Masonry Magazine May 1970 Page. 16
TAXES
By MIRIAM McD. MILLER
EMPLOYEES BENEFITS PROTECTION ACT
A bill known as the "Employees Benefits Protection Act" was introduced by Senator Javits of New York. This bill supposedly is strongly backed by President Nixon. In effect, the bill would protect employees with pension fund rights against improper investments and conflicts of interest on the part of administrators of these funds.
Should this bill become a law, then the people who administer employee benefit funds would have to deal with those funds exclusively avoiding a possible conflict of interest or carelessness. The bill contains definite reporting and disclosure requirements. The Secretary of Labor would be given investigatory and enforcement powers so that he could oversee the new responsibilities of management. Finally, the bill proposes a body of uniform federal law in employee benefit protection, superseding state laws relating to the fiduciary, reporting, and disclosure responsibilities of persons acting on behalf of employee benefit plans.
REMINDER
Effective on wages paid after April 30, 1970, an employer will not be required to deduct and withhold tax from an employee's wages if the employee has an effective withholding exemption certificate stating that he 1) incurred no income tax liability in the preceding taxable year, and 2) anticipates no tax liability for the current year.
HIGHER PENALTIES
Possibly because of an increase in the number of businessmen who were delaying paying over withheld taxes to the Government, heavier penalties were imposed by the new Tax Reform Act. One thought was that some businessmen were finding it cheaper to use tax money and pay interest on it than to go to the trouble of borrowing money from regular commercial sources.
With passage of the Tax Reform Act. Congress increased the penalty for underdepositing withheld taxes without reasonable cause from an average of 2% to a flat 5%. Also, there was imposed an additional penalty of ½ of 1% per month from the due date of the return (up to 25%) for failure to pay any tax (except estimated tax) when due.
BUSINESS EXPENSES
A taxpayer was the president, chairman of the board, controlling stockholder, and a salaried employee of a manufacturing corporation. Although he had received rent for the use by the corporation of his home study, he did not report the amount of the rent on his income tax return. The taxpayer argued that such use of a room in his home would give him a deduction for business use of his home in excess of the amount of the rent-so he elected not to report it as income. The Tax Court ruled against the taxpayer. He could not make such an election. Also, there was no legal basis to support the taxpayer's argument. The court held that the amount received by the taxpayer as rent for the home study constituted additional unreported income.
On another point, the court also ruled against the taxpayer. A business expense deduction was claimed by the taxpayer for the cost of entertaining his corporation's customers in his home. The court pointed out that the business that would give rise to such deductions was the corporation's business. The taxpayer controlled the corporation and could have been reimbursed by it. (Aisley v. Commissioner, TC Memo 1070-63).
SOCIAL SECURITY NUMBERS
Remember that whenever you file a tax return of any kind to include your Social Security number, not only on the returns themselves, but on any other documents submitted by you and on all checks or money orders. It may even he wise to note on the checks or money orders the purpose of the payment-e.g.. "2nd estimated tax payment. 1970." Thus, should your check or money order become separated from the returns after they reach IRS, the Social Security number will permit fast and proper identification.
PENSION INCOME
According to one survey, three quarters of the individuals who receive pension and annuity income report it incorrectly, and it is believed that this is due primarily to the complexity of the law and regulations on the subject. Of the taxpayers who report this income incorrectly, the survey showed that two-thirds overstate their income and pay too much tax. It is believed that as many as one-third of the individuals eligible for retirement income credit do not bother to claim it because it is too hard to figure out. Recently. Edwin S. Cohen, Assistant Treasury Secretary. stated with regard to this incorrect reporting of pension and annuity income: "I worry about the simplicity, not for the thousands who can afford expert advice on complex matters, but for the millions who cannot and shouldn't be required to do so. Thus, simplification should be set as a major target."
To briefly explain the credit-retired persons are permitted a credit against their income tax for 15% of their retirement income. However, there is a limit to the amount of retirement income that may qualify for the credit- $1,524 for a qualified retiree. Then, this maximum amount of credit must first be reduced by two items: 1) Social Security benefits received during the year, and 2) if the taxpayer is under 72, a percentage of the excess of earned income for the year over specified amounts. It certainly could stand simplification.
PROPERTY ASSESSMENT
A taxpayer, in a Federal District Court in Kansas City, Mo., was able to win his case over what appears to have been a pretty pat case for the Government. An assessment of some $19,000 was made against the plaintiff-taxpayer. This assessment was to be used for the cost of acquiring land and the construction of two off-street parking lots. The plaintiff was so assessed because he owned business property within the special benefit district for which the two parking lots were provided.
The taxpayer-plaintiff deducted this amount from his