South Bend news-times. (South Bend, Ind.) 1913-1938, 1920-02-06
Income Tax is Easy
For Professional Men

No great difficulty is experienced
| by professional men in figuring their
income tax. says George r. Hess.
acting internal revenue collector. be-
cause such men keep at all times
well IN touch with their expendi-
lures. The greatest difficulty in max
Ing the returns. according % Mr..
Hess, is for the individual to figure
just what he is permitted 10 deduct
as professional expense In order TO
arrive at his net income
In explanation Of the points 20 be
considered reference 10 the regula-
lions relating 10 the income tax
shows that an individuals gross in
come from profession includes al
/ compensation for his service Where
services are paid for with something
other than money the fair market
value Of the thing taken in payment
Is the amount 10 be included as in
4 come. II the services were render
cd at a stipulated price. in the alb
/ sence Of evidence TO the contrary.
/ such price will be presumed to be
\ the fair value OF the compensation
/ received.
Salary Received.
I I'm the case Of "A salary received.
| this should be shown separately in
! Block II of the return. Many pro
/ fessional men and women-lawyers.
medical examiners. teachers. ac-
| COuntants. etc-.-are officers or en-
| ployes Of a state or a political sub
D IA
\ or county. Their salaries or wages
| as such officers or employees is ex-
| empt from the federal income. The
| exemption also applies to the fees
! received by notaries' public COM
missioned by states, also the COM
missions Of receivers appointed by
state courts.
As TO fees for services TO clients.
patients. etc. these should be in
cluded in the gross income for the
taxable year in which received. un-
less they are included when they
accrue TO him in accordance within
an approved method Of accounting
followed by him.
A professional man may make his
return on the basis OF cash intake
and actual expenditures for the year.
It should be noted that a taxpayer
is deemed 10 have received income
which has been credited to or set
apart for him without restriction.
A more exact and equitable
method Of figuring net income in on
the "accrual basis" This means a
computation on the basis Of income
earned and expenses incurred. !
whether paid or not, that actually
pertain on the taxable year. eXclud-
ing income earned and expenses in
Cured in previous or succeeding
years. A professional man who
keeps books of account should make
returns by this method If his ac-
counting method is one generally
employed and shows "a correct net
income.
A professional man may claim as
deductions the costs of supplies used
by him in the practice of his profess
sion, expenses paid in the operation
and repair of an automobile used in
making professional calls, dues TO
professional societies and subscrip-
tions TO professional journals, the
rent paid for office rooms, the eX-
pense of the fuel. light. water, tele-
phone. etc, used in such offices, and
the hire Of Office assistants. Amounts
expended for books. furniture and
professional instruments and equip
ment of a permanent character are
not allowable as deductions
In the deductions from gross in
come the law specifically bars per
sonaI living or family expenses.
In the case of professional man
who has a regular place of business
and who rents a residence, but incl
IDENTIFY receives there clients, pa
tents or callers in connection with
his professional work. no part OF the
rent at his home is deductible- If,
| however. he uses part OF the mouse
for his office. such part of the rent
as is properly attributable to such
office is deductible.
Bad Debts.
The uncoHectible bills Of prfes-
siona1 men. particularly doctors,
dentists and lawyers. have very
important bearing on the net earn
/ ings for each year. The principal
noint in connection with such ac-
counts made in income tax pro
codure is that there can be no such
| allowance for bad debts in returns
figured on the cash basis That
is. a person who has been making
/ his annual returns on the basis OF
| cash received and actual cash eX-
penditures each year has never
shown as income his accounts with
uatients or clients. and is, there
fore. not entitled to take them out
/ of income.
/ on the other hand person VINO
| -......1L,- nrltrnd his crosS income