Masonry Magazine August 1970 Page. 19
TAXES
By MIRIAM McD. MILLER
WORKING COUPLES
In late June, the IRS issued a special set of instructions to explain how working couples could claim withholding exemptions to minimize underwithholding. The IRS pointed out that the possibility of underwithholding for married couples, both of whom worked, was increased by the enactment of the Tax Reform Act of 1969 and in particular by the new low income allowance provisions.
The IRS has made available to employers a special withholding table (Notice 186) that shows how working couples should claim withholding exemptions so that the amount withheld will be closer in line with the final amount that will be due. Thus, the need for working couples to come up with a large additional amount to pay on their 1970 tax bill could be avoided.
As a result of the Tax Reform Act the withholding system followed by employers, on the instructions of the IRS, gives each employee one low income allowance. However, when filing their income tax return a working couple will be entitled to only one low income allowance and unless an adjustment is made in the amount being currently withheld they will doubtless have to pay more taxes. IRS News Release No. 1047.
NO NEW TAXES FOR 1970
Secretary of the Treasury Kennedy told the Senate Finance Committee that the Nixon Administration will ask for no further new taxes in 1970. However, Secretary Kennedy pointed out that there is "some likelihood" that the Administration will request either some tax increases next year or a postponement of certain tax reductions scheduled for 1972 by the Tax Reform Act of 1969.
UNEMPLOYMENT BENEFITS
The IRS has restated its position with regard to the taxation of certain unemployment benefits. The question presented to the IRS was whether the benefit payments received by an individual from a State agency during unemployment periods, pursuant to the Federal and State plan for unemployment compensation, are includible in the gross income of the recipients. It was the holding of the updated Revenue Ruling that such payments are not includible in the gross income of the recipients. Rev. Rul. 70-280.
EMPLOYER'S CHILD
There is an exception permitted to the withholding tax law where the service involved is performed by a child under the age of 21 while in the employ of his father or mother.
Recently the IRS was asked its opinion on the following situation. A bank acted as the administrator of the estate of a decedent who had conducted a retail lumber business, The bank carried on the lumber business and employed four children of the decedent who were under 21 years of age and also were beneficiaries of the estate.
The bank asked the IRS if these four children would come under the above exception to the withholding law because of either their interest in the estate of their father or because of their relationship to him.
The IRS said No. All employment and withholding taxes must be observed by the employer-estate in the wages paid to the four children of the decedent. So long as the business of the estate is being conducted by the administrator, the children are employed by the estate. These children are not to be considered as being in the employ of their "father or mother." Secondly, the IRS pointed out, any services that are performed by employees after an employer's death are considered to be in the employ of the employer's estate, which is a new employing unit. Rev. Rul. 70-307.
SUBCONTRACTOR
Still another court has ruled that a general contractor was liable to the U.S. for the amount of withholding and employment taxes required to be deducted from the wages of the employees of a subcontractor.
The Whilmar General Contractors, Inc. were working on a job on the Hopkins Memorial Hospital in Sulphur Springs, Texas. Shortly after Whilmar began work on the hospital it learned that one of its subcontractors was not able to pay its employees the wages due them. The general contractor paid the amount of the wages, less withholding taxes and employment taxes to the subcontractor.
The court found the general contractor liable for the withholding and other employment taxes owed by the subcontractor. The court said that the general contractor had the duty to use "due diligence" to determine whether the subcontractor had paid the taxes on time. U.S. v. Whilmar General Contractors, Inc. (D.C. Tex. 1970).
EMPLOYMENT AGENCY FEES
The Tax Court had taken the position that if a fee paid to an employment agency was successful in obtaining a new position with a new employer than such fee was deductible as a business expense. Conversely, the employment agency fee is not deductible if the efforts of the agency do not lead to a new job.
The Tax Court has now enlarged this position somewhat by permitting the deduction if such an agency fee resulted in the taxpayer's securing a new job with his old employer.
When the taxpayer's old employer learned that the taxpayer was "preparing to leave to accept a new position with a new employer," it matched the new employer's offer. The court found that the new position or promotion was a direct result of the employment agency's efforts and because of that the fee was a deductible business expense. It did not matter, the court pointed out, that the old employer did not know of the taxpayer's arrangement with the employment agency. It was enough that it knew of the new offer. Primruth v. Commissioner, 54 TC No. 36.
FIRE INSURANCE PROCEEDS
Under the Tax Reform Act of 1969, insurance proceeds paid after 1968 as reimbursement for living expenses incurred while a residence is unlivable because of fire or other casualty need no longer be included in income for tax purposes. It should be noted that this same provision also applies to those taxpayers who cannot get into their principal residence because such occupancy is forbidden by governmental authority because of the occurrence or threat of such a casualty (hurricane, flood, etc.).
(Continued on page 28)
masonry August, 1970
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