FF. Bellefonte, Pa., November 21, 1913. COMPLEXITIES IN COLLECTION OF INCOME TAX MADE CLEAR. i Questions About New Law’s Meaning An- | swered by Legal Expert. Its Involv- ed Phraseology Made It Difficult to Understand. By CHARLES A. BRODEK, Member of the New York Bar Association, | New York city. I has been estimated that the In- | come tax law will directly affect | more than half a million citizens | and aliens. Probably millions will | be indirectly affected in one way or! another by the provisions of the law | for payment of the tax “at the source.” i In addition to those directly and indi- rectly affected, there are many who | will be concerned to know whether or not they come within the provisions of the new law. In the light of more | than twenty vears' experience in han. ! dling tax questions from the legul | standpoint. 1 have sought to set down | the questions which would naturally come to the mind of the inquiring citi- | zen and to set down briefly and in sim- | ple language the answers to such ques- | tions, Preliminary Questions. Q.—When was this law passed? A.—Oct. | 3, 1913, and went into effect at once. It | forms section 2 of the tariff bill. Q.—Does it affect any income I received before the law was passed? A.—Yes; It | taxes income from March 1, 1913. Q.—~Why did the law fix March 1, 1913, as the date from which income was to be taxed? A.—Because the United States su- preme court had held some years ago that | the government had no constitutional | power to pass such a law, and it was therefore necessary to adopt a constitu- | tional amendment giving the government | power to tax incomes. This constitutional | amendment went into effect the last part of February, 1913, and congress therefore taxed incomes from the very earliest date. Q.—Has the government the power to | pass a law In October, 1913, taxing income | which I received before that date? A.—It | has been claimed that this provision of ! the income tax law is unconstitutional, be- | cause income received from March to Oc- | tober, 1913, had become part of capital at the time the income tax law was passed. It is unquestioned that the federal govern- ment has no power to tax a man's capital directly. Whether this provision of the law is unconstitutional is extremely doubt. ful. Q.—~Have I the right to refrain from paying the tax on income received before the law passed until the courts have de- | termined whether this tax was valid? A.— | No; you must pay the tax next June, and | you cannot await any court's decision, Q.—~Does that mean if this provision is invalid I will lose what I paid to the government? A.—No. You should pay that portion of the tax which relates to | your Income before October, 1913, under protest. If this feature of the law is held to be invalid the government will then re- pay to you this part of the tax. The gov- ernment has always been very fair in re- | funding taxes paid under any law found | to be invalid. Individuals Subject to the Tax. Q.—What persons are subject to the tax? | A.—Every citizen of the United States, whether residing at home or abroad, and every alien residing in the United States are taxable upon their entire net income | minus specitic exemptions, Every non- resident alien Is taxable upon his net in- | come derived from property in the United States or from carrying on any business or profession in the United States, Q.—Who pays the tax? A.—The tax will be collected either directly from the tax- payer or through the employer, agent, trustee or other person having control of | his income. The latter method is termed “collection at the source.” Corporations Subject to the Tax. | Q.—~What corporations are subject to the tax? A.—Every corporation, joint stock company or association and every insur- ance company organized in the United | States is subject to a tax of 1 per cent upon its net income. and every foreign | corporation is subject to a tax upon its | net income from: business transacted or | capital invested within the United States. | Q.—Are any concerns exempt? A.-—Yes. Agricultural organizations, mutual sav- ings banks. fraternal beneficiary socle- | ties, building loan associations. cemetery | companies and religious, charitable, scien- | tific and educational corporations, busi- ness leagues, boards of trade and civie or- | ganizations are not subject to the tax. They are clearly defined in the law, so that other corporations may not use these exceptions as a loophole. | Tax Returns. Q.—What individuals are required to | make tax returns? A.