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15 Facts About the IRS to File Away

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The one thing most people know about the Internal Revenue Service is that they don't like it. A recent survey found that only 31 percent of Americans trust the IRS, while other polls show it ranks as the U.S.’s least favorite federal agency. Animosity aside, it’s helpful to know a few facts about the organization that takes so much of your hard-earned money. Here are a few to get you ready for April 18th.

1. PEOPLE HAVE HATED IT FROM THE BEGINNING.

In 1861, the U.S. government under President Lincoln created the first income tax as a way to cover Civil War expenses. It was a 3 percent flat tax on all incomes above $800. But before any taxes were collected, Secretary of the Treasury Salmon Chase pointed out that they’d probably spend more money collecting taxes than the taxes themselves would generate [PDF]. The Revenue Act of 1861 was repealed and replaced with the far more important Revenue Act of 1862. Those who made between $600 and $10,000 a year were subject to a 3 percent tax, while those who made more than $10,000 contributed 5 percent. This ruled out most citizens (Union citizens, that is), but the measure was still deeply unpopular, especially when the rates were increased in 1864. In 1872, amidst costly Reconstruction efforts, the government did away with the income tax provision, choosing instead to collect taxes on beer, liquor, wine, and tobacco. But one of the longest-lasting effects of the Revenue Act of 1862 was that it created the position of Commissioner of Internal Revenue, the forerunner of the IRS.

2. IT HAS A LONG HISTORY OF SCANDALS.

J. Edgar Hoover

From lowly agents to presidents, those on the inside are too often seduced by the agency’s power. Franklin Roosevelt used the IRS to target enemies like the publisher William Randolph Hearst, while Richard Nixon famously wielded it to investigate his Democratic opponents. Under FBI Director J. Edgar Hoover, the IRS audited the NAACP and civil rights leaders like Martin Luther King, Jr. According to investigative journalist David Burnham, “In almost every administration since the IRS’s inception, the information and power of the tax agency have been mobilized for explicitly political purposes.”

3. A FORMER IRS COMMISSIONER WAS CONVICTED OF TAX FRAUD.

You’d think the head of the nation’s tax-collecting agency would be on top of his finances, no? Well, in 1952 Joseph Nunan Jr. was found guilty of failing to report $86,000 in personal income. Included in this was $1800 he’d won after betting Truman would win the presidency in 1948.

4. IT GOT AL CAPONE CONVICTED.

For years authorities tried to nail the famed Chicago gangster, but nothing stuck. So they turned to the IRS, who put an agent named Frank Wilson on the case. Capone didn’t have a bank account or financial records and was careful to leave no paper trail, making the task monumentally difficult for Wilson and his team. After sifting through more than 2 million documents, Wilson finally came across payments to Capone that hadn’t been listed as income. This led to Capone’s arrest on tax evasion charges, and an 11-year prison sentence.

5. TAX DAY WAS ORIGINALLY MARCH 1ST.

Congress set the due date back in 1913 with the passage of the Sixteenth Amendment, which formalized a nationwide income tax. A few years later, it pushed the date back to March 15th, and in 1955 revisions to the tax code moved the date back again to April 15th (note: this year’s due date is actually April 18th). So why not stick with the original due date? The IRS claims it needed more time to process returns, but tax experts believe that an increase in refunds for the middle class meant the agency wanted to hold onto its money longer and collect interest.

6. IT MISSES OUT ON 15 PERCENT OF WHAT IT’S OWED.

It’s called the tax gap, and it represents the funds that the IRS is owed but never receives due to taxpayers underreporting their income, making filing errors, and so on. The agency receives about $2 trillion annually, and says it misses out on an estimated $385 billion.

7. THE TAX CODE IS MORE THAN 75,000 PAGES LONG.

There’s a reason more and more people are relying on tax software and other services: The tax code is so complex, it makes War and Peace seem like a beach read. And it’s always changing. Between 2001 and 2012, the code was amended 4680 times—or more than once a day.

