1. Amount

1. AMOUNT

Normal Tax - 1 Per Cent.

Net income of individuals exceeding $3,000.

NOTE - Paragraph "S" of the Income Tax Law modifies and repeals the Corporation Excise Law of 1909.

2. Against What Levied

Entire Taxable Net Income of Citizens of the United States residing at home or abroad.

Aliens residing in the United States. Domestic corporations.

Net Income Derived From Business Transacted or Capital Invested in the United States by Aliens residing outside of the United States.

Foreign corporations. Exceptions: A non-resident alien need pay no tax on income from bonds, mortgages and similar obligations of corporations.

Additional Tax

(Gross Incomes of Individuals Only.)

1% on the amount by which income exceeds $20,000.

2% on the amount by which income exceeds $50,000, but does not exceed $75,000.

3% on the amount by which income exceeds $75,000, but does not exceed $100,000.

4% on the amount by which income exceeds $100,000, but does not exceed $250,000.

5% on the amount by which income exceeds $250,000, but does not exceed $500,000.

6% on the amount by which income exceeds $500,000.

Deductions For The Normal Tax

1. Necessary expenses actually paid in carrying on business:

Exception: Family, living or personal expenses are not deductible.

2. All interest paid on indebtedness.

3. Taxes: State, County, School and Municipal.

NOTE - National, State, County, School and Municipal Special assessments for local benefits such as street paving, sewer drainage, etc., are not deductible.

4. Losses actually sustained during the year.

(a) Incurred in trade or business.

(b) From fire, storm or shipwreck, and not compensated by insurance or otherwise.

5. Debts due and found worthless and charged off.

6. Reasonable allowance for wear and tear of property.

NOTE - No deductions for new buildings, permanent improvements, etc., which tend to increase the value of property.

NOTE - The foregoing deductions 1, 2, 3, 4, 5 and 6 only are allowed in calculating net income for the additional tax.

7. Dividends received from a corporation, joint-stock company or association which are taxable on their net income at the source.

8. Amount of income on which tax is paid or withheld at source:

(a) Interest on obligations of the United States, a State, County, or political subdivision of a State, including interest paid on public improvements, reclamation, drainage or special assessment bonds issued for local improvements.

(b) Salaries of

1. Present President of the United States.

2. Judges of the Federal Courts.

3. Officers and employees of a State or a political subdivision of a State, except when such salary is paid by the United States Government.

9. Exemptions from the tax:

(a) $3,000 per annum for a single person. ($2,500 for the year 1913.)

(b) $4,000 per annum for a married couple living together.

($3,333.33 for the year 1913 for a married couple living together.)

The Return

Annual Return Must Be Filed by:

1. Persons having an annual net income exceeding $3,000.

2. Trustees, executors, administrators and conservators having the receipt, custody or payment of annual net income of another person exceeding $3,000.

3. Corporations total annual net income. (No specific exemption allowed.)

4. Persons or corporations withholding the tax at the source.

(a) A separate return for each payee.

(b) Certificate Form No. 1042, page 94.

(c) A return by one of two or more joint trustees is sufficient.

Return Must Contain

1. The gross amount of income from all separate sources, and from the total, deducting the aggregate deductions of authorized expenses and allowances. Return to be under oath or affirmation.

(a) Personal return Forms Nos. 1040, 1041, pages 71-76.

(b) Corporations returns, Forms Nos. 1030, 1031, 1032, 1033, 1034, 1035, pages 80-90.

When Return Must Be Filed

1. Individuals:

(a) On or before March 1.

2. Corporations:

(a) On or before March 1, or:

(b) Within 60 days after the close of the designated fiscal year.

Where Return Must Be Filed

1. Individuals:

(a) Where the person or corporation resides or has his or its principal place of business.

2. Foreign corporations and non-residents:

(a) Where the principal place of business in the United States is located.

3. Trustees, etc.:

(a) Where such trustees reside, or (b) Where will or instrument under which he acts is recorded.

When The Tax Must Be Paid

1. Individual:

(a) Between June 1 and June 30.

2. Corporation:

(a) Between June 1 and June 30, or:

(b) Where corporation uses "fiscal year," tax must be paid within 180 days after the close of such "fiscal year."

Deduction And Payment Of Tax At The Source

Deduction At The Source Requires:

1. Persons to withhold the normal tax of one per cent on all funds payable to another person when the aggregate amount exceeds $3,000, and is fixed and certain.

2. Corporations to withhold the normal tax of one per cent on all interest paid by them or their agent on bonds, mortgages, trust deeds or similar obligations of corporations regardless of amount.

3. The person required to deduct the tax is personally liable for the same.

4. The additional tax is not deducted at the source at any time.

5. No tax is deducted on dividends of corporations which pay the income tax on their net earnings.

When The Tax Is To Be Deducted At The Source

1. Whenever the aggregate amount paid is fixed and certain.

NOTE - Not including dividends on stock of corporations.

2. The tax of one per cent is deducted "at the place where the income originates."

(a) Interest on bonds, mortgages or deeds of trust of corporations, domestic or foreign.

(b) Interest on foreign bonds.

(c) Dividends of corporations or insurance companies doing business in foreign countries.

How Exemptions May Be Claimed Against Deduction Of The Tax At The Source

1. The $3,000 personal exemption.

To obtain exemption, the payee must file with the person withholding the tax Certificate Form No. 1007, page 67, at any time 30 days before the annual return of the withholding agent is required to be made.

2. Deductions for expense:

(a) The payee must file with the withholding agent a true return of his income from all sources and the deduction claimed therein Certificate Form No. 1008, page 70.

3. If the payee is a minor, or insane, or absent from the United States, or unable by illness to make such return, the father, conservator or other authorized person may make the return for such person under oath. An extension of 30 days for filing the return may be obtained upon application to the collector, made within the period for such extension is desired.

NOTE - Deduction and payment of the tax at the source applies only to amounts payable to individuals, not to corporations.