Masonry Magazine January 1971 Page. 27
TAXES
By MIRIAM McD. MILLER
1971 TAXES
With the beginning of a new year, the tax picture is beginning to change. If you are an unmarried taxpayer or can qualify as the head of household, you will be subject to a lower tax rate in 1971. The maximum differential between the rates of a taxpayer filing a joint return and a taxpayer filing as an unmarried individual will be 20% above that for the married couple. The 1971 rates for a head of household are to be halfway between the new rates for a single person and the existing rates for a married couple.
There is no rate change scheduled for a couple filing a joint return in 1971.
There will be no surcharge in 1971 as it expired June 30, 1970. The standard deduction will be increased from the 1970 rate of 10% of your adjusted gross income with a maximum of $1000 to 13% of the adjusted gross income with a maximum of $1500.
The personal and dependency exemption goes up to $650 in 1971 from its new high of $625 in 1970.
DEPENDENTS
With tax return time approaching, it might be of interest to review some of the rules concerning the qualification of an individual as a dependent of a taxpayer.
As you know, if a child of the taxpayer is under 19 or is a student, he may have earned more than $625 during 1970 and still be claimed as a dependent by his parents so long as his parents furnished more than half of his support. With regard to a person who is not a child of the taxpayer, it is necessary not only that the taxpayer contribute more than half of his support but that the dependent not have earned more than $625 during 1970.
In measuring the "amount" of support such items as food, clothing, medical and dental care, education, and shelter should be included. Where the taxpayer owns his own home, the child or dependent's share of what would be a fair rental value of the home can be included in determining the amount of support.
Should a taxpayer support both parents and only one has income exceeding $625, then it may be possible to claim the remaining parent so long as the taxpayer can show that he paid for more than half of the cost of maintaining the home of the parents for the entire year. Where only one of the parents has income, then the taxpayer should specify that all of the money that he contributes goes to the parent with little or no income. Because if the taxpayer specified that he contributed a certain sum to both parents it may well be that he could not show that his contribution was more than half of the total support of both parents. Dependent parents need not, of course, live in the same home as the son or daughter who supports them.
It is possible where there are several children contributing to the support of their parents that no one person contributes more than half of the the support of the parent. In such a case, it is possible for one of the contributing children (who must furnish at least 10% of the support of the parent himself) to claim the parent if each of the other children (who contributed more than 10%) will file a written statement to the effect that he will not claim the parent as a dependent that year.
A child of a divorced couple may be claimed as a dependent of the father even if the child lives with the mother and the father does not provide more than half of the child's support. However, two facts must exist: 1) the father must contribute at least $600 toward the child's support and 2) his ex-wife must agree in writing to let the father do this (unless, of course, the divorce or separate maintenance decree so provides.)
Not Grandchild. The Tax Court has ruled that grandparents who provided over half of the total support of each of their two grandsons who attended college were not entitled to dependency exemptions. These grandchildren earned more than $600 in gross income. The court said that while a child of a taxpayer may earn over $600 and still be a dependent so long as the taxpayer contributes to more than half of the support this rule does not apply to the grandchild of a taxpayer. Bunn v. Commissioner, 55 TC No. 27.
TAX COLLECTION
Chances are very good that Regulations governing the collection of taxes from employers will be amended. It is proposed that in 1971 employers collecting less than $200 per quarter would be relieved from depositing withholding taxes at the end of every quarter. As the law now stands this rule applies only to employers collecting less than $100. Thus, the new rule would be that a deposit would be required three banking days after the last payday of the calendar quarter if the total undeposited taxes equal at least $200.
Then, at the other end of the scale, it is proposed that the big employer who collects over $2000 in withholding taxes will be required to deposit the taxes within three banking days after the payday that results in a cumulative liability of $2000 or more. A speed up in the payment of excise taxes that have been collected by manufacturers and retailers has also been proposed.
The speed up in the payment of these taxes, resulting in the Government's having the use of the money sooner, is one of the means being used by the Nixon Administration to fight any increase in taxes for the general public.
WORK SHIRTS
The taxpayer's employer required that his employees wear an identifiable uniform. The work clothes in question consisted of six shirts with emblem arm bands sewn on. The armbands were not removable unless the threads were taken out. The taxpayer never wore the shirts outside of work, nor, were such shirts suitable for everyday wear.
The Commissioner denied the taxpayer's deduction of the cost and maintenance (cleaning, etc.) of these shirts. However, the Tax Court overruled the Commissioner and allowed the taxpayer to deduct the cost and cleaning costs of the shirts required to be worn in his employment. These expenses were deductible as ordinary and necessary expenses incurred in carrying on the taxpayer's trade as a road car inspector. Farrior v. Commissioner, TC Memo 1970-312.
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