The Waterbury Democrat. [volume] (Waterbury, Conn.) 1917-1946, 1944-01-26
YOUR FEDERAL
INCOME TAX
No. 10
COMPENSATION FOR
PERSONAL SERVICES

The first item of income to be
entered in the Federal income tax
return is salaries, wages, and COM
pensation for personal services.
This item includes, in general, all
earnings and compensation from
employment, and other income Of
a personal nature, such as prize
winnings and the like.
Compensation for personal serv-
ices includes commissions paid to
statesmen, compensation or bonuses
for services on the basis Of per-
centage of profits, commissions on
insurance premiums earned by in
Surance statesmen or agents,
bonuses whether in cash or secur-
tiles or goods, the value of board
and lodging (where it is not pro-
vided for the convenience Of the
employer), earnings paid for in
groceries, goods, or services Cat the
market value of such goods or Serv-
ices), and the like.
It includes the salary Of a clergy
man, as well as marriage fees, bap-
tismal offerings, sums paid for say
ing masses for the dead, and other
contributions received by the
clergyman or priest, and not paid
to the church. The rental value Of
a parsonage supplied to clergy
man is, however, exempt and need
not be included; but if no parson-
age is furnished and instead an
allowance for a parsonage or quar-
tiers is given, the amount Of this
allowance must be included as in
come.
Transportation charges paid by
the Government on account Of the
transportation Of families Of mill
tary and naval personnel are in the
nature Of additional compensation
and must be reported as income;
but the allowance for quarters and
for subsistence are exempt.
Beginning in 1913, members of
the armed forces of the United
States, and citizens or residents Of
the United States who are members
Of the military or naval forces Of
any of the other United Nations,
are exempt from income tax on
not more than $500 Of the annual
compensation received during the
present war for active service in
such forces. This exemption ap-
plies without distinction as to rank
or marital status, and is in addi-
ton to the personal exemption and
other credits.
Old age pensions and retirement
pay received from a former en-
ployer on account of previous serv-
ices must be reported, except where
they are exempt by express provi-
sions Of law, as in the case Of Ger
tain Government pensions to war
veterans who are no longer in ac-
tive service. If, however, the en-
ployee had made contributions to-
ward the pension or retirement
fund, the retirement payments are
treated as an annuity that has
been purchased and only a portion
of such payments Is considered as
income. (For the manner Of treat
ment of such annuities see inStruc-
ton in the return, Form 1040)
The earnings of a professional
man, such as lawyer or doctor
maintaining his own Office, would
not be entered on Form 104O under
item 1 as compensation for per-
sonal services, but would be enter
ed under item 8-"Net profit Cor
loss) from business or precision. -
For purposes of the earned income
credit Cline 6 on page Of the re-
turn form, however, his profess
Sional income is considered as COM
pensation for personal services.
Ordinary and necessary expenses
incurred in connection with en-
ployment may be deducted in ar
irving at the net amount of salaries
and other compensation for per-
sonal services. The amount of such
expenses is shown on tho line below
the total income in item / on the
face of the return, Form 104O, and
the net amount is then entered
after deducting expenses. An item
lied statement of such expenses
mist h0Wnvnr ha attached %0 kI,n