Masonry Magazine April 1971 Page. 17
TAXES
By MIRIAM McD. MILLER
TAX LEGISLATION
Chairman Mills of the House Committee on Ways and Means has introduced a bill designed to clear out the "deadwood" in the Internal Revenue Code. The bill is intended to clear out, among other things, unnecessary verbiage. It is estimated that the simple substitution of the word "Secretary" for "the Secretary or his delgate" will eliminate 5000 words in the Code.
This House Committee is still working on the 1971 Social Security bill that calls for a 10% increase in Social Security benefits, a hike in the taxable earnings base from $7,800 to $9,000 for this year and future increases in tax rates. This legislation provides that the tax rate for both employers and employees will stay at its present rate of 5.2% through 1974 and then is to be increased to 6% in 1975 and to 6.5% in 1980. The tax rate applicable to self-employed individuals (now at 7.5%) would be cut to 7.3% for 1971 through 1973 and would then be increased to 8% in 1974.
CHRISTMAS GIFTS
Each Christmas a company paid to its employees, in addition to their regular salaries, an amount equal to a specified percentage of their monthly salaries. These amounts, called "Christmas gifts" by the company, are paid to all employees without regard to any distinctions based upon quality of work or length of service with the company.
The IRS ruled that such amounts are wages and subject to withholding and all other employment taxes. This is so because the IRS says these "gifts" are paid in connection with, and as a result of, the employment relation existing between the company and its employees. It was considered immatrial that the amounts were not based upon the quality of the employees' work or their length of service with the company.
Noted in Ruling is an earlier one which still holds that the value of a turkey, ham, or other merchandise of nominal value, distributed by an employer to his employees at Christmas (or a comparable holiday) are not wages for Federal employment tax purposes. Rev. Rul. 71-53.
MAGNETIC TAPE & CENTIPHONE
In a recent speech the outgoing Commissioner of the IRS, Randolph Thrower, envisioned a "growing future in the use of magnetic tape as a medium of communication between business and the Internal Revenue Service."
Mr. Thrower discussed the IRS" "Centiphone" program. This Centiphone, now being tested in selected IRS districts, permits taxpayers in a large area usually a state to telephone tax questions to the central IRS office for that area without paying toll charges. "This gives taxpayers better information tion and enables us to service these calls with trained specialists," Mr. Thrower pointed out.
Mr. Thrower went on to say that "tax officials from countries on every continent come to us regularly to ask how we manage this enormous tax system." In achieving a low cost of tax collection, Mr. Thrower credited business as "a real partner of the tax administration in making the American tax system the most effective and efficient in the whole world." (It costs the U.S 404 to collect every $100 of tax compared to 854 for Canada, $1.23 for England, and $1.77 for Japan.)
"Our system could not succeed without business' accurate and detailed recordkeeping, withholding from employees, depositing, filing returns and estimates, and above all- demonstrating over-all standards of integrity, unparalleled in economic history," Commissioner Thrower noted. IRS News Release, 2/17/71.
EXTENSION OF FILING TIME
The IRS has announced that the ten-day grace period normally granted to those individual taxpayers whose applications for income tax filing extensions are denied will no longer be granted automatically. It had been the practice of the IRS, where a taxpayer's request for an extension of time to file his return was denied, to administratively allow a ten-day grace period. Even though the law contained no such provision the IRS did this to help a taxpayer avoid a late penalty when he received the denial on or after April 15.
Should it appear that a request for extension of time to file an income tax return is frivolous solely to gain extra time to file the IRS will deny both the extension request and the ten-day grace period. This does not mean that where a taxpayer files an application for an extension and de- scribes in detail the circumstances beyond his control that caused the delay that an extension would not be granted.
The IRS cautions taxpayers to be sure to give the complete information on the reasons for the need for more time. Merely saying, for example, that their taxpreparer is too busy will not do. But, an extension will not be denied a tax- payer where the workload of his tax return preparer is a ma- terial factor and this is fully explained in the application.
The IRS further warned that it will not grant an exten- sion where the reason given is merely the complexity of the Tax Reform Act of 1969. IRS News Release, 2/16/71.
"PAY AS YOU GO"
Advice was recently asked of the IRS on whether a "pay as you go" retirement plan would qualify under the IRS Code. A corporate-employer established a noncontributory pension plan providing for a normal retirement benefit of $100 per month for each employee upon his retirement after the attainment of age 65. No contributions by the em- ployer or employee were made prior to the retirement of the employee. At that time the employer would pay the $100 monthly pension directly to the retiree.
The IRS said that such a plan did not meet the require ments of the Code. A qualified plan must be a funded plan. There must be a trust or custodial account of some type. But, a qualified plan may not provide for direct payments by an employer to his employees in the manner described here. Rev. Rul. 71-91.
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