—Every person of | lawful age subject to the tax having a net | income of $3000 or over for the taxable year. In addition, all guardians, trustees, executors, administrators, agents, receiv- ers and conservators must make a tax re- turn for the person for whom they act. Q.—8uppose there are two or more guardians, trustees, executors, etc., must each make a return? A.—No; a return made by any one is sufficient. Q.—Are there any individuals who need not make a tax return? A.—Persons hav- ing net incomes not exceeding $3.000, per- sons for whom the return is made by an employer or by a guardian, trustee, ex- ecutor, etc.,, and who have no other in- corporations which pay tax and whose net income does not exceed $20,000, Q.~Does a copartnership have to file a return? A.—No; only if required by the commissioner or collector; each partner must make an individual return. Q.~What corporations must make re- turns? A.—All corporations subject to the The tax is | the return must be filed for the calendar year, but the corpo- ration may designate and use the last day of any month as the day for closing its fiscal year, provided it gives thirty days’ notice to the district collector. The tax is then levied for the fiscal year, and the re- turn must be filed within sixty days after the close of the fiscal year and the tax paid within 120 days after the close of the fiscal year. Q.~Where must the return be filled? A. --An individual must file the return where be resides or has his principal place of ! the additional $1,000? | Salaries of the present president of the | United States, present judges of the fed- ! Clerk hire, rent, ' taxes which fell due within the year for business; a corporation or a nonresident must file where the principal place of business is located, and the trustee. guard- fan, executor, etc.., must file the return. where he resides or where the instrument under which he acts is recorded. Q.—What must the return contain? A.— The gross income and certain deductions and allowances which will be explained shortly. Q.—Must the return be sworn to? A.— Yes. In case of a corporation the oath or . affirmation is made by an officer. Gross Income. Q.—What does gross income mean under the income tax law? A.—Gross income is defined in the statute as gains, profits and income derived from salaries, wages or compensation for personal service or from professions, vocations, businesses, trade, commerce or sales or dealings in real or i personal property growing out of the own- ership or use of or interest in real or per- sonal property, also interest, rent, divi- dends, securities, or the transaction of any lawful business, or gains, profits and | income from any source whatever. i Q.—Does gross income include property | acquired by gift or by will? A.—No, but | it includes the income from such prop- erty. ' Q.—Will proceeds of life insurance poli- | cles paid upon death or paid upon the ma- | turity of a term or upon surrender of a policy be included as income? A.—No. Rates of Taxation. Q.—What i= the rate of taxation? A.—! The normal rate is 1 per cent of the net ' income, and this applies to corporations as well as to individuals. In the case of | individuals having a net income exceed- | ing $20.000 the law provides for an addi- tional tax. Q.—What is the rate of the additional | tax against incomes of individuals? A.— One per cent on amount by which income | | exceeds $20,000 but does not exceed $50,000; | i ceeds $0,000 but does not exceed $75,000: 2 per cent on amount by which income ex- | 1 3 per cent on amount by which income ex- | ceeds §75.000 but does not exceed $100,000; 4 | per cent on amount by which Income 21 ceeds $100,000 but does not exceed $350,000; 5 per cent on amount by which income ex- | ceeds $250.00 but does not exceed $600,000; | | 6 per cent on amount by which income ex- | | withhold the tax until such time as the ! ceeds $500,000. Q.—Are corporations ever liable for the | additional tax? A.—Never. Q.—In calculating net income for the ad- ditional tax, are the same deductions made as in calculating net income for the | normal tax of 1 per cent? A.—Yes. with | the exception that in calculating net in- come for the additional tax neither divi- dends nor amount of income on which tax is withheld at the source will be deducted Exemptions and Deductions. Q.~—Is there any exemption allowed to a taxable person? A.—Yes, $3,000; and if the person is married and his wife lives with him the exemption is $1,000 more, making $4,000 in all. The same provision is made if the persona making the return is a mar- | ried woman whose husband lives with her. ' Q.—Can husband and wife each deduct A.—~No. Only one deduction of $4,000 shall be made from the | aggregate income of husband and wife when living together. Q.