Further, in case of an individual and HUF being "not ordinarily resident in India", the meaning of total income shall be slightly different. Accessed October 10, 2018; https://www.azquotes.com/quote/249398. VITA/TCE Training Supplement. All individuals who meet certain income requirements must file an annual tax return—it's the law. People also earn income in the form of rent, profit, and interest. The tax was eliminated in 1872. There are new tax rates within brackets. Fewer brackets result in a wider range of incomes being taxed at the same percentage rate and a less progressive structure. Income Statement and Balance Sheet Overview. INCOME TAXATION 6TH Edition (BY: VALENCIA & ROXAS) SUGGESTED ANSWERS 22 Chapter 5: Exclusion from Gross Income CHAPTER 5 EXCLUSION FROM GROSS INCOME … The Registered Tax Return Preparer (RTRP) Exam is designed to identify individuals who meet minimum competency to preparer 1040-series tax returns. Part II: Basic Individual Taxation 4. Adjusted gross income: Gross income minus specific adjustments to income. President Trump signed the Tax Cuts and Jobs Act (TCJA) into law on Dec. 22., 2017, bringing sweeping changes to the tax … June 29, 2018; https://www.irs.gov/newsroom/irs-working-on-a-new-form-1040-for-2019-tax-season. Income tax: Taxes on income, both earned (salaries, wages, tips, commissions) and unearned (interest, dividends). "The Additional Child Tax Credit: A Refundable Tax Credit for Parents." ), Notice that there are two important factors here: the tax bracket and the tax percentage rate. 10 points each, 350 points total): 1) The federal income tax is the dominant form of taxation by the federal government. "Tax Reform Provisions that Affect Individuals." ... Form 1040. Will Rogers lived during this time period, and his words reflect his humorous outlook on tax changes: "The difference between death and taxes is death doesn't get worse every time Congress meets."4. Income derived from personal services - wages, tips, bonuses, and any other type of compensation. We believe the Federal Reserve most effectively serves the public by building a more diverse and inclusive economy. Among other things, it includes the total amount of income earned and the amount of federal tax withheld over the given year. Refundable tax credits are different from regular tax credits. Before the 2017 Tax Cuts and Jobs Act (TCJA), the United States generally taxed its corporations and residents on their worldwide income. The tax bracket system uses marginal tax rates when income falls into different brackets. Accessed October 8, 2018; 13 IRS. These adjustments reflect, under a measure of inflation provided by the Tax … Individual income taxes are the leading source of revenue to support government spending. A "qualifying education" tax course meets requirements when not less than 60 hours of instruction is taught in basic personal income tax law, theory, and practice by an approved curriculum provider. A new law passed in December 2019 extended tax breaks but also caused delays for many 2019 forms, instructions, and publications. A large percentage increase was also seen in 1944 because of World War II. The taxable income limits in each tax bracket change as well as the tax percentage rate for each bracket. However, the details of income taxation are uncertain and subject to change. https://www.irs.gov/newsroom/historical-highlights-of-the-irs. Married taxpayers can choose to either combine their incomes and file a joint return or file separately. Basic Tables: Exemptions and Itemized Deductions. Form 1040 is used by citizens or residents of the United States to file an annual income tax return. Accessed October 17, 2016; http://www.taxhistory.com/1943.htm. AZQuotes.com, Wind and Fly LTD, 2018. Earned income: Money you get for the work you do. Level: Basic… History shows that income tax law is always changing. Tax exemption: An amount allowed by the IRS that can be deducted from taxable income to reduce the amount of income tax owed. ... 8 Key Highlights of the New Form 1040 Draft. "2018 EITC Income Limits, Maximum Credit Amounts and Tax Law Updates." a. The streamlined form can be supplemented with additional schedules as needed for more complex tax situations.14. Tax payments Federal Income Tax Withholding May Need Adjustment. Income Tax basics Before Registration and Filing of your Income Tax Return, it is recommended that one should establish basic understanding regarding these processes. The Tax Cuts and Jobs Act changed the way taxable income is calculated and reduced the tax rates on that income. 15 And in 1913, the first Form 1040 appeared after Congress levied a 1 percent tax on net personal incomes above $3,000 and a 6 percent tax on incomes of more than $500,000. H&R Block, October 2018; So, individual tax payers might pay taxes in several different brackets depending on their income because the money that falls in each tax bracket is taxed at a different rate. 6. Under the 2017 Tax Cuts and Jobs Act, the Child Tax Credit and the Additional Child Tax Credit have been combined with the following new guidelines and changes effective for 20189: 4. Learn vocabulary, terms, and more with flashcards, games, and other study tools. 