The United States federal income tax laws apply to all U.S. citizens and legal aliens earning more than a minimum amount of money each year. Income tax liability attaches to any individual earning more than $10,000 in a year. A portion of an individual’s earnings is required to be paid to the Internal Revenue Service (IRS), the federal government tax agency. Many states have replicated the federal income tax laws and their residents’ income in the same manner.
- IRS: A general overview of the agency and the statutes from which it derives tax collecting authority.
- Association of Federal Tax Administrators: Explanation of taxes from an organization dedicated to streamlining state tax collection.
- The U.S. Department of the Treasury: Tax information provided by the executive agency.
The Beginning of Income Tax
The power to collect taxes derives from the U.S. Constitution. The impetus for this authority was the author’s recognition of a country’s inability to rely solely on funding from foreign governments. However, it was not until the country became divided by the Civil War that the government established an income tax through the Revenue Act of 1861. While the bill established the tax, it was insufficient to pay for the nation’s growing war debt. In 1862, a structured income tax was instituted, in which the amount of tax paid by an individual differed based on the total amount of their earned income. The tax was repealed 10 years later.
- Treasury Department Fact Sheet: History of the institution of the federal income tax.
- Tax History Museum: A breakdown of the history of taxes into specified periods of time.
Changes to the Income Tax Law
Since its 1861 enactment, the income tax laws have undergone significant legal changes. Between the 1871 repeal of the tax and the beginnings of the 1900’s the government instituted a flat-rate income tax. Because of the lack of association between assessed taxes and a state’s population, this law was identified as illegal. It was not until the 16th Amendment, ratified in 1913 that the government gained the authority to tax incomes regardless of a state’s population. The multi-tiered tax rate has remained in effect since 1913, although the taxable amounts and tax percentages have consistently increased to maintain pace with inflation.
- Library of Congress: The federal library’s description of the history of income taxes.
- Tax Foundation Organization Federal Income Tax Rates from 1913-2010.
Myths Regarding the Income Tax Law
There are many myths regarding income tax laws. Often, individuals disgruntled with being required to pay both state and federal income tax laws believe that the federal government does not have the authority to collect taxes or is able to give the IRS authority to act on their behalf. However, the 16th Amendment clearly provides tax collection capabilities to the federal government. Another myth is that tax protesters are not penalized for not paying taxes. The truth is that failing to pay income taxes can result in severe fines.
- Myths and Facts about Income Tax: Discussion of the issue of myths regarding the IRS failure to demonstrate taxing authority.
- Legal Aspects of Income Taxes: Legal aspects and myths of federal tax laws.
Filing Your Taxes
Each April 15th, all individuals are required to file a tax return and provide any payment it owes to federal and state governments. If an individual is unable to file by the deadline, extensions are granted through written requests; these extensions are not difficult to obtain. Persons can file individually or as a married couple. Several deductions to the amount of tax liability are available, such as for charitable donations and medical expenses.
- University of Michigan: Overview of tax laws and regulations.
As no individual can avoid paying at least federal income taxes, it is essential to understand basic filing requirements. The history of income taxes explains the foundation and rationale for income taxes, as well as debunks many of the myths about the government’s authority to collect taxes. Amounts due, however, do not need to be high; deductions and deferrals enable large reductions to the amounts owed to governments.