—~Can guardians, trustees, executors. ete., deduct the exemption of $3000 for the benefit of the person for whom they act? A.—Ves Q.—What deductions can be made by an individual for expenses, ete,? A.—1. Neces- sary expenses actually paid in carrying on business. 2. All interest paid on ia- debtedness. 3 All national, state, county, school and municipal taxes. 4. All losses | actually sustained in trade or arising | from fire, storms or shipwreck and not compensated by insurance or otherwise. | .5. Debts due and found worthless and charged off. 6. Reasonable allowance for wear and tear. 7. Dividends received from corporations which pay income tax. 8. Amount of income on which tax is paid or withheld at the source, provided such income does not exceed §3.000 or is irregu- | lar as to time and amount. 9. Interest on | obligations of the United States, a state | or a political subdivision of a state. 10. | eral courts and the compensation of all officers, employees of a state or a political subdivision of a state, provided the same is not paid by the United States govern- 11. The exemption of $3.000 or 34,000 for couples living together. As above ex- plained, these deductions are allowed In calculating net income for the normal tax. For the additional tax items 7 and 8 are! not allowed. Q.—Can personal. living or family ex- penses be deducted? A.—No. Q.—Is an assessment for local benefits deemed a tax and deductible as such? A.—No The statute expressly provides that such assessments shall not be de- ducted. Q.—Can any deduction be allowed for cost of new buildings, improvements or betterments nade to increase the value of any property? A.—No. Q.—What is meant by the necessary ex- penses pald in carrying on business? A.— lighting, heating, sta- tionery, delivery charges, etc. Q.—Suppose I have allowed state or local taxes to accumulate for several years; can i deduct the payment of ac- cumulated taxes, or can I only deduct tha which I made an income tax return? A.— You can dejuct all the tax payments whether they were accumulated or not. Q.—What deductions are allowed to cor: porations? A.—1. The ordinary and neces sary expenses incurred in maintaining and operating the business and properties of the including rentals. 2 All losses actually sustained and not compen- sated by insurance or otherwise, includ- ing reasonable allowance for deprecia- tion. 3. Interest paid on bonded and other indebtedness to an amount of such in- debtedness not exceeding one-half the in- terest bearing indebtedness and its out- standing capital stock. 4. All na- tional or state or imposed by a foreign government. Q.—Is a corporation entitled to an ex- emption of $3,000 or $4,000 like an individ- ual? A.—No. There are no exemptions in the case of corporations; they are allowed to deduct the expenses, losses, interest and taxes as already explained, Q.—Individuals may deduct dividends: can a corporation deduct dividends re- Collection at Source. Q.—What is meant by the collection of this tax “at the source?’ A.—The law provides that all persons, firms and corpo- rations paying interest, rent, salaries, an- nuities or fixed or determinable 514 LH i i E 3 §E ii: £87 : £ Bo i 5 LH i | own return. | deductions to the collector between June 1 per cent from my rent? A.—~No; you can only make the deduction provided the rent you pay exceeds 15.650 per year, and this same principie applies to all payments of rent, salary, interest, annuities, etc., with the sole exception of interest on corporate Q.—If the interest on corporate bonds | amounts to less than $3.000, must the 1 per cent be Jdeducted at the source? A.— ; Yes; the law provides that where the in- come is interest on corporate bonds the tax must be deducted at the source, irre. spective of the amount of the interest payment. Q.—If rent or salary payable by me amounts to $3.00 or less | understand 1 withhold no tax, but if it amounts to more than $3,000, do [ withhold the tax on the excess or on the whole amount? A.— You withhold the tax on the whole amount. For example. if rent or salary due from you amounts to $2,000 or less you deduct nothing, but if it amounts to $3,500 you must deduct §E—namely, 1 per cent of the entire $3,700. Q.—Can the person entitled to rent, sal- emption? A.—Yes: by filing a notice with you he can claim and obtain an exemp- tion of $3.000 (or $4,000 If married and with a wife living with him): in that case you should only deduct the 1 per cent from the excess over the exemption. For ex- ample, if a landlord or emplovee is en- titled to $5,000 a year and files with you an exemption as n married man amounting to $4,000 you would only deduct $10—-namely, 1 per cent on the excess of $1,000, Q.