Causes and Effects of the Tax Return Blockade

April 7, 1924
Entire Report

A survey of the work done and remaining to be done in the Bureau of Internal Revenue on back income tax returns discloses an accumulation of 1,605,955 returns, or 22 per cent of the whole number received by the Income Tax Unit for audit since 1917. These figures are as of March 1, 1924, the last date for which any statistics are available. They do not include returns filed March 15, upon which the work of audit has not yet started. Of the back returns still awaiting final audit 28,203 are 1917 and 1918 returns. The evidence is that the Income Tax Unit has only recently begun to make substantial progress on the auditing of back returns.

Hardships to Taxpayers

In consequence of the accumulation of returns, thousands upon thousands of taxpayers have been left, in doubt, “some for more than five years, as to the amount of their ultimate tax liability. Until the expiration of the five year limitation on additional assessments, no taxpayer can be certain, under the present condition, that he will not be suddenly confronted with a demand for large additional tax payments upon the final auditing of his returns for past years. These additional assessments, in the case of large taxpayers have sometimes amounted to $1,000,000 or more.

When the limitation upon additional assessments on 1917 returns expired March 15, 1923, some 16,000 returns for that year still awaited final audit by the Income Tax Unit. The situation was met by demanding that taxpayers sign waivers and in cases of refusal, arbitrary assessments were made, in amounts sufficient to cover all possible contingencies. The same methods were followed, to protect the interest of the government, when the limitation on 1918 returns expired March 15, 1924.

The delay in final settlement of the taxpayers' liability, it Is pointed out, may make impossible business extensions and improvements which, are necessary or desirable, and in extreme cases may result in little short of business paralysis. Pro forma assessments made when the limitation on additional assessments on 1917 and 1918 returns was about to expire, while they may later be scaled down or even cancelled eventually, in the meantime constitute a serious threat of injury to the taxpayer, giving rise to liens which hinder or prevent the normal processes of business and frequently Interfere with commitments previously made. “How can a concern do business,” it is frequently complained, “if it hasn't the faintest notion not only what its tax for 1924 is going to be but what its tax for 1917 was?”

Purpose of the Audit

All personal returns on incomes of less than $5,000, which constitute 75 to 80 per cent of the returns filed,

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Mar. 24, 1965  Excise Tax Cuts and the Economy
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Apr. 02, 1959  State Tax Problems
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Aug. 14, 1957  Fast Tax Write-Offs
Apr. 10, 1957  Federal Payments in Lieu of Taxes
Sep. 12, 1956  Corporation Profits and Taxes in Prosperity
Mar. 16, 1954  Shares in Tax Relief
Nov. 21, 1953  Revision of Excise Taxes
Mar. 19, 1953  Federal-State Tax Relations
Oct. 01, 1952  European Taxes and Tax Evasion
Nov. 03, 1950  Excess Profits Tax
Feb. 01, 1950  Tax Loopholes
Jun. 04, 1949  Excise Taxes
Oct. 27, 1948  Postwar Sales Taxes
Aug. 29, 1947  Taxation of Family Income
Apr. 09, 1947  Income Tax Relief
Jan. 11, 1946  Taxation of Cooperatives
Oct. 16, 1945  Federal Taxes on Business
May 08, 1944  Postwar Taxes
Sep. 20, 1943  Sales Taxes
Dec. 05, 1941  New Taxes for Defense
Apr. 05, 1941  Taxation for National Defense
Feb. 28, 1941  Taxation of Alcoholic Beverages
Jan. 11, 1941  Exemptions from Taxation
Dec. 04, 1940  Federal Taxes and Defense Financing
Feb. 01, 1940  Sharing of Tax Revenues
Feb. 02, 1939  Turnover Taxes in the States
Nov. 05, 1937  Broadening of the Income-Tax Base
Jun. 17, 1937  Exemptions from Income Taxation
Apr. 05, 1937  Coordination of Federal and State Tax Systems
Dec. 19, 1936  Revision of Federal Tax on Capital Gains
Nov. 02, 1936  State Taxation of Natural Resources
May 26, 1936  Assessment of Property for Taxation
Apr. 17, 1936  Federal Taxes on Consumption
Mar. 19, 1936  Taxation of Undistributed Corporate Profits
Dec. 17, 1935  Reduction of Tax Burdens on Real Estate
Oct. 21, 1935  Tax Delinquency in the United States
May 21, 1935  Comparative Tax Burdens in America and Britain
Feb. 01, 1935  Federal Taxation of Corporations
Nov. 27, 1934  Elimination of Conflicts in Taxation
Jul. 25, 1933  Taxation of Excess Profits
Jan. 25, 1933  Tax Burdens and Tax-Free Securities
Nov. 23, 1932  The Beer Tax and the Sales Tax
Dec. 19, 1931  Sales Taxes: Federal, State, and Foreign
Sep. 18, 1931  Death Taxes and the Concentration of Wealth
Mar. 18, 1931  Federal Taxation of Large Incomes
Jan. 10, 1931  Taxation of Capital Gains
Nov. 09, 1929  Federal Tax Reduction-1930
Aug. 08, 1927  Federal Tax Reduction—1928
Sep. 27, 1926  Tax Reduction and the Public Debt
Jan. 16, 1926  Taxation of Estates and Inheritances
Nov. 07, 1925  Federal Taxation of Small Incomes
Nov. 28, 1924  Social, Fiscal and Legal Aspects of the Inheritance Tax
Apr. 07, 1924  Causes and Effects of the Tax Return Blockade
Dec. 12, 1923  Tax Exempt Securities
Dec. 10, 1923  Taxation
Income Tax