TO: Every American T Payroll
FROM: The Secretary the Treasury
SUBJECT:
The New Pay-As-You-Go Method
of Collecting Your Income Tax
Starting July 1st, both your Income and Victory Tax
will be collected by an entirely new and more convenient
method.
Under the old system, you were obliged every March
15th to pay either the full tax for the previous year, or a
quarter of that amount. Under the new system, you will
keep paid up from month to month.
After July 1st, your employer is obliged by the new law
to withhold every month a part of your wages and turn the
money into the United States Treasury as payment on your
Income and Victory Tax.
Of course, the amount that your employer withholds will
depend upon your pay and your exemptions. But this is the
important point: For most of us, the amount withheld over
a year’s period will add up to the same that we’re paying
now—plus or minus a few dollars.
At the end of the year, we may owe the Government a
few dollars or the Government may owe us. (See the tables
below.)
You may have heard 20% mentioned as the proportion
of your wages that will be withheld. Actually, this is in
correct. To figure the amount that will be withheld, take
your total wages and subtract your allowance for exemp
tions and allowance for dependents; 20% of this lesser
amount is the total that will be withheld.
Now please remember this: You must claim those ex
emptions to take advantage of them. Before July 1st, you
must file with your employer an Exemption Certificate. If
you do not do this, your employer will have no choice but
to deduct 20% of your full pay check.
Here is how the new tax collection method will work:
Let’s say you are a working man earning $3,000 a year;
that you are married, and have two children.
First of all, as a married man you are allowed a personal
withholding exemption of $1,248, plus an exemption of $312
for each dependent (other than your wife). This makes a
total exemption of $1,872 ($1,248 for yourself and wife,
plus $624 for your two dependents), which is deducted
from the $3,000 you earn before your tax is computed. You
are thus paying tax on $1,128, of which your employer will
withhold 20%, or $225.60 for the year. Therefore, in your
pay envelope, after July 1, you will receive about $4.40
less each week.
In March, 1944, when you ordinarily would be faced
with paying taxes on your 1943 income, you will file a re
turn showing how much you have already paid, and how
much your total tax actually amounted to. If, by that time,
you have already paid more than your actual tax due, you
will be given credit for the difference. If you owe more
than you have paid, you will pay the difference.
Since this plan starts July 1, many wonder what happens
to the tax payments they will already have made by that
time—on March 15 and June 15.
For a great majority of people, here is what happens . . .
Your 1942 income tax is “forgiven” (either all, or most of
it). The March and June installments which you originally
paid on that 1942 income tax are credited, instead, as pay
ments on your 1943 tax. With the result that on July 1st,
with the year half gone, you have already paid tax on that
half-year’s income. In short, you are “paying as you go.”
There is one thing more. Since this pay-as-you-go method
leaves you just as much of your net income as you had be
fore, you will probably find it possible to at least maintain
your present rate of buying War Bonds. Do this by all
means!
Taxes alone will not bring to the Treasury nearly enough
money to finance the great invasion war that lies ahead.
The war needs every cent of your money that does not go
for the necessities of life.
l
AMOUNTS WITHHELD FROM WEEKLY WAGES FOR INCOME AND VICTORY TAX UNDER PAY-AS-YOU-GO
TABLE 1 SINGLE PERSON —NO DEPENDENTS
Weekly
wage
Amount to
be withheld
weekly
Withholding
as a percent
of wages
Annual total
to be
withheld
Annual total
to be paid
$17.50
22.50
27.50
35.00
45.00
55.00
65.00
75.00
85.00
95.00
$ 1.10
2.10
3.10
4.60
6.60
8.60
10.60
12.60
14.60
16.60
63%
93
113
13.1
14.7
15.6
16.3
16.8
17.2
173
$ 5720
10920
16120
23920
34320
44720
55120
65520
75920
86320
$ 73.73
126.48
18423
262.85
373.35
489.85
61327
73737
861.48
99132
TABLE 2 MARRIED PERSON-NO DEPENDENTS
Weekly
wage
Amount to
be withheld
weekly
Withholding
as a percent
of wages
Annual total
to be
withheld
Annual total
to be paid
$17.50
22.50
27.50
35.00
45.00
55.00
65.00
75.00
85.00
95.00
i 20
20
.70
2.20
420
620
820
1020
1220
1420
1.1%
U
2.5
6.3
9.3
113
12.6
13.6
14.4
14.9
$ 10.40
15.60
36.40
114.40
218.40
322.40
426.40
530.40
634.40
738.40
$ 8.58
16.38
45.18
120.88
227.48
334.08
43929
558.80
679.00
79921
TABLE 3 MARRIED PERSON —ONE DEPENDENT
Weekly
wage
Amount to
be withheld
weekly
Withholding
aa a percent
of wages
Annual total
to be
withheld
Annual total
to be paid
$17.50
22.50
27.50
35.00
45.00
55.00
65.00
75.00
85.00
95.00
i 20
.30
.50
1.00
3.00
5.00
7.00
9.00
11.00
13.00
U%
u
1.8
2.9
6.7
9.1
10.8
12.0
12.9
13.7
$ 10.40
15.60
26.00
52.00
156.00
260.00
364.00
468.00
572.00
676.00
9 829
15.83
23.37
55.68
160.76
262J84
370.02
478.52
59821
717.89
If the amount withheld during the year is more than your total Ineome
and Victory tax for the year, the Government will refund the difference.
TABLE 4 MARRIED PERSON —TWO DEPENDENTS
Weekly
wage
Amount to
be withheld
weekly
Withholding
as a percent
of wages
Annual total
to be
withheld
Annual total
to be paid
$17.50
22.50
27.50
35.00
45.00
55.00
65.00
75.00
85.00
95.00
l 20
20
20
.70
120
3.80
5.80
7.80
920
11.80
U%
12
1.8
2.0
4.0
6.9
8.9
10.4
112
12.4
5 10.40
15.60
26.00
36.40
93.60
197.60
301.60
405.60
509.60
613.60
$ 8.01
15.29
2227
33.49
90.05
195.61
300.77
405.27
517.42
636.58
1? the amount withheld la less than your total Income and Victory tax
for the year, you will pay the difference to the Government.
ECUSTA PAPER COlflPORATION
HARRY H. STRAUS, President Pisgah Forest, North Carolina