Income Tax 2004

The income tax filing deadline is quickly approaching, so we thought this might be a good time to write an article on income tax.  We'll talk briefly about the history of the tax itself, the concept of tax brackets, where to get various IRS forms, and even some information on websites that allow you to complete your income tax forms online and submit them to the IRS - for free.

History of Income Tax

Early in the history of the United States, taxes had been collected on the sales of specialty items such as gold, jewelry, spirits, or tobacco.  But it wasn't until 1913, and the 16th Amendment to the U.S. Constitution, that income tax became a permanent part of life here in the United States.

The 16th Amendment gave Congress the legal authority to create revenue laws that would collect an income tax from individuals and corporations.  Today, the Internal Revenue Service (IRS) is the branch of the government responsible for the collection of federal income taxes.

Income Tax Brackets

Income tax brackets are used by the government to equitably distribute the burden of paying for the services supplied by the federal government.  The concept as deployed today, results in a larger proportion of taxes being paid by those individuals with higher annual income levels.

That is to say, the tax on income here in the U.S. is not a flat tax on every dollar earned.  Instead, the percentage of tax extracted from each incremental dollar of income rises as the individual's income increases.  These tax brackets are also adjusted for the filing status of the individual or family.

For example, an individual with the IRS filing status of Single that has an adjusted gross income or AGI of $100,000 is in the 28% tax bracket.  If a family with an AGI of $100,000 files with a status of married filing jointly, then their tax bracket is 25%.  We have an entire article dedicated to the topic of tax brackets that explains this topic in more detail.

Income Tax Forms

The IRS is also responsible for distributing and managing tax forms for the federal government.  The IRS is accountable for translating any change in tax laws into the proper tax forms.  In the past, most filers received their forms in the mail or visited their local library or post office to find a form.  Today, the IRS has streamlined the entire process, and automatically sends you the forms you've used in past filings.

You can even request that the IRS stop sending you forms each year.  The age of electronic filing has made IRS forms and instructions obsolete for many taxpayers.  To summarize, you really have a lot of options for completing your taxes:

• Complete a paper form that you've received in the mail and mail back the completed tax form to the IRS.
• Complete your tax forms electronically via the IRS website, and then print out those forms and mail them to the IRS.
• Complete your tax forms electronically via one of the 20 plus free file websites and have that service submit your forms to the IRS.

For a more complete listing of some of the common IRS income tax forms, you can take a look at our article on IRS Forms 2004.

File Your Tax Forms for Free

In the past, there were several websites that worked with the IRS to provide citizens with access to free electronic tax forms.  Usually, these were specialty sites that offered free filing if you were either above or below a certain income level, or if you filed one of the simpler 1040 forms such as the 1040EZ.

Those days are gone, and now nearly everyone can file their taxes for free - with certain limitations.  Here is a short list of just some of those websites offering this service free to all income levels:

• TurboTax - Everyone qualifies for free tax filing for the 1040EZ and a "standard" 1040 income tax form.  A deluxe service is offered for $29.95.  If you want to file your state income taxes, it will cost you between $9.95 (EZ) and $36.95.
• TaxAct - Everyone qualifies for free tax filing using a "standard" 1040 tax form, electronic filing of state forms adds $8.00.  Premium services, such as importing data from previous filings or going through more advanced tax questionnaires, costs between $9.95 and $15.95.  This price includes filing of state forms.
• H&R Block - Everyone qualifies for free tax filing using a "standard" federal tax form and questionnaire. Added value planning tools and tax preparation help can be purchased for $19.95.  The filing of state returns cost between $27.95 and $34.95.

The above list includes some pretty well known competitors in the tax preparation arena.  For a more complete list, just visit the IRS website and search for "free file."

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