9 Charney, Gil. Check the status of your refund, and when you can expect to receive your refund. Under the new law, the salary adjustment will be given in four (4) tranches starting in January 2020 and upon full implementation, the basic salaries will increase by a weighted average of … The first dollars earned fall into the first bracket, which is taxed at the lowest rate. https://www.irs.gov/uac/brief-history-of-irs. While that might seem complicated, the structure ensures that taxpayers with lower incomes pay a smaller overall tax rate than those with higher incomes. "Working on a New Form 1040 for 2019 Tax Season." Dear Readers, Welcome to Taxation Interview questions with answers and explanation. a. Central Banker: News from the St. Louis Fed, In Plain English: Making Sense of the Federal Reserve, Economics and Personal Finance Glossary and Flashcards, Materials and Videos from Featured Events, Center for Household Financial Stability HOME, Manuals, Regulations, Laws & Other Guidance, Preview the Individual Income Tax: The Basics and New Changes Reading Q&A, Read more about our award-winning resources », Learn more about Econ Ed at the St. Louis Fed, Contact our economic education specialists, In Plain English - Making Sense of the Federal Reserve. The top individual tax rate dropped from 39.6% to 37%, and numerous itemized deductions were eliminated or affected as well. The following videos describe the taxpayer experience at free tax preparation sites and explain basic … Individual Income Tax Overview, Dependents, and Filing Status 5. The number of tax brackets has not changed from 2017 and remains at seven tax brackets. Learn vocabulary, terms, and more with flashcards, games, and other study tools. The IRS had to address and make changes to income tax withholding in response to the new law as soon as possible after it passed. Inflation: A general, sustained upward movement of prices for goods and services in an economy. The Income Statement, or Profit and Loss Report, is the easiest to understand.It lists only the income and expense accounts, and their balances. Table 2.1. Geared to a Main Street audience, this e‑newsletter provides a sampling of the latest speeches, research, podcasts, videos, lesson plans and more. Publication 55B. The most recent change in tax laws came on December 22, 2017: President Trump signed the 2017 Tax Cuts and Jobs Act, which went into effect on January 1, 2018. Enroll and you'll be on the way to freedom from the complexity of income tax regulations and the pursuit of a new … There is also an additional qualifying widow(er) status for those who meet special circumstances. St. Louis, MO 63102, Jeannette N. Bennett, "Brief History of IRS." Accessed October 8, 2018; Gross Income and Exclusions 6. Taxpayers must identify all forms of income and calculate the amount of taxable income to arrive at their tax liability. Start studying Chapter C3 The Corporate Income Tax. It also does not define key elements of income tax such as tax deductions, tax exemptions, and expenses or how taxable income is determined. Determine what has to be reported as income on your personal income tax return. There are two ways to get earned income: You work for someone who pays you, or you own or run a business or farm. 16 These historical taxation laws bear little resemblance to the most recent change … Income: The payment people receive for providing resources in the marketplace. "Steps to Take Now to Get a Jump on Next Year's Taxes." Learn more about the Econ Lowdown Teacher Portal and watch a tutorial on how to use our online learning resources. In order to prepare your income tax return, ... can help you calculate your tax and answer any questions that you may have regarding your business. Since the total income of an assessee varies according to his residential status in India, the incidence of tax shall also vary according to such residential status in India. To help you navigate the tax reform changes, here’s a look at ten of the major provisions that may impact you. Click on the apple Some basic changes are addressed as follows: 1. Volunteer tax … The income tax laws classify the residential status of an individual into three categories, depending on the individual's stay in India in the relevant financial year as well as his/her stay in the previous years. The 16th Amendment does not identify specific details. Stay current with brief essays, scholarly articles, data news, and other information about the economy Personal income. 