Just in time for the stretch run of busy season, we have a treat for you today — a guest post from Skip Falatko, director of finance and administration for the Maryland Association of CPAs. Skip?
I’ve accumulated a number of family artifacts, including a scratch copy of my grandfather’s 1935 tax return.
Looking at it the other day, I was struck by how easy it was to prepare taxes back then. The entire form totals four pages and includes:
- The body of the return listing taxable income and expenses
- Instructions
- Surtax tables
- Schedule A, “Profit or Loss from Business”
- Schedule B, “Income from Rents & Royalties”
- Schedule C, “Capital Gains & Losses”
- Schedule D, “Interest on Liberty Bonds”
- Schedule E, “Income from Dividends”
- Schedule F, “Explanation of Deductions”
My grandfather, William J. Endersbee, married with four daughters, earned $3,480.56 in wages in 1935, took a $2,500 personal exemption, and had a total credit for dependents of $1,600, bringing his taxable income to zero. Social Security didn’t start until 1937, so he didn’t yet pay any of that.
At that time, there was a flat 4 percent federal tax (I know) applied against taxable income, excluding Liberty Bond interest and dividends. In addition, there was a surtax applied to all taxable income, including interest and dividends, that started at 4 percent on taxable income of $4,000 or more and went up to 59 percent on taxable income of $1 million or more.
It’s a much more complex world today. A check of tax forms on the IRS Web site shows more than 1,000 income tax forms listed. It’s no wonder we need professional help.
Can we reduce complexity in the tax code? Should we? If so, where do we start?