8. THEY’RE NOT BACKING UP THEIR DATA PROPERLY.

Many home computer users know the importance of backing up valuable information, but apparently the IRS doesn’t. A recent report from the Treasury Department found that the IRS didn’t have sufficient data backup for taxpayer records, nor did it have plans to implement any in the near future. “If the data is not backed up properly, a possibility exists that all taxpayer and management information could be lost and become unrecoverable,” read a press release from the Treasury Inspector General for Tax Administration. The IRS said they plan to comply with the report’s recommendations.

9. YOUR CHANCES OF GETTING AUDITED ARE LOWER THAN EVER RIGHT NOW.

With fewer staffers and resources due to budget cuts, the IRS is performing audits on less than 1 percent of all tax returns. The exception is those individuals making more than $1 million, who have around a 10 percent chance of being audited (since the IRS knows it can make more money from errors on wealthy taxpayers’ returns). Avoid red flags, like overstating deductions and filing by hand, and your chances of getting audited are slim to none.

10. THE EMPLOYEES AREN’T AS UNHAPPY AS YOU’D THINK.

Working for the IRS may conjure images of mind numbing, repetitive tasks and endless rows of cubicles akin to Terry Gilliam’s Brazil. But according to surveys and employee reviews, the agency isn’t such a bad place to work. A survey taken by the Treasury Department several years ago found that 69 percent of IRS employees were satisfied with their jobs, and nearly two-thirds of employees say they’d recommend an agency job to a friend, according to Glassdoor.com

11. PEOPLE HAVE COME UP WITH SOME INTERESTING CHALLENGES TO TAX LAWS.

Legal challenges to the IRS and national tax laws have been quite colorful over the years. In 1954, a Wichita man named Arthur Porth argued that income tax amounted to “involuntary servitude” and was illegal under the Thirteenth Amendment. In 1969, Gladwin Lamb claimed his income was not taxable because it didn’t come in the form of gold or silver. More recently, tax protestors like Larken Rose have rallied around what’s called the 861 argument, named after the section of the tax code that outlines sources of taxable income, and which claims that only income that comes from “international commerce or foreign possessions” can be taxed. One famous case was actor Wesley Snipes, who cited the 861 argument when explaining why he didn’t pay taxes between 1999 and 2004. He served three years in prison. 

12. GOOD LUCK GETTING THEM ON THE PHONE.

The IRS receives more than 100 million phone calls each year from taxpayers seeking help, and around 40 percent are unable to speak with an agent. Budget cuts are mostly to blame, but the agency’s response may only be making matters worse. The Taxpayer Advocate Service, a watchdog group, said the IRS plans to reduce personal assistance further and increase its online presence—a plan that National Taxpayer Advocate Nina Olsen says won’t address complex issues, and will put Americans who don’t own a computer at a disadvantage. 

13. FRAUD IS A MAJOR PROBLEM.

IRS Commissioner John Koskinen

Experts estimate tax-refund fraud will bilk the IRS of $21 billion this year—a huge increase from the $6.5 billion taken just two years ago. The agency has moved to address the issue by doubling its fraud prevention staff. But enforcement could prove to be an uphill battle, since all clever fraudsters need to create a fake W-2 is a person’s name, date of birth and social security number. To make matters worse, last month hackers accessed identity information from an IRS web tool aimed at preventing identity theft. 

14. E-FILING STARTED BACK IN 1986.

Only five tax preparers agreed to participate in the pilot program. After collecting data from their clients’ returns, they called up an IRS processing center in Cincinnati and transferred everything to a device called a Mitron, which was essentially a tape drive hooked up to a modem. The Mitron then transferred the data to a Zilog supercomputer that processed the returns. The process was time-consuming, but it quickly improved. By 1990, the IRS was receiving more than 4 million returns through the new e-file system. 

15. NOW, MORE THAN 90 PERCENT OF TAXPAYERS E-FILE THEIR RETURNS.

The IRS really, really wants you to e-file. It’s about twice as expensive for the agency to process a written return as it is for an online return. And with fewer agents available to input them, it’s more time-consuming as well. Concerns over Internet security had taxpayers wary when e-filing first emerged, but the IRS sped up its refund deliveries and now it’s become the preferred method. 

