Your Taxes : Everybody Gets a Taste of Taxes
Here are some unusual tidbits about taxes:
Tax History
Did you know our present income tax system is only 81 years old? Income taxes started with the Tariff Act of 1913, which added the 16th Amendment to the Constitution. In short, the 16th Amendment states that Congress can “lay and collect taxes on income from whatever source derived.”
In 1913, a 1% tax was levied on all companies and on individuals with net income above $3,000. (A $1,000 exemption was allowed for married couples.) One in 271 Americans found themselves subject to tax that year, according to CCH Inc., a Riverwoods, Ill., publisher of tax law information.
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Tax Hike Strikes Home
President Clinton’s tax law, passed last August, may cost the Clinton family a few bucks. The new law, which retroactively raised tax rates on wealthy filers, pushes the Clintons into the 36% tax bracket, according to CCH Inc., a Riverwoods, Ill., publisher of tax law information. If their income is the same in 1993 as it was the year before, they would pay an extra $4,502 in federal tax, CCH analysts estimate.
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Demographics, Deductions
Used to be that kids grew up, got married and created a few little tax deductions of their own. But in the last several years, there’s been a decided shift. Kids, sometimes as young as 12 years old, are having kids. And, from a tax standpoint, that can be confusing.
“We’re getting an increasing number of questions about filing status,” says Nina Homfelt, a national spokeswoman for Jackson Hewitt Tax Service in Irving, Tex.
If you’re a mother, living with your mother, and caring for your child, do you file “single” or “head of household?” Is your child your dependent or your mother’s? What happens if the child’s father contributes to the baby’s support?
The answers hinge on who pays what.
“If the grandparent provides more than half of the support for both the mother and child, the grandparent claims both as dependents,” says Tim Robinson, Jackson Hewitt’s Southern California district manager. “The parent would file ‘single’ and not claim anyone (including herself) as a personal exemption.”
If the father is paying child support of less than 50% of the baby’s expenses, he would not get a deduction for the child--nor would he get a deduction for the child support expenses. If he pays alimony, he’d deduct the amount of the alimony payments and the mother would have to claim the alimony as taxable income.
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Think the IRS Is Tough?
The Clinton Administration wants to put professional bill collectors on the trail of some delinquent taxpayers. The Administration’s recent budget proposal advocates launching a “test” that would allow the IRS to hire collection agencies to track down and get payment from about 100,000 people with back tax bills. The proposal is controversial because past congressional probes have found that bill collectors often engage in abusive and, sometimes, illegal tactics to collect debts.
The Clinton plan would put several safeguards in place--such as restricting the collection agencies’ access to taxpayer records and how far they can go to collect tax bills. There would also be an IRS survey of taxpayer “satisfaction.” It is unclear whether Congress will approve the plan.
About This Report
Today’s “Your Taxes” report, Pages D6 through D11, is a guide to preparing 1993 income tax returns. All stories were written by Kathy M. Kristof, The Times’ personal finance columnist.
