4. Article 33 of the Regulations, United States Internal Revenue, in explaining exemptions under C and deductions under B, says in part:

(a) In all cases where the income tax of a 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, except by an application to the collector for refund of the tax unless he shall, not less than thirty 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 be withheld upon the amount of such exemption. If 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.

(b) Nor shall any person under the foregoing conditions be allowed the benefit of any deduction provided for in subsection B * * * unless he shall, not less than thirty days prior to the day on which the return of his income is due, either file with the person who is required 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. **

*

(e) Claims for exemption and deductions may be filed with the withholding agent and claims for deductions may be filed with the collector, not later than thirty days prior to March 1. In cases where claims for deductions are filed with the collector within the time prescribed, the collector will 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.

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, inust be furnished the withholding agent.

5. Articles 65, 66, and 69 of said Regulations provide:

ART. 65. A withholding agent who pays monthly, or periodically during the year, interest, rents, salaries, wages, etc., shall not withhold the said tax until such time as the interest, rents, salaries, wages, etc., shall have reached an aggregate amount in excess of $3,000. When such amount has been reached, such agent shall withhold the tax on the whole $3,000 and any excess thereof, unless the person to whom the income is due files a notice claiming exemption under paragraph C, * in which case the withholding agent shall withhold only the tax on the income in excess of said exemption of $3,000 or $4,000 (as the case may be), and the tax so withheld shall be paid as required by law.

*

ART. 66. In case the person to whom the income is due is entitled to any deductions under paragraph B, he may avail himself of such deductions by filing with the withholding agent Form 1008, * in which case the withholding agent will only withhold the tax on such income in excess of the deductions claimed on said form.

ART. 69. Withholding agents shall make an annual list return (Form 1042), in duplicate, to the collector of internal revenue for the district in which the withholding agent resides or has his principal place of business on or before the 1st day of March in each year, showing the names and addresses of persons who have received incomes in excess of $3,000, on which the normal tax of 1 per cent has been deducted and withheld during the preceding year. This return must be accompanied by all forms presented claiming exemptions and deductions.

6. Disbursing officers of the Quartermaster Corps will deduct and withhold the normal tax of 1 per cent on the following items:

(a) Pay, both base and service.

(b) Foreign service pay.

(c) Increase of pay because of aviation.

(d) Pay as aid.

(e) Pay for certificate of merit.

(f) Rents payable to persons, as distinguished from corporations and companies.

The tax will not be withheld at the source on the following items:

(a) Pay for mounts.

(b) Mileage.

(c) Reimbursement for actual expenses.

(d) Per diem allowances in lieu of subsistence while travel

ing under orders.

(e) Commutation of quarters.

(f) Payments for heat and light.

(g) Rents payable to corporations, companies, etc.

7. Where the rent payable to one person is less than $3,000, no deduction is made and no exemption need be claimed.

Should the withholding officer be in doubt, under the wording of the lease, whether the person named to receive the rent is entitled to it as owner or as agent, he may require such person to furnish him with Form 1007 properly executed by the owner of the property.

Unless it clearly appear in the lease that the rent is payable to a company, corporation, etc., the tax must, in the absence of properly executed Form 1001, be withheld.

8. A withholding agent shall not withhold the normal tax of 1 per cent until the payments made by such withholding agent to any one person in a calendar year aggregate in excess of $3,000, when he shall deduct and withhold upon the entire amount paid by him unless exemption is claimed on Treasury Department Form 1007 revised, and then only on the amount in excess of the amount of the exemption claimed. In case the exemption notice is not filed until after withholding has been made, the withholding agent may, at any time prior to rendering his annual list return, refund the amount of tax withheld to the extent of the exemption claimed, provided such exemp tion is claimed prior to January 30 of the year following the tax year.

In order to enable these adjustments to be made, withholding agents paying monthly will not file their return prior to January 30 following the close of the calendar year covered by the return, January 29 being the last day on which exemption certificates can be filed for the preceding year.

The appropriate time for a withholding agent to make his annual return is between January 30 and the last day of February following the calendar year covered by the return.

