the taxpayer's account. In this case, the amount of the claim as certified will be posted to the list and recorded on the journal in the same manner as though payment were made by the collector.

(7) In all cases where abatement claims are certified by the collector, notation will be made on the assessment list of the date on which the abatement claim was filed and the amount thereof, and on the daily journals, form 769.

(8) Blanket claims for abatement of uncollectible items form 53 may be filed by the collector as heretofore. The same record will be made on the tax journal and on the assessment list as in cases where the taxpayers submit such claims (the only difference being that in the first instance the claim originates with the taxpayer instead of with the collector). (T. D. 2871, June 21, 1919.) 30

Claims for abatement of uncollectible taxes.

REGULATION. When a tax is found to be uncollectible, the collector or deputy collector who made the demand for payment and is conversant with the facts may prepare a claim for abatement on form 53. . . . . Although credits allowed on account of insolvency or absconding release the collector from the obligation created by his receipt for the amount credited, the obligation to pay still remains upon the person assessed. It is the duty of the collector to use the same diligence to collect a tax after it has been abated as uncollectible as before abatement. Collectors should therefore keep a record of all taxes thus credited and of the persons from whom they are due, and should enforce payment whenever it is in their power to do so. (Art. 1033.)

T. D. 2871, above quoted, supplements T. D. 2688 (April 1, 1918) and amends Reg. 45, Art. 1036.

CHAPTER IX

INFORMATION AT THE SOURCE

By providing for a system of information at the source in the 1917 law, Congress took the first step in scientific procedure so far as securing trustworthy information as to the personal incomes of individuals is concerned. "Collection at the source" was too technical and annoying to be suited to American conditions.

Instead of a return of all payments of $800 or over in any taxable year, as called for in the 1917 law, a return is now required in the case of payments of $1,000 or more in any taxable year. In his report to the Senate on the 1918 law, Senator Simmons said: "In order not to burden taxpayers with the labor and expense of furnishing useless information, returns of information are to be made only to such extent as may be prescribed by the Commissioner. . . . . This is especially important on account of the present scarcity of clerical labor both inside and outside of the department."1

Information must be reported by everyone subject to the law. The farmer who pays his foreman $90 a month must be educated to obey the law as well as the corporation which pays its president $900 a month.

Strenuous efforts should be made to collect income taxes from all subject to tax. As to most wage-earners in the class subject to the tax, information regarding the exact amount received by them is in the possession of the Treasury.

It takes many years to prepare the way for an effective. system of reaching the incomes of all individuals who should pay a tax. If the present law calling for information as to the incomes of all single individuals who receive annually $1,0001 or more is strictly and impartially enforced, it will be

'Report to Senate, page 10.

the means of raising many millions of dollars in taxes hitherto untouched. Of course, the reduction of the personal exemption to $1,000 and $2,000 has in itself called for the making of returns by many who were not taxable under prior laws. But the enforcement of collection at the source in the case of those in receipt of incomes of, say, $1,200 to $2,000 per annum would have been impracticable. It is not unreasonable to call for, and it is not inconvenient to furnish, the information in regard to such payments.

The requirements regarding information at the source are not confined to business concerns. They extend to individuals. as well who in their personal capacity pay out certain sums aggregating $1,000 or more to any one person during an entire year. Each individual must state the amount paid for rent of an apartment or dwelling house-except when paid to real estate agent to a chauffeur or servant, if the amount paid is fixed or determinable. Payments made to a corporation, however, need not be reported."

Who must furnish information.

LAW. Section 256. That all individuals, corporations, and partnerships, in whatever capacity acting, including lessees or mortgagors of real or personal property, fiduciaries, and employers,

The classes to which paid.

making payment to another individual, corporation, or partnership,

Description of payments.-

of interest, rent, salaries, wages, premiums, annuities, compensations, remunerations, emoluments, or other fixed or determinable gains, profits, and income (other than payments described in sections 254 and 255), [The exceptions are dividends and transactions by brokers (see pages 107, 109).]

The amount to be reported.

of $1,000 or more in any taxable year,

See page 225.

'Payments to corporations need not be reported. (See page 225.)

Employees of United States government must make re

turn.

or, in the case of such payments made by the United States, the officers or employees of the United States having information as to such payments and required to make returns in regard thereto by the regulations hereinafter provided for,

Form of returns.

shall render a true and accurate return to the Commissioner, under such regulations and in such form and manner and to such extent as may be prescribed by him with the approval of the Secretary, setting forth the amount of such gains, profits, and income, and the name and address of the recipient of such payment.

The method of complying with the provisions of the law quoted above in regard to information returns as distinguished from withholding requirements is stated as follows:

REGULATION. All persons making payment to another person of fixed or determinable income of $1,000 or more in a taxable year must render a return thereof to the Commissioner (Sorting Division) for the preceding calendar year on or before March 15 of each year, except as specified in articles 1073, 1074, 1075, 1076 and 1079. The return shall be made in each case on form 1099 (revised), accompanied by a letter of transmittal on form 1096 (revised) showing the number of returns filed and the aggregate amount represented by the payments. The street and number where the recipient of the payment lives and whether he is single, married or head of a family should be stated, if possible. Where no present address is available, the last known post-office address must be given. Although to make necessary a return of information the income must be fixed or determinable, it need not be annual or periodical. (Art. 1071.) (For copies of forms, see Appendix.)

6

[Former Procedure] Under the 1913 and 1916 laws there were provisions for withholding at the source for all classes of income, but there was no provision for information at the source except in cases where exemption was claimed. (The withholding provisions are referred to in Chapter X, "Payment of Tax at Source.")

Information at the source was provided for in the 1917 law, in lieu of withholding, except in certain instances, and the provisions of this act relative to information at the source are substantially the

same.

[Former Procedure] Under the 1917 law the amount to be reported was an annual aggregate of $800.

"Where withholding is required the income must be annual or periodical as well as fixed and determinable.

Fixed or determinable income defined.—

REGULATION. Only (a) fixed or determinable (b) annual or periodical income is subject to withholding. Among such income, giving an idea of the general character of income intended, the statute specifies interest, rent, salaries, wages, premiums, annuities, compensations, remunerations and emoluments. But other kinds of income may be included. (a) Income is fixed when it is to be paid in amounts definitely predetermined. On the other hand, it is determinable whenever there is a basis of calculation by which the amount to be paid may be ascertained. (b) The income need not be paid annually if it is paid periodically, that is to say, from time to time, whether or not at regular intervals. That the length of time during which the payments are to be made may be increased or diminished in accordance with someone's will or with the happening of an event does not make the payments any the less determinable or periodical. A salesman working by the month for a commission on sales which is paid or credited monthly receives determinable periodical income. (Art. 362.)

Payments to employees.-The manner of handling returns of such payments is specially dealt with as follows:

REGULATION. The names of all employees to whom payments exceeding $1,000 a year are made, whether such total sum is made up of wages, salaries, commissions or compensation in any other form, must be reported. Heads of branch offices and subcontractors employing labor, who keep the only complete record of payments therefor, should file returns of information in regard to such payments directly with the Commissioner. When both main office and branch office have adequate records, the return should be filed by the main office. In the case of an employer having a large number of employees who are moved from place to place as the exigencies of the service require, and who consequently has no complete record of annual payments to them at any one place, the salary of two representative months may be taken to establish a fair monthly wage, and unless the yearly payment based on this estimate in the case of an employee amounts to $1,000 or more, no return of payments to such employee is required. . . . .7 (Art. 1072.)

A recent ruling makes it clear that when board and lodging are given as part of the compensation, it is to be taken into consideration in determining liability to make information

returns.

'See page 235.