A client recently dug up an income tax return from 1924 while cleaning out family records (click the image to the right for a larger view). The client was nice enough to show us a copy and after looking at the tax return, it is interesting to reflect on how some things have changed and how some have stayed the same.
The first thing I noticed on the return, that we take for granted these days, was the lack of a social security number. In 1924, the social security system was not yet established, and therefore there were no social security numbers! These days, the Internal Revenue Service (IRS) requires a social security number or equivalent to identify an individual. It makes you wonder how it was possible to track who was filing income tax returns back in 1924.
The 1924 income tax return was Form 1040A, which could be used for individuals who had earned income of less than $5,000. A tax rate of 2% was listed on the return. These days you would have to go to a tax table to find that! The tax on $540 in 1924 was $10.80, which is equivalent to $54 in 2010. Of course, there are credits and other items to offset the tax liability of $54 in 2011. Although a tax rate of 2% may seem low, the highest tax rate in 1924 was 46% compared to 35% today.
It was definitely fascinating to look at the return and see how things have changed. With a world that changes every day, the internal revenue code has had to change along with it!