Daily Kennebec journal. [microfilm reel] (Augusta, Me.) 1870-1975, 1921-01-24
THE INCOME TAX
Facts You Should Know for
Making 1921 Report


Inmates that there will be filed on or
475,000 corporation returns covering
the calendar year 1920.
The revenue act Of 1918 provides
,, that every corporation, joint-stock
company, association and insurance
company. not specifically exempt is
liable to tax, and except where exempt
ed and the accounting period ends
other than on December 81 the return
| must be filed by March Is with the
collector of interenal revenue for the
district in which the corporations
principal place of business is located.
Form 1920 is used by every corpora
| ton Except persona service corpora
! tions), domestic and foreign. subject
to taxation for filing it's income and
! profits tax return. Form 1865 is used
| by personal service corporations. The
return must be sworn to by the presi-
dent vice president, or other principal
| officer and by the treasurer or assist
| ant treasurer.
EXEMPT CORPORATIONS
Certain corporations, such as labor
agricultural, and horticultural organi-
cations. corporations organized and
| operated exclusively for religious
charitable. scientific. or educational
purposes, business and civic leagues
| farmers and fruit growers mutual as
sociations, may. by establishing their
exemption, be relieved of the duty of
i filing returns and paying the tax. No
corporation is exempt from filing a
| return until it's status has been de-
termined by the collector and the cor
poration so informed.
The corporation must file it's return
on the basis of it's existing accounting
| period, which is established as the H.
month period ending on December 81
or upon the last day of some month
other than December. The corpora
| ton cannot change it's accounting
period without permits sion of the Com
missioner of Internal Revenue. The
Commissioner will not approve a
change of basis of computing net in
come unless the notice is given at least
| SO days before the due date of the re-
turn on the existing basis, and at least
80 days prior to the, due date Of 1.-The
return on the proposed basis. Efs
In general, the taxable net income
of corporation is it's accounting net
,, income but a corporation can not de-
duct donations and gratuit:es. nor can
Federal income and profits taxes be
deducted.
EXCESS PROFITS TAX
In place of the surtax imposed upon
individuals, the law imposes upon cor
porations. in addition to the normal
tax, an excess profits tax The compu-
tation of the excess profits tax beings
withthe determination of the corpora
tons invested capital. Invested capt.
tai, as defined by the law, is the
amount of cash and tangible property
paid into the corporation, together
with the paid-in or earned surplus and
undivided profits at the beginning Of
the taxable year.
The value of intangible property
paid in for stock or shares, in an
amount as limited by Section 326 Of
the revenue act of 1918, may also be
included in invested capital. The term
Intangible property" means patents.
copyrights. secret processes ana for
mul@, good will, trademarks. trade
brands. franchises. and other like
be included in invested capital. Ad-
justment must be made for inadmis-
sible assets. which are defined as
stocks, bonds. and other obligations
tother than obligations Of the United
States), ehdividends or interest from
(which is not included in computing
net income.
EXAMINATION OF RETURNS
The Bureau of Internal Reenvue
carefully examines and audits returns
of corporations, and whenever neces-
sary makes correction in the amount
Of tax due under the law. Severe PEN
alties may be imposed upon corpora
lions for delinquency in filing returns.4
fraud or negligence in the understate-
ment Of an ytaXes. and 1t is important
that the corporation in filing its re-
turn follows closely the instructions
printed on the return form.