector of internal revenue,
who is Uncle Sam’s tax-collector in
Oregon, are of importance to every indi
vidual or citizen whose efforts during
the past year produced a measure of
profit subject to revenue assessment.
I It is of foremost importance to know
that under the provisions of the revenue
[lawfor 1924 it is required that every un-
[ married person whose net income for
last year amounted to $1,000 or more or
had a gross income of $5,000 or more,
must file a statement to that effect with
the collector and pay tax on any and all
earnings over and above said' sums.
[Likewise every married couple with an
[aggregate net income of $2,500 or more,
For a gross income of $5,000 or more
•shall file returns of such incomes.
I Husband and wife, living .together, may
I include the income of each in a'single
joint return, or each may file a separate
[return showing the income of each. Net
[income is gross income less certain
[specified reductions for business ex-
[penses, losses, bad debts, contribu-
[tions, etc.
The period for filing returns is from
| January 1 to March 15, 1925. The re-
[ turn, accompanied by at least one-fourth
| of the amount of tax due, must be filed
| with the collector of internal revenue
I for the district in which .the taxpayer
I has his legal residence or has his princi
pal place of business.
The federal income tax law requires
I that every person who had a gross in-
I come of $5,000, or more, for 1924-, must
I file a return, legardless of whether or
I not that sum yielded him a cent of
I profit. To illustrate: A received from
I his business and other sources $5,000
■during the year 1924, but his deductible
I expenses for the year aggregated $4,500.
I His net income being less than $1,000.
|A would not have to pay an income tax.
However, he is required under -the law
to file an income tax return if his gross
income was $5,000, or more, regardless
of whether or not he realizes any profit.
These returns must be filed in the office
of Clyde G. Huntley, collector of internal
revenue, not later than March 15.
The federal income taz law on 1924
incomes allows the following exemptions:
Single person, or married person not
living with husbund or wife, $1,000;
head of a family, or married person
living with husband or wife, $2,500; for
each dependent under the age of 18, or
incapable of self-support, $400. Head
of a family under the law is defined
as “a person who supports in one house
hold one or more relatives by blood,
marriage, or adoption.”
All federal officers and employees,
whether elected or appointed, are re
quired to pay a federal income tax on
their salaries. However, salaries paid
officers and employees of the state or
any political subdivision thereof, such
as a city, town, county, or school district,
are exempt from taxation under the
federal income tax law.
In making out his federal income tax
return, the farmer is required to report
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TEAM WORK
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Kipling
It is not the guns of Armament,
Or the money they can pay;
It is the close co-operation
That makes them win the day
It is not the individual or the
Army as a whole;
But the everlastin’ teamwork
Of' every bloomin’ soul.
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as gross income all receipts derived from
the sale or exchange of farm products,
including crops and livestock, whether
produced on the farm or purchased and
resold. Where farm produce is exchanged
for groceries, merchandies, or other
articles, the fair market value of the
articles received must be reported as
income. A farmer who rents his farm
on the crop-share basis must report such
income for the year in which the crops
are sold. Profits derived from the sale
or rental of farm lands must be reported.
In computing this tax, the farmer may.
deduct all amounts paid in producing,
harvesting, and marketing of crops,
including labor, cost of seed and ferti
lizer used, cost of minor repairs to farm
'buildings (other than dwelling), cost of
repairs to fences and machinery and the
cost of small tools used up in the course
of the year, such as pitchforks, hand
rakes, hoes, axes, etc.
Where in exceptional cases such as
ilness or absence from the state a tax
payer is unable to make his tax return
before March 15, an extension of not to
exceed 30 days may be obtained upon
application to the Commissioner of In
ternal Revenue, Washington, D. C. These
requests must be made prior to March
15. Collector Huntley no longer has
authority for granting these extensions.
Taxpayers are particularly urged by
the, collector, to be sure arid use the
correct blank in reporting their income
tax statement. The short form, 1040-A.
is to be used only by individuals whose
net income consists of salaries, wages,
commissions, and interest not exceeding
$5,000 in the aggregate. The large form,
1040, must 'be used by individuals whose
net income from all sources was in
excess of $5,000. The large form must
also be used by every individual any
part of whose income was derived from
business or profession, farming, sale of
property or rents,, regardless of the
amount. By observing these instruc
tions, the taxpayer will have no difficulty
in making cut his' return of income and,
in addition, will save much confusion in
the handling of returns by the collectors.
All the ordinary and necessary ex
penses paid or incurred in carrying on
any trade, 'business, profession, or voca
tion are allowable deductions in prepar
ing federal income tax returns. Typical
expenses of a mercantile establishment
are amounts paid for advertising, hire
of clerks, and other employees, rent,
light, heat, and, water, telephone, in
surance, delivery expenses, the cost of
operating delivery wagons and motor
trucks, and incidental repairs to such
vehicles, but not the original cost of
such vehicles. The expenses of a manu
facturing business include labor, rlaw
materials, supplies, repairs, light and
heat, power, selling cost, administration
and similar charges. .
The revenue act of 1924 contains a
special provision for reduced taxes oh
“earned income,” which did not appear
in previous laws. All net incomes up to
$5,000 are deemed to be earned income.
On this amount the taxpayer is entitled-
to a credit of 25 per cent of the amount
of the tax. For example, a taxpayer,
unmarried- and with no dependents,
whose net income for 1924 is $5,000
would pay, without this reduction a tax
of $80. His actual tax is $60. From
his net income of $5,000 he is allowed
a personal exemption of $1,000; -the tax
of 2 per cent on the $4,000 of taxable
income is $80, one-fourth of which, or
$20, may be deducted. In no case is the
earned - net income considered to be in
excess of $10,000. A taxpayer, who re
ceives a salary of $20,000, for example,
can claim only $10,000 as “earned net in
come.”
Every unmarried men who is- the
head of a family and who had a net in
come of $1,000, or more, during 1924
must file a return in the office of the col
lector of internal revenue, although he
is entitled to the -same exemption of
$2,500 allowed married persons.
Compensation paid its officers and
employees by a state or political sub-
divition thereof, including fees received
by notaries public commissioned by
states and the commissions of receivers
appointed by state courts are exempt
from the federal income tax. Compensa
tion paid- its officers and employees by
the federal government, however, is tax
able. The value of property acquired by