Evening star., 1941-03-02
Maryland Mails
New Tax Forms
Only ifAsked
Revenue Officers
Prepare to Answer
DeIuge Of Inquiries
BY BEN III. PEARSE,
Star Staff Correspondent.

ANNAPOBlS, MO, March 1.-Tn6
State income tax Offices here and
in Baltimore are making prepara-
tions to handle a deluge of inquiries
on the new. law signed by Gov.
O'Conor last week which reduces
the tax on earned income from 212
to per cent and that on investments
income from to per cent.
New blanks are being printed and
probably will be available early this
week, officials announced. They
will be sent only on request. Send
ing out new blanks to 10000 in
come tax payers would be too ex-
pensive and would unnecessarily de-
lay procedure, it was explained.
Taxpayers can use the old forms II
they choose, officials said
While the principal change is in
the tax rate reduction, several 9TH
er alterations were made which re-
suit in savings to the taxpayer,
especially one permitting personal
exemptions to be subtracted from
net income before the tax rate iS
applied to compute the net tax pay
able. 9
DeadIine Is April Is.
The date for filing returns as we'll
as making the first payment has
been shifted from March Is to April
Is, and the tax may be paid in
quarterly installments. The cor
poration tax Of y per cent remains.
the same
The only change in the listing OF
those required to make returns was
the elimination of one classif1ca-
ton relating to individuals with
investment income exceeding $500
for the taxable year.
Henceforth returns should be
made only if the net income earned
or from investments for the taxable
year exceeds $1,000 for a single per-
son, or married person not living
with husband or wife; $4,000 if mar
ried and living with husband or
wife; if gross income exceeds $1,000.
or if the combined net income Of a
husband and wife living together
exceeds $4,000 in the aggregate or
the combined gross income exceeds
$1,000.
However, the provision requiring
fiduciaries receiving net incomes OF
5000. or gross incomes of 5000 has
been retained.
Change in Figuring Method.
Next to the reduction in rates, the
chief difference in the law this year
Is the method of figuring the tax
due. Using the example of single
person, officials explained it thus:
Under the old law, person with
an investment income OF $1,000 flg-
ured his total tax at per cent, or
$50. afd subtracted 2l2 per cent or
allowable deductions and personal
exemptions. Assuming no alloWaole
deductions, pa per cent OF the ex"
emption for an unmarried person,
81 900, would be S25, which SUBJ
tracted from $50 would leave net
tax due of s35, although the per-
son with a 1000 income theoreti-
cally had a $1,000 exemption.
Under the new law, the same per-
son with a $1,000 investment in
come would be completely exempted
by applying the $1,000 exemption be-
fore figuring the rate. in that case
the exemption leaving nothing to
tax.
Differences in Law.
An unmarried person with $1,000
income from investments under the
old law would first multiply by
per cent. From the sl20, he would
subtract his exemption at the old
rate of 212 per cent of $1,000, or
s25, which subtracted from the $l20
would leave a tax of S95 due. Un-
der the new law, he would subtract
the 81 600 exemption from his $4,000
investment income before applying
the new investment tax rate,
per cent, and figure his net tax due
at only $50.
On earned income, the only saw.
ing will be the reduction in rate
from 212 to 2 per cent. Under the
old law, an unmarried person with
a $1,000 earned income would figure
his tax at $25, then subtract his
S., 900 personal exemption multiplied
by 2I2 per cent, or S25. leaving no
tax due. The $1,000 exemption also
leaves no tax due under the new
setup. Under the old law, an un-
married person with $4,000 income
would figure his tax at 2l2 per cent.
or $50, then subtract his $1,000
exemption multiplied by 212 per
cent, or SIS. and be taxable for the
difference, s25. Under the new law,
he would first subtract his $1,000
exemption from his $1,000 earned
income, and multiply the difference,
81 900, by 2 per cent to compute
his tax due, $40.
On Investment Income.
Officials stressed that persons hav-
ing investment income are taxable
at S per cent on the amount OF
taxable net income up to but not
exceeding the amount of invest
ment income, the per cent rate
applying only to the balance, II
any.
Again using the example of an
unmarried person, with an income
of $1,000 earned and $1,000 from
investments, a total of $4,000, the
81 900 personal exemption would first
be subtracted, leaving a net tax
able income of $1,000. The 5 per
cent rate would be levied up to the
amount of investment income, in
this case the entire net taxable
income of $1,000 With an earned
income of $4,000 and investment in
some of 1000, a total of $1,000, the
personal exemption of $1,000 would
be subtracted, leaving a net taxable
income of $4,000. Against this. the
5 per cent rate would apply up
to the amount of the investment
income, or $1,000, while the 2 per
cent rate would apply to the re-