Masonry Magazine October 1970 Page. 19
TAXES
By MIRIAM McD. MILLER
HIJACKING
The Nixon Administration has proposed that some 2,500 guards having the same power and status as U.S. marshalls, be provided for certain flights of U.S. aircrafts. Obviously, the legislation is intended to halt the increasing number of aircraft hijackings on international flights. It has been proposed that the program be financed by an increase from 8% to 8.5% in the excise tax on domestic airline tickets and an increase from $3 to $5 per head in the tax on tickets for overseas flights.
The bill will be introduced as proposed by the Administration with two additions. First, there would be added a June 30, 1972 cutoff date, at which time a review is to be conducted of the program. Secondly, the airlines would be given the option of showing on tickets or in advertising the breakdown of fare and taxes, while still being required to show total cost.
WITHHOLDING ON PENSIONS
With the ever increasing number of taxpayers living on pensions, the burden to these pensioners of having to make quarterly estimated tax payments impressed the Congress and became a matter of tax legislation. Beginning in 1971, the withholding of income tax on taxable pensions and annuity payments will be possible. Such withholding is to be on a voluntary basis.
It should be noted that there is no ceiling on the amount that a taxpayer may elect to have withheld from his pension or annuity payments, provided that the net amount of an annuity or pension payment, after withholding, will not be less than ten dollars. Thus, a retiree who receives income other than from his pension can arrange to have this new form of withholding take care of his tax responsibility for the year. There is a minimum requirement- the smallest amount that may be withheld is $5 per month. This method of withholding does not apply to lump-sum payments. As Social Security payments and Veterans Administration annuities are not taxable, the new withholding provisions would not, of course, apply to them.
A new Form W-49 is to be used by the pensioner or annuitant to indicate to his payer the amount of tax that he wishes to have withheld. The IRS advises that, in general, withholding is to begin three months after the request is received.
BACK PAY
While in the employ of a railroad company a taxpayer was discharged. He filed a grievance procedure with the National Railroad Adjustment Board. When the Board ruled on the case it determined that the taxpayer had been dismissed "without cause" and the railroad company was ordered to reinstate the taxpayer and pay him for all lost time. The amount paid the taxpayer represented lost time for a period in excess of two years.
Advice was then requested from the IRS as to the tax treatment of such money. The IRS ruled that the payment for lost time made to the taxpayer by the railroad company is includible in his gross income in the taxable year received and is "wages" and therefore subject to withholding at source and all other employment taxes. Rev. Rul. 70-404.
masonry ● October, 1970
EMPLOYEE RECORDS
According to the Regulations every employer who is required by the law to deduct and withhold income tax upon the wages of employees must keep records of all remuneration paid to such employees. Such records must show, for example, the name, address, and account number of the employee, the total amount of wages paid, the amount of income tax withheld, etc.
The question recently came up concerning the necessity of record keeping by employers in the following situation. It seems that in many industries and localities it is a common practice for an employee, with either the express or implied consent of his employer, to hire and pay one or more helpers or assistants.
On whom does the responsibility fall of keeping records on such substitute employees? It would fall on the original employer. The fact that an employer-employee relationship may come into existence other than by direct contact between the parties concerned does not relieve the employer from keeping the records required by the Regulations.
Therefore, all provisions of the law that that apply to employees generally also apply to each so-called "substitute" employee or skilled worker's helper who is hired by an employee of the employer with either the express or implied consent of the latter. Rev. Rul. 70-447.
INSURANCE PREMIUMS
A calendar year corporation that operated its business on the cash receipts and disbursements method of accounting paid the premiums on a three-year rear fire insurance policy covering the property used in its business.
The question presented to the IRS for determination was whether the corporation could deduct, in the year paid, the full three-year insurance premiums paid in advance for the three-year period the policy covered or did it have to pro-rate the deduction for the premiums over the three year period?
The Regulations provide that if an expenditure results in the creation of an asset having a useful life that extends substantially beyond the close of the taxable year, the expenditure may not be deductible in its entirety when paid.
The payment in advance, the IRS pointed out, of insurance premiums by a taxpayer filing returns on the cash basis results in the creation of an asset, prepaid insurance, that is used up ratably over the period covered by the insurance contract.
Therefore, only a pro-rata portion of an insurance premium attributable to the taxable year can be deducted and no deduction can be made for the total amount in the year paid.
CONGRESS
Congressional activity in the tax field currently is centered around the Administration's proposals for (1) an acceleration in the payment of estate and gift tax, (2) a postponement of scheduled reductions in the automobile and communications services excise taxes, and (3) a tax on lead additives used in the refining of gasoline. Should this