—How about the collection of coupons on corporate bonds? A.--The interest is to be deducted by the corporation. The owner of the coupon must then file a cer- tificate of ownership with the bank or other concern which receives the coupon for collection, otherwise that bank would have to deduct the tax and attach iis own certificate. giving the name of the owner. The owner has a right to claim exemp- tion. up to $3.00) if single or $4.00 If mar- riled. The forms of certificates of owner- ship and of exemptions have been pre- scribed and may be obtained from the col- lector, Q.—In deducting the tax from rent. sal- ary and interest, shall 1 deduct from each payment or wait until £3,000 has been paid? | ary, interest, annuity, ete., claim an ex- | i 1 i i A.~Under the regulations you need not ! rent, salary or interest shall have reached , an aggregate In excess of $3,000. The tax subsequently is to be deducted from the Cull amount or from $3,000 or $4,000 less if notice of exemption has been filed. Q.—~What tax shall be deducted in 19137 A.—For the year 1913 everything is on a five-sixths basis, have been in effect for ten months. All calculations of exemptions, deductions, in- come, ete, fur i913 shall be taken at five- , sixths of the whole annual amount In each case. Q.—Suppose the landlord or employee entitled to receive more than $3,000 a year because the law will | has business cxpenscs, losses, ete., which | bring his net income below $3.00 in all; can he, by filing a statement of such busi- ness cxpenges, losses. ete, obtain a full payment from me without deduction? A.— . sorts of fish needing more oxygen than No. You must still deduct 1 per cent. He | will be entitled to obtain the benefit of such deduction hy application to the col- | lector. Q.—~What do 1 do with the amounts I | deduct from payments of salary, interest, rent, annuity, etc.” A.—You hold them and make separate returns for such de- duction at the same time you make your | You pay the amount of the 1 and June 30. Individuals and corpora- tions will be notified of the amount upon which they are liable on or before Junel. Publicity of Returns. Q.—Are the returns made by an individ- ual or corporation open to the inspection of the public? A.—All returns, whether by individuals or corporations, are public records, but they may be inspected only upon the order of the president under rules and regulations to be prescribed by the secretary of the treasury and ap- proved by the president, Q.—Can income tax returns be inspected by the tax officers of any state, city or : President Adolfo Diaz of Nicaragua county? A.—No. except as they may be | inspected by any citizen, as explained in my answer to the previous question, The | only exception is that officers of any state which imposes a general income tax may have nccess to the returns, Penalties. Q.—~What is the penalty for neglect or refusal to make a retura on time? A.— | Five per cent of the amount of the tax is added and 1 per cent per month from the time it became due, and a fine may be imposed of not less than $20 or more than $1,000 in the case of an individual or not more than $10,000 in the case of a corpo- ration. Q.—~What is the penalty for making a false or fraudulent return? A.—A fine not exceeding $2,000, imprisonment for one year, or both, in the case of an individ- ual or officer of a corporation and a fine not exceeding $10.00 in the case of a cor- poration, Q.—Ig there any penalty if a landlord while it was gathered in session. | i | i | | i i i | i | or employee or other person from whom | a tax must be deducted at the source filles | a false statement respecting the $3,000 ex- emption or $4.00 for a married couple? A.—Yes: a fine of $300. Q.~Can a man's or company's books and accounts be examined by the col- lector? A.—The United States courts can i compel attendance, production of books | and testimony in cases where persons are summoned by the collector. OPERATED ON FOR CRIME. Michigan Judge Believes That Two Moral Delinquents Are Cured. Two prisoners who had been sent from Benton Harbor, Mich., to Chica- go by Circuit Court Judge Bridgeman to undergo operations by Dr. BE. H. Pratt of Evanston, Ili, for the cure of moral delinquency returned a few days ago and faced the court. “I am a man now,” said George Cor- bet, one of the men. He stuod erect. Before the operation his shoulders sag- ged. His eyes were clear, and he had the appearance of one who Is sound morally and physically. Clarence Chappell. the other man, had pleaded guilty to a charge of bur- glary and was known