The Daily Gate City And Constitution Democrat

THURSDAY, JAN. 8, 1920.

ABOUT EXEMPTION FROM INCOME TAX

Many People Had to Pay Fines Last Year Because They Took Too Much for Granted In Returns.

FAMILY HEAD DEFINED

Legal Definition is Made by Department In Order to Avoid Any Confusion In Making Report,

Twenty-thousand persons last year paid a fine of $5 each for failure to file an income-tax return for 1918, although their income for that year was not taxable.

The revenue act provides an exemption of $1,000 for single persons, $2,000 for married persons and heads of families, and an additional exemption of $200 for each person dependent upon the taxpayer, if such person is under 18 years of age, or incapable of self-support. The delinquents last year were persons whose income exactly equaled the amount of the exemptions and who considered it unnecessary, therefore, to file a return, and others whose income was non-taxable because of dependents, and who were under a similar mistaken impression.

For example, a single man with a net income of $1,000 was supporting a sister for whom he was allowed an exemption of $200, placing his income in the nontaxable list. For this reason he did not file a return. When his delinquency was discovered through a return filed by his employer, who is required to report payments of $1,000 or more to each employee, he was fined $5.

Must File a Return.

To avoid penalty, every person whose income for the last year equaled or exceeded $1,000, or $2,000, according to their marital status or their status as the head of a family, must file a return. The law makes no exceptions, the penalty for failure being a fine of not more than $1,000.

Head of a Family.

Whether or not a person is the "head of a family" and entitled to a $2,000 exemption is a question to be determined largely by circumstances surrounding each individual case. The fixing of his status decides, in many instances, whether his income is taxable or nontaxable.

A head of a family is defined by treasury regulation as "a person who actually supports and maintains one or more individuals who are closely connected with him by blood relationship, relationship by marriage, or by adoption, and whose right to exercise family control and provide for these dependents is based upon some moral or legal obligation." A single person is the head of a family if he is the sole support of relatives living in the same house with him and if he exercises control of household affairs. The words "sole support" are used in the sense that there is no other person to whom the dependents may look for support. Income from other sources, such as interest on bonds, stock dividends, pensions, etc., if meagre enough still to leave the recipient dependent, does not preclude a claim for exemption. Such income, however, must be included in the return of the head of the family.

Can Not Divide Exemption.

The $1,000 additional exemption allowed the head of a family can not be divided between two single members of a household. A division of responsibility excludes the parties from such claim. A single person who does not qualify as the head of the family may still claim an exemption of $200 for each person dependent upon him for support, if such person is under 18 years of age or incapable of self-support. A son who has left home but who sends to his mother more than half the sum required for her support is entitled to the $200 exemption, provided the mother can not support herself. Otherwise the amount must be considered as a gift, and, therefore, is not deductible. A son living at home and supporting his mother may claim the $2,000 exemption allowed the head of a family, but not an additional exemption of $200 unless the mother is incapable of self-support.