15 Surprising Facts About Income Tax

by Paul Michael on 19 January 2011 (7 comments)

Brought to you by TurboTax Federal Free Edition — Free to prepare, Free to print, Free to efile.

With the holidays now out of the way, many of us begin to focus on our finances. What did we spend? What did we save? And of course, when will we start preparing our taxes? The mid-April deadline is looming on the horizon, but do you know why that specific date was chosen? Or how you can actually get rewarded by the IRS? Well, here are some insights on those, and many other, income tax facts.

1. Why is April 15th the deadline?

Tax day wasn’t originally in April. When the 16th Amendment was introduced in 1913, the date was March 1st. That changed to March 15th in 1918, and was then moved to April 15th in 1955.

While the IRS claims the move helps “spread out the peak workload,” tax experts suspect the real reason for pushing back the deadline is that “it gives the government more time to hold on to the money.”

Don't forget that this year's tax deadline was extended to April 18 to avoid conflicts with Emancipation Day. (See also: Important Tax Dates of 2011.)

2. Income tax started because of war.

The American Civil War to be precise. The Revenue Act of 1861 was introduced to gather funds for the expensive conflict that lasted for four years, with the price of war coming in at approximately $2.5 million per day.

3. You can make big money reporting a company for tax evasion.

It’s called the Whistleblower Informant Award. This comes straight from the IRS site:

The IRS Whistleblower Office pays money to people who blow the whistle on persons who fail to pay the tax that they owe. If the IRS uses information provided by the whistleblower, it can award the whistleblower up to 30 percent of the additional tax, penalty and other amounts it collects.

So if you know something and want a clean conscience, you’ll actually get rewarded for it.

4. The federal tax code has grown to over 70,000 pages.  

It started life as 400 pages in 1913. It’s hardly surprising that 82% of taxpayers now turn to a tax accountant or tax software for help. 

Intimidated by the 70,000 pages?  Be sure to keep a tax term glossary and tax preparation checklist handy to help you navigate through this annual obstacle course.

5. Americans spend 7.6 billion hours every year preparing taxes.

Sound like a lot? Well, there are roughly 312 million people in America according to the U.S. Census Bureau. That means every man, woman, and child spends 24.4 hours getting ready for tax day. 

6. New York City has the world’s highest corporate income tax.

The figure, from a 2009 Forbes report, was 46.2%. That’s followed by Illinois (42.3%) and then Japan (41%). Compare that to the lowest, a miserly 10%, paid in Bulgaria, Cyprus, and Macedonia.

7. 89% of you think it’s NOT OK to cheat on your taxes.

What a stand-up crowd you are. In a survey done in 2008 (PDF), the result was overwhelmingly in favor of staying honest. Considering the survey was conducted by the IRS, you’d have to wonder what the other 11% were thinking.

8. Tax evasion is prevalent in the world of babysitting.

It seems that as many as 95% of people who employ babysitters, housekeepers, or other home health aides are not as upfront about it as they should be.

9. Over 700 wealthy Americans donated their 2010 tax breaks.

It’s a project called Responsible Wealth, and it’s supported by rich folks like Bill Gates and Richard Rockefeller.

10. You can earn $10.3 billion and pay zero income tax.

How? Well, it’s not easy, but GE did it 2008. By offsetting losses from another GE division, it was able to pay no taxes on the 10.3 billion pre-tax dollars it earned the year before.

11. Breast implants can be a legitimate tax write-off.

A stripper called Chesty Love was allowed to write-off the cost of her two new assets, claiming they were essential props in her performance. For more strange tax write-offs, there’s a mind-boggling list of 20 outrageous tax deductions.

12. Even the head of the IRS uses a tax preparer.

When Douglas Shulman, the head of the Internal Revenue Service, gets his taxes done by a professional, you know the tax laws are complex.

13. Americans spend $27.7 billion every year on tax preparation.

Using the 312 million figure from fact five, that equates to around $89 for every single person in the United States.

14. There are more IRS employees than troops in Iraq.

Enforcing 70,000 pages of complex tax law takes a lot of work. There are roughly 106,000 IRS employees (as of 2010), and we currently have 45,000 troops in Iraq.

15. The first-ever income tax was collected in 1404 A.D.

The place — England. It was so hated that all records of it were burned. However, in 1798 Prime Minister William Pitt the Younger implemented income taxes to pay for weapons and equipment for the Napoleonic Wars. Taxes have been a part of English life ever since.

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Guest's picture
jim

#5 : CNN reported earlier this month that we spend 6.1 billion hours and they got that number from the IRS apparently. Honestly I think 6 or 7 billion is inflated.

Will Chen's picture

If I were the IRS, I would lowball that number so Americans don't get so frustrated with the tax system. =)

Guest's picture
Cassandra

That would be 1404 A.D., actually, for the first income tax.

Will Chen's picture

Hmmm... Yes. A.D. makes a lot more sense. Thanks Cassandra!

Guest's picture

I recenlty became self-employed, and I have to say, as much I dread the burden of taking out my own taxes, I am surprisingly amazed at all the things that actually qualify for a write off. Now let's hope that army of IRS employees that you point out don't come calling...

Darwins Money's picture

These were some enjoyable and enlightening facts. Taxes are such a controversial topic in our society. People want government services, security and opportunities, but they will forever complain about their tax burden.

Guest's picture
D. M.

YOU MUST PREPARE YOUR HOMEWORK BEFORE WRITING MISLEADING INFORMATION. THE INCOME TAX IN BULGARIA IS 10% BECAUSE IT IS A FLAT TAX. COMPARED TO AVG CORPORATE TAX IN USA- 15%. IN BULGARIA, THE SALES TAX IS 22% COMPARED TO THE SALES TAX IN MARYLAND- 6%. CHECK YOUR INFORMATION!!!!!