Masonry Magazine June 1970 Page. 25
Taxes
(Continued from page 21)
He should be relieved of the 6% penalty, the IRS does allow him to present his case and even provides a form (Form 2210) for him to use.
The IRS has announced that an individual will not be subject to a penalty for underpayment of his 1970 estimated tax if, by the proper installment dates, he bases his estimate on data in his 1969 return but uses the 1970 tax rates and the $625 personal exemption allowed for 1970.
MAILING DEPOSITS
Deposits of withheld income and employment taxes, corporate estimated income taxes and excise taxes that are mailed to Federal Reserve Banks or other authorized depositaries are governed by a special rule. In order for the mailed deposit to be considered timely mailed, it must be mailed two or more days before the prescribed due date. However, the payer, or the one making the deposit, must be able to establish that he timely mailed the deposit. Also, the deposit must be mailed in the U.S., and it must be properly addressed, postage-paid, and in either an envelope or an appropriate wrapper. The best solution would be to send the deposits by registered mail because that way not only is the date of registering noted but the date of registering is considered to be the date of mailing.
NONBUSINESS LOSSES
As you know, nonbusiness bad debts or losses are not deductible but are rather considered as short-term capital losses. On the other hand, a business bad debt may be the basis for a deduction. A taxpayer who was a general contractor and a specialty contractor for roofing and siding claimed a deduction for business losses that were found by the Commissioner to be nondeductible nonbusiness bad debts.
The contractor had certain amounts of money deposited in two uninsured savings institutions which went bankrupt. The taxpayer's deposits were for the purpose of earning interest on the money deposited and consisted of funds from business and personal transactions.
The Tax Court ruled that the debts were not directly related to the taxpayer's trade or business. "The mere deposit of funds in the names of the taxpayer and his wife to draw interest was not directly related to his contracting occupation or a separate business in itself. The funds were not segregated for business use but were also used to satisfy his personal debts." Thus, the court ruled that the losses could not be deducted as business losses. Keller v. Commissioner, T.C. Memo, 1970-79.
IDLE TIME PAY
The IRS was recently asked for advice on whether certain payments made by a company to its employees are "wages" for purposes of FICA and FUTA taxes and withholding. The company involved was unable to operate its plant during the entire year. When its plant is not in operation the company pays the employees for what it designates as "idle time," during which period the employment relationship continues between the company and the employees but the employees perform no services for the company. While it had no written agreement on the matter, the company guaranteed each employee a minimum of 30 hours' work per week. If an employee works the full time of 40 hours per week he is paid for 40 hours. If he works only 20 (Continued on page 30)
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masonry June, 1970