Every year you do your taxes but have you ever stopped and wondered how the payment of income taxes got started? Or why the due date to file tax returns is April 15?

The federal government’s top source of revenue, income taxes are an important part of society. It’s how we pay for many of the necessities that are a part of our daily lives. Members of the nation’s workforce as well as entities such as corporations, trusts, estates, and others that pay income taxes with their profits pay these taxes.

There are two forms of income taxes. Federal income taxes are paid by all workers and are paid at a certain federal rate. State income taxes are paid by the workers of states to the state and at a rate determined by the state. There are seven states that don’t have any state income taxes, Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming.

America’s income tax system is a voluntary system. This doesn’t mean that paying income taxes are optional but that each taxpayer voluntarily reports their annual income. Rather than putting everyone on the honor system, the Internal Revenue Service (IRS) has safeguards in place. For example, the IRS receives the W-2 form of every worker.

The safeguards put in place by the IRS means that they can easily calculate your tax if you don’t file a return and can bill you accordingly. This voluntary system is the fundamental difference between income taxes and other taxes such as a sales tax. In some cases, the IRS can charge you interest and penalties and even commence criminal actions against you but that’s only on rare occasions.

Origin of Income Taxes

The origin of income taxes in the United States is generally attributed to the passing of the 16th Amendment. The amendment states that, “The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without appointment among the several states, and without regard to any census or enumeration.” The amendment was passed by Congress on July 2, 1909 and was ratified on February 3, 1913. However, taxes on income actually dates back much earlier than that.

During the Civil War, Congress passed the Revenue Act of 1861 to help pay for the war effort. This act included a tax on personal income though it was repealed 10 years later in 1871.

In 1894, Congress once again looked to tax incomes by enacting a flat rate federal income tax. However, this move was ruled to be unconstitutional by the United States Supreme Court as it was a direct tax not apportioned according to the population of each state.

The purpose of the 16th Amendment was to remove this objection and allow the federal government to tax the income of individuals regardless of the population of each state. And with its ratification in 1913, income taxes, as we know it came into existence.

April 15th Deadline

When Congress ratified the 16th Amendment on February 3, 1913, clearing the way for the collection of national income taxes, they set the deadline for March 1, just over a year later. With the Revenue Act of 1918, the government raised the tax rates and to coincide with that move they inexplicably changed the tax deadline to March 15.

The March 15 date remained until the next major tax overhaul occurred in 1955. Among the many tax-code revisions was another change in date. This time they changed it to the current date of April 15. According to an IRS spokesman the move was to “spread out the peak workload.” However, there’s another explanation.

Income taxes were applied more to the middle class, the largest segment of Americans, than anyone else. Because of this, the government had to issue more refunds. The month extension gave the government a little more time to hold onto the money before issuing refunds.

Income taxes in America have taken several twists and turns throughout its history to end up where it is today. Initially started to help pay for the Civil War effort, income taxes have now become the primary way the federal government funds itself. So come into G.I. Tax and let us help you file your returns by this year’s April 18 deadline.