With the exception of withholding agents on duty in the Philippine Islands, China, and at remote Alaskan and foreign stations, the return should be filed so as to be in the hands of the proper collector of internal revenue by March 1. In the excepted cases the return should be filed so as to be in the hands of the collector by March 31. Withholding agents on duty in the Philippine Islands, China, and at all stations beyond the continental limits of the United States, except Alaska, should file their return with the collector of internal revenue, Baltimore, Md. Those in Alaska should file their return with the collector of internal revenue, Tacoma, Wash. Exemption certificates need not be in duplicate.

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9. In case an officer from whom there has been withheld the tax on an amount in excess of amount exempt under paragraph C ($3,000 or $4,000, as the case may be) is entitled under paragraph B to deductions which would wipe out, in whole or in part, the amount withheld, the withholding officer may, upon receipt of Form 1008, properly executed, refund to such creditor officer the amount withheld to the extent of the deductions claimed. In such case Forms 1007 and 1008 must both be filed by the creditor officer with the withholding officer on or before January 29 following the close of the calendar year.

10. The amount of the exemption, $4,000, may be split between husband and wife, each taking such part as may be desired, but the total exemption of the two can not exceed $4,000.

11. An insane officer, if married and living with his wife at time of commitment, confined in an institution is held to be living with his wife during confinement.

An officer living apart from his wife, to whom he pays alimony, suffers deduction on all income in excess of $3,000.

12. When a disbursing officer is relieved from duty because of expiration of detail, retirement, resignation, etc., he will render the return required in his capacity as a withholding agent at the same time as he would have rendered it if he had continued on disbursing duty.

In case of the death of a disbursing officer, the board appointed to settle his accounts will, if the disbursements made by the deceased require it, furnish the proper collector of internal revenue with a return, in duplicate, on Treasury Department Form 1042, as of date of death, accompanied with a statement that the amount of the withholdings, if any, are on deposit in the Treasury of the United States to the credit of the special deposit account of the deceased. All claims for exemption, Form 1007 revised, or for refundment of excessive withholdings, Treasury Department Form 1008 revised, which may have been filed with the deceased will be forwarded to the collector of internal revenue, together with the return on Form 1042. A certified copy of the Form 1042 will be filed with the findings of the board.

When a disbursing officer is directed to change station he will, before departing from his old station, provide himself with such data as may be necessary to enable him to make proper withholdings from any officer who may have been paid

by him at the old station, should such an officer present accounts to him at the new station.

Claims for exemption filed with a disbursing officer should be retained by such officer for submission with his annual list return of withholdings. In all cases when an officer ceases disbursing at any particular station, he will leave at such station a certified list of the claims for exemption which have been filed with him in order that his successor may have knowledge thereof. In case of death the list will be prepared by the board of officers appointed to settle his accounts.

13. If an officer has filed certificate of exemption with any withholding agent, he will, on presenting pay vouchers to another withholding agent, forward with such vouchers a certificate to the effect that "claim for exemption for $---- has been filed with quartermaster at

14. Withholding agent turns over the tax withheld by him only when called upon to do so by the collector of his district.

15. Every person whose net income during a calendar year amounts to $3,000 or more will be required to execute and forward to the collector of internal revenue of the district in which he may be stationed or residing in the United States a return of his income prepared on Form 1040, entitled "Return of annual net income of individuals." This return must be filed with the collector on or before March 1 of the following year.

16. Officers on duty or residing beyond the continental limits of the United States who have no legal residence in the United States should prepare and forward their annual return of net income to the collector of internal revenue at Baltimore, Md., in whose district Washington is located, unless they be in Alaska, in which event the return should be sent to the collector of internal revenue at Tacoma, Wash. The return should be forwarded in time to reach the office of the collector not later than March 1 of each year. (G. O. 50, 1914, as amended by Par. I, G. O. 13, 1915, and Par. I, G. O. 54, 1915-2165465, and Addls. B. and F, A. G. O.)

235. Method of accounting for moneys withheld at source. The following decision of the Comptroller of the Treasury, dated August 11, 1914, prescribing the method of accounting for moneys withheld at the source by disbursing officers from income payments, is published to the Army for the information and guidance of all concerned in connection