5. Start studying Study Guide 6 Financial Planning Exam Answer Key U3 C11 L2 3. But it’s important to understand some basics of individual income taxation before these changes are addressed. Individual Income Tax: The Basics and New Changes (Page One Economics, Focus on Finance) The federal individual income tax is certain. Activity 2: Taxing Times-Calculate the amount of taxes owed by individual taxpayers. "100 Years of Tax Brackets, In One Chart." Taxable income is calculated based on the taxpayer's adjusted gross income for the tax year minus allowable tax exemptions, deductions, and credits. 17 IRS. New law: Business owners can take a 20 percent deduction on their pass-through business income… $952.50 + $3,501.00 + $286.00 = $4,739.50. Income is broadly included in the tax base, whereas deductions must be specifically provided for in the law. Ben Franklin died in 1790—many years before the first federal income tax was levied. Individual Income Tax:arin / iStock The Basics and New Changes Jeannette N. Bennett, Senior Economic Education Specialist GLOSSARY Adjusted gross income: Gross income … 11 IRS. from the Research Division of the St. Louis Fed. ... "For an individual, all income … May 03, 2021 - May 05, ... S Corporations: Key Issues, Compliance and Tax Strategies. INDIVIDUAL INCOME TAX Key Elements of the U.S. Tax System Q. "Qualifying for the Earned Income Tax Credit." Then, in 1913, the federal income tax resurfaced when the 16th Amend­ment to the Constitution gave Congress legal authority to tax income. Income limits in each bracket are different for each filing status. When income "fills" that bracket, additional dollar amounts get bumped into the next bracket and taxed at a higher rate. 2018; Income within each bracket is taxed at a specific rate for that bracket. Congress initiated the first federal income tax in 1862 to collect revenue for the expenses of the Civil War. President Donald Trump signed the Tax Cuts and Jobs Act (TCJA) on Dec. 22, 2017. 2018; They not only reduce the amount of taxes owed or completely eliminate any taxes owed but can result in a refund as well. The Distributional Impact of the Tax Cuts and Jobs Act over the Next Decade online learning resources? Let’s begin with a concrete example illustrating how changes in income level affect consumer choices. Our online tax trivia quizzes can be adapted to suit your requirements for taking some of the top tax … Information about Form 1040, U.S. (Gross income is the total amount earned before any adjustments are subtracted.). Through CASSIDI you are able to search for and view banking market definitions, find banking market concentrations and perform "What If" (pro forma) HHI analysis on banking market structures. "History of Federal Income Tax Rates: 1913-2018"; Taxpayers can choose to take the higher of either the standard deduction or their itemized deductions—whichever results in the lowest tax. One very noticeable change from the 2017 Tax Cuts and Jobs Act is the new Form 1040, which will simplify filing for many taxpayers. Income tax: Taxes on income, both earned (salaries, wages, tips, commissions) and unearned (interest, dividends). Additionally, for each new tax year there are hundreds of forms and publications the IRS updates and adjusts for the cost of living. "Brief History of IRS." Individual Deductions 7. The W-4 form is often filled out for new employment (or when your tax situation changes) for determining how much money is withheld for federal income taxes. These two tax credits, designed to provide tax relief for low- to middle-­income earners, are based on a taxpayer's taxable income and number of children. 2018; [22% × $1,300.00 = $286.00 tax on this portion of taxable income], Total tax liability: Moving expenses are no longer deductible. For 2018, the maximum EITC amount available is $6,431 for taxpayers filing jointly who have three or more qualifying children.12 In 2017, almost 27 million taxpayers received over $65 billion from the EITC.13, 7. These adjustments also prevent taxpayers from possibly paying a higher tax rate when there is no actual increase in real income. Review the top eight notable changes to the form for individual tax filers. 8 Bird, Beverly. The number of tax brackets has varied greatly from year to year according to changes in taxation laws.3 (See examples in Table 1. Revenue (government): The income received by government from taxes and other sources. 1 IRS. This year’s Tax Facts covers: Temporary tax deadline extensions and select financial measures implemented … In 1894, this was changed to the Bureau of Internal Revenue and renamed in the 1950s as the Internal Revenue Service (IRS).1 The IRS is the branch of the Treasury Department responsible for implementing tax legislation, interpreting tax law, ensuring taxpayers' compliance with the law, and collecting income tax. Jump to navigation links Jump to main content Jump to footer links. The standard deduction has increased. In 1862, collection was the responsibility of a Commissioner of Internal Revenue. Quality and Volunteer Tax Alerts Latest Tax Information for Individuals Publication 5192, Ten Key Points for Communicating with People with Disabilities. 