All images courtesy of Getty 

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A Brief History of Black Friday
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The unofficial start of the holiday shopping season is often referred to as the busiest shopping day of the year. But where did this tradition start and just how big is it? Here are the answers to a few frequently asked questions about Black Friday. Hopefully they'll give you some good talking points tomorrow, when you line up outside Best Buy at 4 a.m.

HOW DID BLACK FRIDAY BECOME SUCH A BIG SHOPPING DAY?

It's hard to say when the day after Thanksgiving turned into a retail free-for-all, but it probably dates back to the late 19th century. At that time, store-sponsored Thanksgiving parades were common, and once Santa Claus showed up at the end of the parade, the holiday shopping season had officially commenced.

In those days, most retailers adhered to an unwritten rule that holiday shopping season didn't start until after Thanksgiving, so no stores would advertise holiday sales or aggressively court customers until the Friday immediately following the holiday. Thus, when the floodgates opened that Friday, it became a huge deal.

SO RETAILERS WERE ALWAYS HOPING FOR AN EARLY THANKSGIVING?

You bet. They weren't just hoping, though; they were being proactive about it. In 1939, the Retail Dry Goods Association warned Franklin Roosevelt that if the holiday season wouldn't begin until after Americans celebrated Thanksgiving on the traditional final Thursday in November, retail sales would go in the tank. Ever the iconoclast, Roosevelt saw an easy solution to this problem: he moved Thanksgiving up by a week. Instead of celebrating the holiday on its traditional day—November 30th that year—Roosevelt declared the next-to-last Thursday in November to be the new Thanksgiving, instantly tacking an extra week onto the shopping season.

BRILLIANT! HOW DID THAT WORK OUT?

Not so well. Roosevelt didn't make the announcement until late October, and by then most Americans had already made their holiday travel plans. Many rebelled and continued to celebrate Thanksgiving on its "real" date while derisively referring to the impostor holiday as "Franksgiving." State governments didn't know which Thanksgiving to observe, so some of them took both days off. In short, it was a bit of a mess.

By 1941, though, the furor had died down, and Congress passed a law that made Thanksgiving the fourth Thursday in November, regardless of how it affected the shopping day that would become known as Black Friday.

WHY CALL IT BLACK FRIDAY?

If you ask most people why the day after Thanksgiving is called Black Friday, they'll explain that the name stems from retailers using the day's huge receipts as their opportunity to "get in the black" and become profitable for the year. The first recorded uses of the term "Black Friday" are a bit less rosy, though.

According to researchers, the name "Black Friday" dates back to Philadelphia in the mid-1960s. The Friday in question is nestled snugly between Thanksgiving and the traditional Army-Navy football game that's played in Philadelphia on the following Saturday, so the City of Brotherly Love was always bustling with activity on that day. All of the people were great for retailers, but they were a huge pain for police officers, cab drivers, and anyone who had to negotiate the city's streets. They started referring to the annual day of commercial bedlam as "Black Friday" to reflect how irritating it was.

SO WHERE DID THE WHOLE "GET IN THE BLACK" STORY ORIGINATE?

Apparently store owners didn't love having their biggest shopping day saddled with such a negative moniker, so in the early 1980s someone began floating the accounting angle to put a more positive spin on the big day.

DO RETAILERS REALLY NEED BLACK FRIDAY TO TURN AN ANNUAL PROFIT?

Major retailers don't; they're generally profitable—or at least striving for profitability—throughout the entire year. (A company that turned losses for three quarters out of every fiscal year wouldn't be a big hit with investors.) Some smaller outlets may parlay big holiday season sales into annual profits, though.

IS BLACK FRIDAY REALLY THE BIGGEST SHOPPING DAY OF THE YEAR?

It's certainly the day of the year in which you're most likely to be punched while reaching for a Tickle Me Elmo doll, but it might not be the busiest day in terms of gross receipts. According to Snopes.com, Black Friday is generally one of the top days of the year for stores, but it's the days immediately before Christmas—when procrastinators finally get shopping—that stores make the serious loot. Black Friday may, however, be the busiest day of the year in terms of customer traffic.

