intent to defeat or evade the assessment required by law to be made shall be guilty of a misdemeanor, and shall be fined not exceeding $2,000 or be imprisoned not exceeding one year, or both, at the discretion of the court, with the costs of prosecution.

Art. 27. Nothing in the law or these regulations shall be construed to release a taxable person from liability for income tax, nor shall any contract entered into after the act of October 3, 1913, took effect be valid in regard to any Federal income tax imposed upon a person liable to such payment.

Art. 28. For regulations relative to the claiming of exemptions and deductions on income, the tax on which is to be deducted and withheld at the source, see article 33.

PART 2.

COLLECTIONS AT THE SOURCE.

at source applies

mal tax imposed

individuals.

Art. 29. The deductions and payment of the tax at the Collections source of income applies only to the normal tax imposed only to the norupon individuals and shall not be construed to require ulection at any of such tax to be withheld prior to the 1st day of source not operaNovember, 1913. Art. 30. Paragraph E of section 2 of the act provides Persons, firms, that

All persons, firms, copartnerships, companies, corporations, jointstock companies or associations, and insurance companies, in whatever capacity acting, including lessees or mortgagors of real or personal property, trustees acting in any trust capacity, executors, administrators, agents, receivers, conservators, employers, and all officers and employees of the United States having the control, receipt, custody, disposal, or payment of interest, rent, salaries, wages, premiums, annuities, compensation, remuneration, emoluments, or other fixed or determinable annual gains, profits, and income of another person, exceeding $3,000 for any taxable year, other than dividends on capital stock, or from the net earnings of corporations and joint-stock companies or associations subject to like tax, who are required to make and render a return in behalf of another, as provided herein, to the collector of his, her, or its district, are hereby authorized and required to deduct and withhold from such annual gains, profits, and income such sum as will be sufficient to pay the normal tax imposed thereon by this section, and shall pay to the officer of the United States Government authorized to receive the same; and they are each hereby made personally liable for such tax.

tive until Nov. 1,

1913.

etc., required to withhold tax at the source.

agents.

Art. 31. All persons, firms, etc., mentioned in the Withholding above-quoted paragraph are referred to in these regula

66

tions as "debtors" or "withholding agents," and the word source" is to apply to the place where the income originated and is payable.

to which tax is to be

Art. 32. The income from which the normal tax of Income as per cent is to be withheld by withholding agents in- withheld. cludes all items of income exceeding in the aggregate $3,000 and payable to any one person during the year, except:

(a) Dividends on capital stock or from the net earnings of corporations and joint-stock companies or associations and insurance companies subject to like tax.

39

annual retainers.

(b) Income of an individual which is not fixed or certain and not payable at stated periods, or is indefinite or irregular as to amount or time of accrual, shall not be withheld at the source, but shall be listed in the annual return of the individual, and the tax shall be paid thereon by him.

Incomes derived from the following professions and vocations come under this head: Agents compensated on the commission basis, lawyers, doctors, authors, inventors, and other professional persons whose income is irregular and indefinite.

Such persons shall make personal return of all their income, provided their total net income from all sources is Special fees and $3,000 or over. For example: When a lawyer receives a retainer of $5,000 as a special fee, a deduction therefrom shall not be made by the payer; but when a lawyer receives a retainer of $5,000 per annum, and the exemption claimed is $3,000, $2,000 of such income would be taxed and the tax retained at the source; or if his exemption claimed should be $4,000, $1,000 of such income would be taxed and the tax thereon withheld at the

source.

(c) Items listed in article 5, which are wholly exempt from tax.

Exemptions Art. 33. (a) In all cases where the income tax of a

under paragraph

C. Certificate to

holding agent.

be filed with with- person is withheld and deducted and paid or to be paid at the source, such person shall not receive the benefit of the deduction and exemption allowed in paragraph C (see arts. 9 and 10) except by an application to the collector for refund of the tax unless he shall, not less than 30 days prior to the day on which the return of his income is due, file with the person who is required to withhold and pay tax for him, a certificate claiming the benefit of such exemption, and thereupon no tax shall Penalty for be withheld upon the amount of such exemption. If obtain exemp- any person for the purpose of obtaining any allowance or reduction by virtue of a claim for such exemption, either for himself or for any other person, knowingly makes any false statement or false or fraudulent representation, he shall be liable to a penalty of $300.

making false representations to

tion.