31/2020 Dated 29.05.2020. Balance, August 2018; https://www.thebalance.com/child-tax-credit-changes-4158690. Taxes: Fees charged on business and individual income, activities, property, or products by governments. False Answer… 3. And taxation laws have changed many times. Interested in using our June 29, 2018; https://www.irs.gov/newsroom/irs-working-on-a-new-form-1040-for-2019-tax-season. Income taxes can be levied on both individuals (personal income taxes) and businesses (business and corporate income taxes). And, according to this column, it is also a question that economists do not know the answer to. Explore data, research and more in FRASER, our digital library. And with each change, taxpayers are affected. © 2018, Federal Reserve Bank of St. Louis. TAX REFORM BASICS FOR INDIVIDUALS & FAMILIES. "The Child Tax Credit: 2017 vs. Individual Income Taxation (10) Employee & Business Owner Planning (9) S Corporation Income Taxation (8) ... Level: Basic. Read more about our award-winning resources ». TaxReform-Infographic-TA. 3. It made a short-lived comeback in 1894 but was ruled unconstitutional the very next year. https://www.irs.gov/individuals/steps-to-take-now-to-get-a-jump-on-next-years-taxes. New tax changes for 2020 give taxpayers the opportunity to save more for retirement and health-care expenses, take a bigger deduction on their individual tax return and fine-tune how much tax … ITR Forms applicability for A.Y. Figure 1 shows a budget constraint that represents Kimberly’s choice between concert tickets at $50 each and getting away overnight to a bed-and-breakfast for $200 per night. Taxable income: Adjusted gross income minus allowable tax exemptions, deductions, and credits; the amount of income that is subject to income tax. And today, the federal income tax is well established and certain. (Once the amount of tax owed is calculated, it can be divided back into total income to determine the average tax rate for an individual taxpayer. Knowledge of basic concepts would not only ensure that the tasks are performed easily but also in the prescribed manner. The IRS has undergone significant efforts to develop questions based on general tax … The December 2018 issue addresses basic facts about the federal individual income tax and the new changes … 4 Key Changes for Your 2020 Tax Return Tax law changes are more modest this year, but there are still some interesting ways you might save money. It does not define what portion of income should be taxed. It is time to say so. These taxpayers are allowed to use the joint return tax rates. For example, if your income increases by 3 percent in a year when the inflation rate is also 3 percent, your real income hasn't changed. This progressive tax applies higher tax rates to higher income brackets than those applied to lower brackets. No prior tax experience is necessary to enroll and take the course. Activity 4: Consumer Spending Patterns-Take a virtual field trip to learn about changes in income and income tax … Investments 8. It levied a 3 percent tax on incomes between $600 and $10,000 and a 5 percent tax on incomes of more than $10,000. https://bradfordtaxinstitute.com/Free_Resources/Federal-Income-Tax-Rates.aspx. https://www.irs.gov/newsroom/individuals. Income Taxation - Answer key (6th Edition by Valencia)- Chapter 5 1. To qualify for this credit, certain requirements must be met that depend on income level, filing status, and number of qualifying children. Our nation's first income tax was signed into law by President Lincoln in 1862. After calculating taxable income and identifying a filing status, the amount of tax liability can be determined using percentage rates. Example: For 2018, the income tax of a single taxpayer with a taxable income of $40,000 is calculated based on the first three brackets (see "2018 Income Tax Brackets"). Practice and learn to fill in the W-4 tax form lesson. Instead, only the income that you earn within a particular bracket is subject to that particular tax rate. Source: Internal Revenue Service. Tax refunds. The EITC allows taxpayers to get a refund, even if they do not owe or have not paid any tax. Tax rates are progressive; from 10% to 35% for individuals … Let’s discuss your answers on Student Handbook page 117, Budget Basics, and see what you already know. Washington, DC: March 2018, p. 2; https://www.irs.gov/pub/irs-soi/17databk.pdf. Claim tax deductions, credits, and expenses to reduce the amount of tax you must pay. Regardless of changes in taxation laws, taxes must be collected. "Historical Fact of the IRS"; Tax Changes and Key Amounts for the 2020 Tax Year Americans are facing a long list of tax changes for the 2020 tax year. These omissions in the 16th Amendment allow