Snopes's data shows the 10-year span from 1993 to 2002, and in that interval Black Friday was never higher than fourth on the list of the year's busiest shopping days by sales volume. In 2003 and 2005 Black Friday did climb to the top of the pile for sales revenue days, but it still gets stiff competition from the week leading up to Christmas, particularly the Saturday right before the big day.

DO PEOPLE REALLY GET INJURED ON BLACK FRIDAY?

Sadly, yes. One of the most tragic Black Friday incidents happened in 2008, when 34-year-old seasonal employee Jdimytai Damour was killed after a crowd of hundreds of people from the approximately 2000 people waiting outside knocked him own and stampeded over his back after the doors opened at 5 a.m. at the Wal-Mart on Long Island, New York.

In 2010 in Buffalo, New York, several shoppers were trampled trying to get into a Target. One of the victims, Keith Krantz—who was pinned against a metal door support and then shoved to the ground—told a CNN affiliate he thought he would be killed. “At that moment, I was thinking I don't want to die here on the ground,” Krantz said.

In Murray, Utah, 15,000 shoppers swamped a mall with such force, the local police had to respond to break up skirmishes and fistfights, and keep shoppers from ransacking stores.

In 2008, a fight broke out between a young girl and a man at another Wal-Mart store in Columbus, Ohio, over a 40-inch Samsung flat-screen television. It was $798, marked down from $1000. The New York Times reported that the not-so-aptly-named Nikki Nicely, 19, leaped onto a fellow shopper’s back and began pounding his shoulders violently when he attempted to purchase the television. “That’s my TV!” shouted Ms. Nicely, who then took an elbow to the face. “That’s my TV!” The fight was broken up by a police officer and security guard. “That’s right,” Nicely cried as her adversary walked away. “This here is my TV!”

HOW CAN THIS KIND OF THING BE AVOIDED?

In an effort to keep a few would-be clients from personal injury law firms, the Occupational Safety and Health Administration (OSHA) created a special checklist for retailers expecting large crowds.

So what’s OSHA’s advice? Consider using bullhorns. Hire a team of police officers. Be prepared for “crowd crushing” and “violent acts.” Set up barricades. And, above all else, if charging shoppers come running, stay out of the way.

Haley Sweetland Edwards contributed to this story, portions of which originally appeared in 2009.

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Pop Culture
A Speedy History of the Hess Truck
Hess Corporation
Hess Corporation

Unless you know someone crazy about air fresheners or caffeine pills, holiday gifts purchased at gas stations don’t usually provoke much excitement. But if you were one of the millions who grew up in the northeast, the annual release of the Hess toy truck at Hess gas stations—usually green, always labeled with a Hess logo, always boxed with batteries—was and is as much a part of the holiday as Santa Claus and his sleigh.

The idea for an affordable, quality children’s toy sold at service stations at thousands of Hess locations in 16 states was courtesy of Leon Hess, the college dropout-turned-fuel magnate who began selling oil door-to-door in 1933 and graduated to gas stops by 1960. Hess decided he would trump the cheap merchandise given away by gas stations—mugs, glassware—by commissioning a durable, feature-heavy toy truck modeled after the first oil tanker he ever bought for his company. Unlike most toys of the era, it would have headlights that really worked and a tank that kids could either fill up or drain with water.

Most importantly, Hess insisted it come with batteries—he knew the frustration suffered by kids who tore into a holiday present, only to discover they’d have to wait until it had a power source before it could be operated.

The Hess Tanker Truck went on sale in 1964 for $1.29 and sold out almost instantly. Hess released the toy again in 1965, and then introduced the Voyager Tanker Ship in 1966. For the next 50 years, hardly a year went by without Hess issuing a new vehicle that stood up to heavy play and offered quality and features comparable to the “real” toys on store shelves. Incredibly, fathers would wait in line for hours for an opportunity to buy one for their child.

The toy truck became so important to the Hess brand and developed such a strong following that when the company was bought out in 2014 and locations converted to the Speedway umbrella, new owners Marathon Petroleum promised they would keep making the Hess trucks. They’re now sold online, with the newest—the Dump Truck and Loader, complete with working hydraulics and STEM lesson plans—retailing for $33.99. Bigger, better toy trucks may be out there, but a half-century of tradition is hard to replicate.

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