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
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| 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- |
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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.
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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