We’re just six days away from Tax Day! But how much do you actually know about this day Americans love to hate?
Even though the history of taxes in America goes all the way back to the Civil War, the very first Tax Day as we know it today traces its roots back to the early 20th century – and in those days, Tax Day was in March!
In February 1913, Congress ratified the 16th amendment which authorized the collection of a federal income tax from individuals. Congress then officially named March 1, 1914 as the first Tax Day since the date roughly corresponded to the one-year anniversary of the amendment’s ratification. Initially, the income tax rate was set at one percent if you made more than $3,000 as an individual (that’s about $73,000 in today’s dollars), $4,000 for married couples (about $98,000 today), with a six percent surtax if you made more than $500,000 (about $12 million today).
But the first Tax Day actually sounded pretty painless. The first “Form 1040” (a name that originated from a sequential numbering process) was three pages long, plus one instructional page. Here’s a look at the first page:
And get this – no money was collected in the first year! Instead, all someone had to do was complete and return Form 1040 so field agents from the “Bureau of Internal Revenue” could check it for accuracy.
Four years later, The Revenue Act of 1918 moved Tax Day to March 15th for an unknown reason. Then in 1954, inside the nearly 1,000 pages of revisions to the Internal Revenue Code, Congress pushed the date back to April 15th. The reason this time? It varies: Officially, it was to give IRS employees an extra month of time to help spread out their workload. But other speculated reasons for the move included that it would give Americans an extra month to save money for their tax bills, and that it would allow the government to wait longer to issue refunds (AKA, keep your money longer).
The Simply Money Point
Today, Form 1040 is two pages long… with 106 pages of instructions! And in all actuality, April 15th (or, as it is this year, April 18th) shouldn’t even be called Tax Day. Instead, it should probably be called Refund Day since three out of four of you aren’t paying taxes – you’re actually getting money. But remember, if you get a refund, all that means is that you overpaid the government for an entire year. Now you’re just getting your change back.
For help readjusting your withholding so you can keep more of your hard-earned money every paycheck, follow the link for the “W-4 Withholding Calculator” on Simply Money Advisors’ Tools & Resources page.