as the leader of a gang of toughs. “I believe I am cured.” he said. want to lead a decent life.” Judge Bridgeman announced that the two men would be pardoned and their actions carefully watched. “I believe they have been morally regenerated.” sald the judge. “and if they prove the correctness of my the- ory )aore prisoners will be sent to the operating table instead of to prison.” “I Capital Ends Secret Divorces. Engineers With Big Forces Opening Way Through Cucaracha Slide. The task of opening a way through | Cucaracha slide, the sole remaining ob- | stacle to the navigation of the Panama canal, has been carried on as “rush | work™ since the blowing up of the! Gamboa dike, according to the Canal! Record. The engineers have been putting forth herculean efforts to clear a navi- | gable channel through this nearly half | mile long obstruction. hut owing to the | peculiar mobility of the vast mass of | earth and rock the work of hundreds | of shovels and thousands of gallons of | jetted water ix often undone overnight | by a slumping back into place of the material removed or by additional slides from the sides of the channel. A ton and a half of dynamite was exploded in ene blast Oct. 10 without any substantial result so far as in- creasing the flow of water across the dam was concerned. Since that date three shifts of men. working eight hours ench in rotation, have heen try- ing to create an channel by sluicing with hose and hydraulic monitors. Be- fore this attuck the material had been yielding slowly. and finally the en- gineers have utilized a hig suction dredge. Meanwhile the sharp rise in the level of Gatun lake Oct, 21 has increased the size of the ditch so that now 7.000.- 000 cubic feet of water daily is pass- ing over the slide. and by this time sufficient water has been admitted to fill the two mi es of Culebra cut be- tween the slide and the firet of the Pa- cific locks, enabling the big steam dredges to enter the cut and operate on the earth harrier. Railway Car Fitted With Tanks ls Showing Good Results. According to advices from Paris. an innovation in the transport and sale of living fish has been inaugurated by President Nigg of the French Syndi- cate of Fish Culture. The Fish Trade company. founded by M., Nigg., has rented from a railroad a car used ordi- narily to transport merchandise and has turned it into a special vehicle. There are tank arrangements with constantly fresh running water, and special provision is made for certain others, The car is already showing good re- sults. Its first trip brought R00 kilos of fish from the Dordogne to Paris without any appreciable loss, The company has also installed large receiving tunks in Paris for the fish anu their sale while living. Nicaraguans Ready to Wipe Out Presi- dent and Deputies. | The frustrated plot to assassinate | and all his ministers on Oct. 290 was laid by the sonspirators with remarka- ble care. according to details just pub- lished in Nicaragua. The plotters, it appears. were members of the Liberal party and had divided themselves into three groups, the first charged with the work of killing the president and two cabinet ministers while they were driv- ing together in a carriage in Managua. the second to assassinate Vice Presi dent Fernando Solorzano and the third to throw dynamite bombs among the members of the chamber of deputies The diecovery of the conspirators while they were holding a meeting to arrange the final details of the plot was purely accidental. “My face is my fortune, sir, she said.” The oid rh y womanly to the health, and pont BA that adr hea cure feminine Favorite Prescription. works wonders for women in the resto- ration of lost fairness. It is a true beau- health, and Holiday S in Every Line at Olewines Hardware | SELLING vs. SATISFYING Selling clothing is one thing, satisfying the purchaser another. We mght sell you poor clothes—once. But our object is not the casual purchaser but the perma- nent customer. We rely on the merit of our gar- ments—not the argument of a salesman—to bring you back. Our relation does not end with the sale of a suit or overcoat. You have a right to expect com- plete satisfaction in style, fit, quality. If the garment is deficient in any of these points, we'll thank you to bring it back so that we may make good to you, either by exchanging it or refunding your money. Fall Suits and Overcoats $15.00 to $25.00. Satisfaction Guaranteed. FAUBLE’S The Up-to-Date Store. 58-4 Yeager's Shoe Store “FITZEZY” The Ladies’ Shoe that Cures Corns Sold only at Yeager’s Shoe Store, Bush Arcade Building, BELLEFONTE, PA. 58-27
Significant historical Pennsylvania newspapers