Masonry Magazine March 1969 Page. 24
TAXES
By MIRIAM McD. MILLER
TAX REFORM
The House Ways and Means Committee has begun its hearings on the proposed major tax reform. But, it may be a long time before the results of these hearings get formalized into legislative proposals and even longer before they become law. One member of the Committee, Congressman Utt of California, estimated that it may take the major part of three years to complete a revision of our tax structure. So far the thrust of the Committee's investigations has been into privately owned tax-exempt foundations.
In a recent statement on the tax reform, Secretary of the Treasury Kennedy indicated that there are three areas that he wished to have emphasized in any tax reform proposals. First, the question of equity-are all Americans in similar circumstances paying approximately the same amount of income taxes? Secondly, the new Administration is interested in the use of tax credits to help solve the problems of the cities and of the disadvantaged. Already, President Nixon has directed cabinet members, agency heads, and special advisors to study proposals for the use of tax incentives to motivate private enterprise to participate in improving economic and social conditions in poverty areas. And, thirdly, the Secretary mentioned the need for long-run revamping of our whole tax system-state and local as well as Federal.
With regard to the tax surcharge, Secretary Kennedy recently indicated that the new Administration will continue the surcharge beyond June 30, 1969 in these words "... There is no question in my mind, the inflationary condition of the economy requires a continuation of the surtax..." However, according to Budget Director Robert P. Mayo, any request to have the surcharge extended may not be made until the end of April or even in May.
AUTOMATIC DATA PROCESSING
The IRS recently announced that it added $134 million to federal tax collections in 1968 through the use of automatic data processing (ADP). These additional revenues from ADP operations come from the speed of computers in handling routine clerical operations and the master file account maintained for each taxpayer. In this way the IRS is able to do a better job of checking taxpayer arithmetic, verifying estimated tax payments, identifying duplicate refund claims and checking to see whether a taxpayer has any unpaid taxes before issuing him a refund.
Also, the IRS pointed out that through the use of ADP, taxpayers generally received faster service on their refunds last year as it took IRS just three to five weeks to process most refunds.
Refunds. Surprising as it may seem, annually, hundreds of thousands of taxpayers move without a forwarding address, and prior to ADP many refund checks would go undelivered. However, another advantage to ADP is that these refunds are now held by the IRS until a correct address is obtained, or if not, are credited to the taxpayer's account.
Changes. Also, through the use of ADP, a new form (Form 1040X) was made available by IRS. Now, taxpayers have a simplified method to make changes in a return after it has been filed.
Preaddressed Forms. Use of the preaddressed forms reduces processing costs and assures the prompt and proper identification of all returns. The IRS explained the enormity of the identification problem by the fact that one million taxpayers had to be contacted last year because they either forgot to list their Social Security number or listed the number incorrectly. This delayed any refund due. The use of a preaddressed form automatically would avoid this problem. About half of the tax returns received last year were filed using a preaddressed form.
New Tax Deposit System. To speed up collection of taxes withheld by employers, as well as to reduce the errors made in crediting these taxes to the proper account, a new Federal Tax Deposit System was introduced last year. The system is based on preaddressed forms mailed periodically to employers for use in making deposits. Employers can now deposit withheld taxes in their local banks rather than send them to IRS.
Finally, the IRS reported that over 1000 businesses reported wage, interest, dividend, and other payments to IRS on magnetic tape rather than paper per documents last year. These tape reports are more economical for IRS to process as well as more economical for businessmen to prepare. IRS News Release, IR-959.
RETIREMENT PLANS
In a recent decision the Tax Court stated that in order for a taxpayer to be entitled to a deduction for a contribution to an H.R. 10 retirement plan, he must show a definite written program and arrangement.
The case involved a self-employed osteopath who purchased $2400 worth of Government Retirement Plan Bonds. In the application to the Treasury Department for the bonds, the taxpayer stated that the bonds were purchased in the taxpayer's name as a self-employed individual and were being purchased for a bond purchase plan as described in the Code. However, it was not until some two years after the taxpayer had begun this practice of annually purchasing retirement bonds that he filed for and obtained from the Commissioner approval of his plan.
The Court, concluded that prior to receiving the Commissioner's approval, the taxpayer had no qualified plan. It was not sufficient that the application for the purchase of the bonds recited that they were being purchased for a Code 401 and 405 plan, nor that the taxpayer claimed the deduction on the proper IRS form (Form 2950 covers the Self-Employed Retirement Deduction). There must be written evidence that the plan was committed to the satisfaction of the basic requirements of coverage, and non-discrimination with respect to future employees who fulfill the necessary qualifications of employment. Jones v. Commissioner, 51 T.C. No. 63
Incidently, it is not difficult to satisfy the requirements of a written bond purchase plan. A simplified bond purchase plan can be established merely by filling out Parts 1 and III of Form 3673 and then sending it into the Commissioner for approval. When this form has been properly