Masonry Magazine February 1971 Page. 19
TAXES
By MIRIAM McD. MILLER
EMPLOYMENT TAXES
Effective February 1, 1971, are new Regulations for the deposit in authorized commercial and Federal Reserve banks of income and Social Security taxes that are withheld by employers. Under these new rules more than 800,000 small employers will be either relieved of deposit requirements entirely or will be permitted to deposit less frequently than before.
Employers who have employment taxes of under $200 per calendar quarter will no longer have to make deposits. They should simply send their checks directly to the IRS along with their quarterly tax returns.
Then, employers who have between $200 and $2000 in tax liability each month will have until the 15th day after the end of the 1st or 2nd month of a calendar quarter to make their deposits. These employers will have until the last day of the month following the end of the quarter to deposit taxes for the 3rd month of the quarter.
The larger employer, who has $200 or more of taxes in a month, has been given 3 banking days after the 7th, 15th, and 22nd, and last day of each month after his accumulated liability has reached $2000- at which time he will be required to make a deposit in an authorized bank. According to the new Regulations the deposit requirements will be considered to have been met if at least 90% of actual tax liability for a deposit period is deposited.
The IRS said that it is hoped that these final Regulations for tax deposits will make taxpayers involved feel that it is easier to comply with the deposit rules, will accelerate the receipt of withheld income taxes and Social Security taxes by the Treasury Department, and finally will help the IRS conduct a more effective, computer-oriented enforcement program.
It is anticipated by the IRS that these new tax deposit Regulations and the 5% penalty for failure to deposit which was provided by the Tax Reform Act of 1969 will cause a marked improvement in the timeliness of tax receipts. This flat undeductible 5% penalty was probably enacted by the Congress to combat the increasing number of employers who would delay payment of withheld taxes beyond the due date and in effect have the use of the money at a rate of only 6%. There is also imposed on a tardy employer an additional penalty of ½ of 1% per month from the due date of the return (up to 25%.)
RETIREES PROTECTED
Senator Jacob Javits (R-NY) has announced that he has received a ruling from the Treasury Department which would prohibit private pension plans from reducing benefits paid to retired employees because of Social Security increases voted by the Congress.
Senator Javits said that he had received complaints from retired persons following last year's increase in Social Security benefits indicating that the retirement benefits that they had been receiving from private pension plans were being watered down because of the increased amount of Social Security benefits that they were entitled to receive. "It was appalling to me that in these inflationary times, the result of voting Social Security increases was to deprive the retiree by reduction of his other pension income of the very money he needed to cope with the rising cost of living." Press Release, Javits, 12/22/70.
TAX FREE INCOME
During 1970, it was possible for an individual to receive $1725 (or $1825 if the $100 dividend exclusion is also availed of) without incurring any obligation to pay any tax.
It may be wise to reexamine your own tax picture for 1971-particularly if some income could be shifted to children or low-bracket family members. This may be a good way to save for later college expenses. In 1971, the tax-free level will be $1700 (or again, $18,000 if the $100 dividend exclusion is availed of.) This is so because the personal exemption will be $650 and the low income allowance will be $1,050.
TRAVEL EXPENSES
As you may recall the cost of meals may be deducted as travel expenses only when a taxpayer must "sleep and rest" as a result of his business travels. In a recent case the taxpayer, a consulting engineer who traveled a great deal, sought to deduct the cost of his meals on the road on the ground that he would take a nap in his car before starting his return trip. The engineer alleged that his one-day business trip took up to 19 hours in travel time.
But, the court did not find that the length of the taxpayer's day would cause an exception to the rule to be made. The court pointed out that the Commissioner's rule, known as the overnight rule is aimed at "formulating an objective test which will obviate individual analysis of countless factual variations. The tax involved is too small to warrant case by case haggling over minor differences..." Barry v. Commissioner, 1st cir. 1970.
NEW WITHHOLDING
As of January 1, 1971, lower income tax withholding from wages has become possible. This is so because the personal exemption goes up to $650 and the standard deduction goes up to 13% (with a maximum deduction of $1,500) in 1971.
Another factor affecting the new rates is the total elimination of the surcharge in 1971. And also, there will be lower tax rates for single individuals and heads of households.
Just what this might mean in dollars and cents is illustrated somewhat by the following examples prepared by Commerce Clearing House:
1) A single taxpayer with no dependents, earns $500 semimonthly. His December 15, 1970 check had $95.50 deducted for income tax. However, his check for January 15, 1971 will have only $86.40 deducted for income taxes.