federal income tax laws to change as lawmakers make decisions on raising revenue for government spending, making fairer tax laws, or stimulating the economy. President Donald Trump’s payroll tax holiday — a temporary suspension of the employee’s 6.2% share of the Social Security tax — takes effect on Sept. 1 and runs until the end of the year. If you’re not familiar with that term, Form 1040 is the standard tax form individuals use to file their income tax … It's certain—the IRS is an important agency. The most recent change in taxation laws, the 2017 Tax Cuts and Jobs Act, includes many changes effective for 2018. But it's important to understand some basics of individual income taxation before these changes are addressed. into effect on January 1, 2018. However, unless income tax brackets are adjusted each year for inflation, you might find yourself in a higher tax bracket (and thus paying a higher tax rate) even though in inflation-adjusted terms, your income hasn't changed. The tax rate that applies to the next additional increment of a taxpayers taxable income (or deductions). Suggestions for Grading To earn credit in both economics and English, the student … "The New Child Tax Credit." https://www.irs.gov/uac/brief-history-of-irs. 5. Read each of the fol-lowing questions, and call on students to respond. Liberty Tax Service®’s Basic Income Tax courses educate the public about the latest tax changes, and every facet of individual income tax preparation. The federal individual income tax is certain. "Working on a New Form 1040 for 2019 Tax Season." Taxes are certain. The limit on charitable contributions of cash has increased from 50 percent to 60 percent of adjusted gross income. At the end of the test, there will be a message displaying your answers and any questions that have not been answered. In 2017, the Child Tax Credit was a nonrefundable credit of up to $1,000 per qualifying child for taxpayers with earned income of at least $3,000. What Franklin did not address was the uncertainty of change in taxation laws. 2 Tax History.com. Also, a tax return must be filed to claim the credit. Statistics of Income. IR-2018-146, The deduction of state and local income, sales, Some miscellaneous expenses are limited or are no. This increased standard deduction means more taxpayers will benefit by taking the standard deduction beginning in 2018 (Table 3). Publication 4491-X, VITA/TCE Training Supplement PDF contains new tax law training and other updates to the VITA/TCE training products. Some deductions have been reduced or eliminated, including the following examples10: 6. An individual may also be deemed, under the “sojourning” rule in the Income Tax Act, to be a resident of Canada for the entire calendar year in which that individual was physically present in Canada for more than 182 days, unless they are able to apply the residency tie-breaker rules in a tax treaty between Canada and the individual’s country/jurisdiction of residence to override this rule. 10 IRS. Many factors such as inflation, employment, workforce changes, and adjustments to the federal budget contribute to tax law changes. In 2017, more than 15.5 million tax refunds included a refundable child tax credit, and more than 23.3 million included a refundable earned income tax credit.6. What's new for individuals. … 6 IRS. Get familiar with them … The EITC remains in effect in the new tax law with new guidelines and adjustments for inflation and cost-of-living allowances. The amendment known as Income-tax (12th Amendment) Rules, 2020 has been notified vide Notification No. When refundable tax credits reduce the tax liability to below zero, a refund is given for the difference. One Federal Reserve Bank Plaza This means it did not reduce tax liability below zero dollars. Unmarried taxpayers are classified as either single taxpayers or heads of household if they meet certain guidelines. 14 IRS. a tax system that taxes higher income at higher rates and lower income at lower rates a tax system that gets better as time goes on A progressive income tax system is one in which tax rates increase progressively as income … These Income Tax GK Quiz or General Awareness quiz objective questions answers are very helpful … Regardless of the intent, change can bring confusion. Tax Structure – The basic tax formula for all taxable entities is fairly similar. One primary tax is the individual income tax. True b. = (New total tax - Old total tax) / (New taxable income - Old taxable income) Average tax … Our Tax Center explains and illustrates the tax rules for sales of company stock, W-2s, withholding, estimated taxes, AMT, and more. For example, in 2017, almost 48 percent of government revenue was provided by individual income tax (Figure 1). Multiple Choice Questions (Please choose the Best answer for teach question. Personal exemptions have been eliminated. 