Evening star., 1932-03-11
Your Income Tax
No. IL
When to Report Income from
Salaries, Wages, Etc.

OF the millions of income tax returns
that are filed annually, the vast ma
jority are from salaried persons and
wage earners whose income is derived
from personal services actually rem
dered"
In general, compensation for personal
services should be reported for taxation
purposes in the year 1t Is received or
unqualifiedly made subject to demand.
The mere cediting of compensation on
the books Of the employer to an en-
ploye is not controlling factor. neither
is the fact that the compensation was
available for payment. If the services
were rendered during the year 1880, or
even prior thereto, but the compensa-
ton was not received until the year
1881. the entire amount is taxable in
the year received when the taxpayer is
reporting on the cash receipts basis.
Most persons use the cash receipts basis
In reporting net income.
AL Of the various types Of compen-
sation. unless specifically exempt by
statute, should be included in the tax
payers return Of gross income, such
as salaries, wages, fees, commissions
bonuses, tips, honorariums, prizes,
awards, pensions in recognition of past
services, etc. Other items subject to
tax are fees received by ministers oi
the gospel for funerals, baptisms, masses
and like services, executors fees, direc-
tors fees, Federal jury fees and prize.
received in contests of various kinds.
The salaries OF Federal officers and
employees are subject to the income tax
except the salary Of the President oi
the United States and Federal judges
The salaries of members of the House
Of Representatives and members of the
United States Senate also are subject
to the income tax.
Deductions for business expense,
form large item In the return ol
many taxpayers and must have certain
qualities to be allowed. Such deduction
must be for an expenditure in connec-
ton with the maintenance and oper-
alton OF the taxpayers business or busi-
ness properties, it must be an ordinary
expense and 1t must be a necessary ex-
pense. In insisting upon the latter
qualifications the Bureau of Internal
Revenue Is upheld by the Board Of Tax
Appeals and the courts. Ordinary and
necessary expenses are only those which
are usual and essential in the case OF
similar taxpayers, land do not include
extraordinary and non-essential ex-
penSes."
Typical business expenses Of q mer-
camille establishment are amounts paid
for advertising, hire of clerks and other
employees, rent, light, heat, water, sta
tionery, stamps, telephone, property in
surance and delivery expenses.
The expenses Of manufacturing
business include labor, raw materials,
supplies, repairs, light and heat, power,
selling cost, administration and other
similar charges
The farmer may deduct all amounts
paid in the production, harvesting and
marketing of crops, including labor,
cost of seed and fertilizer used, cost of
minor repairs to farm buildings (other
than his dwelling) and small tools used
up in the course Of year or two. A tax
payer may conduct more than one busi-
ness and claim the business deductions
of each.
A lawyer, doctor, architect, physi-
clan, dentist, clergyman, author or
other professional man must include in
gross income all fees, salaries and COM
pensation of any kind for professional
services.