Masonry Magazine February 1973 Page. 13
TAXES
By MIRIAM McD. MILLER
WIFE'S TRIP
Three years ago a U.S. Court of Appeals rendered a most pleasing decision for businessmen. It allowed the taxpayer (Roy Disney) to deduct the costs of his wife's trip when she accompanied him on a business journey to Europe. It was held that the wife's presence and activities enhanced her husband's image as a businessman and was sufficient cause to justify the deduction of her trip. The Court did caution, however, that the wife must spend a substantial amount of time in assisting her husband to fulfill his business purpose in order for her expenses to be deductible.
Now a new case involving this same point was recently before the U.S. District Court in Nebraska. Involved was the wife of an inspector general of the foreign service (State Department). The facts showed that it was the policy of the State Department to have wives accompany the inspectors on official trips. The Court was faced with the question of whether the wife's presence on the trip served the bona fide business purpose of the husband. The Court noted how the wife was helpful in gathering the information about the posts they visited, one of the taxpayer's purposes in making the trip. Also it was found that her presence as hostess helped boost the morale of the State Department personnel assigned to the posts they visited.
As in the Disney case, this Court ruled that the wife's presence on the trip did serve a bona fide business purpose and the costs of her trip were deductible as an ordinary and necessary business expense of her husband.
A word of caution. This recent case, while most welcomed, should not be interpreted as automatically permitting a businessman to deduct the costs of his wife's presence with him on a business trip. But, certainly where the dominant purpose of the wife's making the trip is a business purpose (though not necessarily the exclusive purpose), the chances of the taxpayer's justifying the deduction as a business expense are becoming greater. U.S. v. Disney, 413 F.2d 783, Wilkins v. U.S. (D.C. Neb. 1972.)
WIN
The tax credit given to employers who hired workers placed in employment through the Labor Department's work incentive program for employable adults on welfare may be claimed for the first time by employers on their 1972 tax returns.
The credit is equal to 20% of the wages paid or incurred after 1971 for the first 12 months of employment. While the 12 months need not be consecutive, they must occur within two years after the employee was hired.
The employer must pay the legal minimum wage or wages paid to other employees for similar work. Like all tax incentive programs, the credit is subject to several more restrictions and rules.
DID YOU KNOW?
In 1972, the cost of collecting $100 in taxes was 54 cents. In 1872, it cost the government $5.87 to collect the same amount. By 1932 the price was $2.17 for every $100 of taxes collected. This year there are some 74,086 people employed by the IRS. This is an increase from some 14,055 employees who worked for the Service in 1919. (IRS Pub. 616.)
DISMISSAL PAYMENT
The IRS was recently asked whether an amount paid to an employee who was dismissed constituted wages for the purposes of withholding and other employment taxes. Following her dismissal, an employee filed a complaint with the Department of Human Rights of the state in which she was employed. The complaint was withdrawn when a settlement was reached in which the employee was given a payment equal to three weeks of her pay. The employee did not return to work after that.
Prior to 1950, "wages" did not include dismissal payments which the employer was not legally required to make. However, in that year, Congress deleted that exception. In House Report No. 1300, 81st Congress, it is stated:
"Therefore, a dismissal payment, which is any payment made by an employer on account of involuntary separation of the employee, will constitute wages irrespective of whether the employer is, or is not, legally required to make such payment." (C.B. 1950-2, 255,277.)
The IRS ruled that the payments involved in the case before it were made upon the involuntary separation of the employee from the service of the employer. Therefore, it was held that the amount paid by the company to its former employee was a dismissal payment and thus "wages" for the purpose of the Federal Insurance Contributions Act, the Federal Unemployment Tax Act, and the Collection of Income Tax at Source on Wages. (Rev. Rul. 72-572.)
AUTOMATIC EXTENSION
If for some reason you find yourself unable to file your Form 1040 by April 16th of this year, remember that there is available an automatic two-month extension of time for filing. However, while the time for filing may be extended, the period for payment of the tax is not.
The taxpayer must file Form 4868 by April 16th. He must at this time estimate his tax and send in the amount of the estimate with Form 4868. Should the taxpayer underestimate the tax that is finally shown on his Form 1040, interest at the rate of 6% per year is due on any additional amount that must be paid with the final form. Where that taxpayer underestimates his tax by more than 10%, he can become subject to the ½ of 1% per month penalty for late payment of tax.
ACUPUNCTURE
You name it and the IRS has ruled on it. According to the IRS, amounts paid for acupuncture services rendered (Continued on page 32)