Deductions un

der paragraph B.

filed with with

(b) Nor shall any person under the foregoing condiForm 1008 to be tions be allowed the benefit of any deduction provided holding agent or for in subsection B (see art. 6, 1 to 6) unless he shall, not less than 30 days prior to the day on which the return of his income is due, either file with the person who is re

collector.

quired to withhold and pay tax for him a true and correct return (on Form 1008) of his annual gains, profits, and income from all other sources, and also the deductions asked for, and the showing thus made shall then become a part of the return to be made in his behalf by the person required to withhold and pay the tax and the debtor or withholding agent will only withhold the tax on the payments made in excess of the deductions claimed on said form. Or such person may likewise make application for deductions to the collector of the district in which return is made or to be made for him.

on behalf of minors or insane persoas.

If such person is a minor or an insane person, or is Certificate filed absent from the United States, or is unable owing to serious illness to make the return and application above provided for, the return and application may be made for him or her by the person required to withhold and pay the tax, he making oath on certificate (Form 1009) under the penalties of this act that he has sufficient knowledge of the affairs and property of his beneficiary to enable him to make a full and complete return for him or her, and that the return and application made by him are full and complete.

fund.

(c) When, however, claims for exemption and deductions faims for reas above described are not filed within the prescribed time, the tax collected in excess can be remitted only on presentation of a claim for refund under the provisions of section 3220, Revised Statutes, said claims to be made either by the withholding agent against whom the assessment was made, or by the person on account of whom such taxes were withheld.

Claims

for

not to be for

Claims for abatement of taxes erroneously assessed, abatement. or which are excessive in amount, may, prior to collection thereof, be filed under the provisions of said section 3220, Revised Statutes, either by the withholding agent against whom the assessment was made, or by the persons on account of whom such taxes were withheld. In the monthly list returns as now prescribed a space Taxes withheld is provided to show the amount of taxes which the with-warded to collecholding agent may remit to the collector when such re- of assessment turns are filed. The withholding agents will not, how-ceived. ever, forward to the collector amounts withheld by him until notices of assessment are received from the collector. Claims for exemption and deductions may be filed with the withholding agent and claims for deductions may be

tor until notices

have been

re

Withholding agents to be furnished statement

collector.

filed with the collector, not later than 30 days prior to March 1.

In cases where claims for deductions are filed with the of deductions collector within the time prescribed, the collector will claimed through immediately furnish the withholding agent (whose name and address must be shown on Form 1008) with a statement of the amount of deductions claimed, and said withholding agent shall not withhold and pay the normal tax to the extent of the deductions claimed as per said list.

Tax withheld to be paid to col

Withholding agents should not file their annual returns until after the expiration of the time allowed persons to file claims for exemptions and deductions and if claims for deductions are filed with the collector in the required time, yet not in sufficient time to have the adjustment made by the withholding agent, the collector will make the adjustment on the withholding agent's return and in reporting such withholding agent for assessment will make allowance for the amount of such deductions claimed. Notice of such adjustment, however, must be furnished the withholding agent.

Art. 34. The normal tax of 1 per cent shall be deducted lector of district. and withheld at the source, and payment made to the collector of internal revenue as provided in the law, by the debtor, or his, her, or its duly appointed agent authorized to make such deduction and payment.

Tax withheld by one agent not to be again with

agent.

No other person, firm, or organization, in whatever held by another capacity acting, having the receipt, custody, or disposal of any income, as herein provided, shall be required to again deduct and withhold the normal tax of 1 per cent thereon, provided that any such person, firm, or organization other than the debtor who has withheld said tax, shall file with the collector of internal revenue for his, her, or its district, a certificate (Form 1006) showing from whom and in what amount the tax has been so withheld. Art. 35. Withholding agents who are required to make of internal reve- monthly returns will, on or before the 20th day of each month, file with the collector for their respective districts such returns for the preceding month, accompanied by all certificates relating thereto, and there shall also accompany said returns all certificates claiming exemptions and deductions which are not required to be listed thereon; and on or before the 1st day of March in each year said withholding agents shall likewise file their annual returns for the preceding calendar year. Annual

Returns to be made to collector

nue.