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Show Your Income Tax (Editor's Note: This is the first in a series of ten articles prepared by the Treasury Department of the Bureau of Internal Revenue at Washington, D. C. Watch for successive explanations of this current cur-rent tax subject each week). WHAT IS INCOME TAX? The federal income tax is, as the name implies, a tax levied upon incomes, and it is payable in relation re-lation to the amount of income. Income, for federal income tax purposes, means in general any compensation for one's services, whether the compensation be in money or in goods or other ser- vices; it includes also the net value received for the product of one's labor, as farm produce in the case of a farmer; income from investments; invest-ments; profit from business operations; opera-tions; and other gains from sales and exchanges of goods and property. pro-perty. Certain limited categories of income are, however, tax-exempt and to the extent of such exemptions exemp-tions are excluded in computing the tax. Because of exemptions from the tax given to persons having less than certain stated amounts of income, in-come, as well as because of various deductions and credits allowable, only a small proportion of the number num-ber of persons receiving income have until recently been subject to the tax. Thus, of the estimated 55 million persons in this country who received income in one form or another an-other during the calendar year 1941, only some 26 million persons were required to file federal income in-come tax returns for that year, while of these same 26 million, more than 9 million were not taxable tax-able due to credits and deductions allowable. As a result of the lowering of exemptions, many more persons i are now subject to the federal income in-come tax than before, and for the calendar year 1942 it is estimated that more than 35 million persons will file federal income tax returns. To the large number of persons now subject to the federal income tax, who have never reported income in-come before for federal tax purposes, pur-poses, an understanding of the law and applicable regulations is of prime importance. An income tax return is a declaration declar-ation on the part of the taxpayer of his total taxable income for the year, together with the various deductions, de-ductions, exemptions, and credits to which he is entitled. It is in reliance re-liance upon voluntary disclosure, and the integrity of taxpayers generally, gen-erally, that the cost of administration administra-tion of the income tax can be kept at a minimum. Though the return is a voluntary statement, any per-" per-" son who willfully makes a return which he does not believe to be true and correct in every material matter is subject to the penalties provided by law. The first requirement of the law is the filing of an appropriate re-( turn. For individuals generally, this must be done by March 15 following the end of the calendar year. The return must be filed with the appropriate collector of internal revenue for the district in which is located the legal residence or principal place of business of the person making the return. Under the present law every single sin-gle person, and every married person per-son not living with husband or wife, having a total income (earnings, (earn-ings, together with other income) of $500 or more, and married persons per-sons living with husband or wife throughout the taxable year, who have a aggregate income (total earnings of both husband and wife, together with other income) of $1200 or more, regardless of the amount of net income, must file a return. |