3 Chang, Alvin. ISOs › Taxes Test your knowledge with our Incentive Stock Options quiz and interactive answer key! Includes tax basics such as sales taxes, ... Income Tax Time Word Problems. 4 Will Rogers. People are required to pay taxes. However, in 2018, the rates have decreased overall (Table 2). If extended, the individual income tax provisions in the Tax Cuts and Jobs Act would increase long-run GDP by 2.2 percent, long-run wages by 0.9 percent, and add 1.5 million new jobs. 2020-21 / F.Y 2019-20 These new changes were separate from the big ones that went into effect in 2018 from the Tax Cuts and Jobs Act of … ... "To place a tax on income, property, or goods" Taxes. It has been updated to include the law change to the tax rates for not-for-profit companies which occurred since the last edition of the guide. The Current Tax Payment Act was signed into law in 1943 and has made collecting income tax easier. Also, it adopted a new tax schedule for individuals earning between $21,000 and $75,000 in income. Direct students to Tax Tutorial-Payroll Taxes and Federal Income Tax Withholding. For example, in 1913, the top tax bracket had a 7 percent rate on all taxable income over $500,000.5 In 2018, the top tax bracket has a 37 percent rate on all taxable income over $600,000. The views expressed are those of the author(s) and do not necessarily reflect official positions of the Federal Reserve Bank of St. Louis or the Federal Reserve System. This process ensures the federal individual income tax is a progressive tax based on the ability-to-pay principle. This is a question that divides politicians and the public. If not enough has been withheld, the taxpayer must pay the additional tax owed. Adjustments for inflation are beneficial to taxpayers and prevent credits or deductions from having a reduced value. "Individual Income Tax: The Basics and New Changes,", Individual Income Tax: The Basics and New Changes, https://www.irs.gov/uac/brief-history-of-irs, https://www.vox.com/2015/10/26/9469793/tax-brackets, https://bradfordtaxinstitute.com/Free_Resources/Federal-Income-Tax-Rates.aspx, https://www.irs.gov/pub/irs-soi/17databk.pdf, https://www.irs.com/articles/additional-child-tax-credit, https://www.thebalance.com/child-tax-credit-changes-4158690, https://www.hrblock.com/tax-center/irs/tax-reform/new-child-tax-credit/, https://www.irs.gov/individuals/steps-to-take-now-to-get-a-jump-on-next-years-taxes, https://www.irs.gov/credits-deductions/individuals/earned-income-tax-credit/eitc-income-limits-maximum-credit-amounts-next-year, https://www.irs.gov/newsroom/qualifying-for-the-earned-income-tax-credit, https://www.irs.gov/newsroom/irs-working-on-a-new-form-1040-for-2019-tax-season, https://www.irs.gov/newsroom/historical-highlights-of-the-irs, The Child Tax Credit has increased to $2,000 for, There is a refundable portion of the credit, limited, The earned income threshold for the refundable, The phase-out income limits for the child tax credit. Answer word problem questions with an income tax theme. Here, the word "marginal" means additional. Start studying Income Tax Chapter 1. = Change in tax / Change in taxable income. 15 IRS. The amount withheld is determined by information the employee provides on an IRS W-4 form. 16 IRS. It cut individual income tax rates, doubled the standard deduction, and eliminated personal exemptions from the tax code. The Bank On movement is designed to improve the financial stability of America’s unbanked and underbanked. But his words have outlived him: "In this world nothing can be said to be certain, except death and taxes." Bank of St. Louis accessed October 17, 2016 ; http: //www.taxhistory.com/1943.htm arrive! Is taxed at a specific rate for that bracket, additional dollar amounts get into! People also earn income in the prescribed manner income level affect consumer choices rates have decreased overall ( Table )... 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Annual tax return—it 's the law most effectively serves the public by building a more diverse and economy... Earned before any adjustments are subtracted. ) deduction: Allowable expenses defined by tax law that can deducted! Is well established and certain a more progressive tax structure – the basic tax formula for all taxable entities fairly... Tax Withholding a tax on income, activities, property, or continue unaffected Perspectives on corporate... Large percentage increase was also seen in 1944 because of world War I Portal and watch a tutorial on to! The fol-lowing questions, and other study tools laws change the details and can make filing a return, recent! And select financial measures implemented … what 's new such as sales taxes, income... Of taxes owed but can result in a bracket example, the amount federal. One Chart. facing a long list of tax changes and Key for! First income tax rates, doubled the standard deduction, and call on to... 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