[Federal Register Volume 73, Number 249 (Monday, December 29, 2008)]
[Rules and Regulations]
[Pages 79354-79361]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-30582]
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DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 31
[TD 9440]
RIN 1545-BI39
Employer's Annual Federal Tax Return and Modifications to the
Deposit Rules
AGENCY: Internal Revenue Service (IRS), Treasury.
ACTION: Final and temporary regulations.
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SUMMARY: This document contains temporary regulations relating to the
annual filing of Federal employment tax returns and requirements for
employment tax deposits. These temporary regulations relate to sections
6011 and 6302 of the Internal Revenue Code (Code) concerning reporting
and paying income taxes withheld from wages and reporting and paying
taxes under the Federal Insurance Contributions Act (FICA)
(collectively, ``employment taxes''). These temporary regulations
generally allow certain employers to file a Form 944, ``Employer's
ANNUAL Federal Tax Return,'' rather than Form 941, ``Employer's
QUARTERLY Federal Tax Return.'' In addition to rules related to Form
944, the temporary regulations provide an additional method for
employers who file Form 941 to determine whether the amount of
accumulated employment taxes is considered de minimis. The portions of
this document that are final regulations
[[Page 79355]]
provide necessary cross-references to the temporary regulations. The
text of these temporary regulations also serves as the text of the
proposed regulations set forth in the Proposed Rules section in this
issue of the Federal Register.
DATES: Effective Date: These regulations are effective on December 29,
2008.
Applicability Date: For dates of applicability, see Sec. Sec.
31.6011(a)-1T(g), 31.6011(a)-4T(d), and 31.6302-1T(n).
FOR FURTHER INFORMATION CONTACT: Audra Dineen, (202) 622-4910 (not a
toll-free number).
SUPPLEMENTARY INFORMATION:
Background
These temporary regulations amend the Regulations on Employment
Taxes and Collection of Income Tax at Source (26 CFR part 31) under
section 6011 relating to the Federal employment tax return filing
requirements and section 6302 relating to the employment tax deposit
requirements. These temporary regulations are part of the IRS's effort
to reduce taxpayer burden by permitting certain employers to file one
return annually to report their employment tax liabilities instead of
four quarterly returns. These temporary regulations affect taxpayers
that file Form 941, ``Employer's QUARTERLY Federal Tax Return,'' Form
944, ``Employer's ANNUAL Federal Tax Return,'' and any related Spanish-
language returns or returns for U.S. possessions.
On January 3, 2006, a temporary regulation (TD 9239) relating to
Form 944 (the 2006 temporary regulation) was published in the Federal
Register (71 FR 11). A notice of proposed rulemaking (REG-148568-04)
cross-referencing the temporary regulations was published in the
Federal Register for the same day (71 FR 46) (the 2006 proposed
regulation). A correction to the 2006 temporary regulation was
published in the Federal Register on March 17, 2006 (71 FR 13766). No
requests for a public hearing were received; therefore, no public
hearing was held. Comments responding to the notice of proposed
rulemaking were received.
Those comments requested that use of Form 944 be changed from
mandatory to voluntary and that the amount of the employment tax
liability used to determine whether employers are eligible to file Form
944 (the ``eligibility threshold'') be increased. The Treasury
Department and the IRS agree with the suggestion to make Form 944
voluntary. The Treasury Department and the IRS will continue to
consider whether to increase the eligibility threshold. The final
regulations allow the eligibility threshold to be increased through
future guidance.
These temporary regulations continue to permit most employers who
file Form 944 to pay accumulated employment taxes annually when they
file their returns and modify the lookback period and de minimis
deposit rule for these employers. In addition to the rules related to
Form 944, these temporary regulations provide an additional method for
employers who file Forms 941 quarterly to determine whether the amount
of accumulated employment taxes is considered de minimis. This safe
harbor was originally proposed in the 2006 proposed regulation.
Explanation of Provisions
Form 944--Regulations Concerning Filing Requirements Under Section 6011
These temporary regulations allow certain employers to file an
annual employment tax return, Form 944, to report their social
security, Medicare, and withheld Federal income taxes rather than the
quarterly Form 941. For these employers, Form 944 will replace Form 941
and reduce their burden by reducing the number of returns they are
required to file each year. Form 944 will not replace Form 943,
``Employer's Annual Tax Return for Agricultural Employees'' or Schedule
H (Form 1040), ``Household Employment Taxes.'' However, if an employer
files Form 944, the employer may choose to report wages with respect to
household employees on Form 944, instead of reporting such wages on
Schedule H (Form 1040). Form 944 is generally due January 31 of the
year following the tax year for which the return is filed. If the
employer timely deposits all accumulated employment taxes on or before
January 31 of the year following the tax year for which the return is
filed, the employer will have 10 extra calendar days to file Form 944
pursuant to Sec. 31.6071(a)-1(a).
Under the 2006 proposed and temporary regulations, the IRS sent a
notification letter to qualified employers with an estimated employment
tax liability of $1,000 or less requiring them to participate in the
Employers' Annual Federal Tax Program (Form 944) (hereinafter referred
to as the Form 944 Program). Employers were eligible to opt out only if
they estimated that their employment tax liability would exceed the
$1,000 threshold or if they wanted to e-file Forms 941 quarterly
instead. New employers who estimated that their employment tax
liability would be $1,000 or less also were eligible to file Form 944.
These employers were identified by their responses on Form SS-4,
Application for Employer Identification Number, and notified that they
were required to file Form 944 in the letter advising them of their
employer identification number. Employers that were not identified by
the IRS in either manner were able to contact the IRS if they thought
they were qualified. If the IRS determined they were qualified, it
would send confirmation to these employers. Once employers received
this letter, they were required to file Form 944 instead of Forms 941.
Commentators suggested that Form 944 should be voluntary instead of
mandatory. This benefits taxpayers because it allows them to choose the
filing requirement they prefer and to change from year to year more
easily. In addition, commentators suggested that the threshold should
be increased in order to allow more employers to take advantage of Form
944 and to bring the threshold in line with the de minimis deposit rule
amount, which is less than $2,500 as discussed more fully in this
preamble. Sections 31.6011(a)-1T(a)(5) and 31.6011(a)-4T(a)(4) have
been revised to incorporate the suggestion to make the program
voluntary. Although these temporary regulations do not adopt the
suggestion to increase the eligibility threshold, the Treasury
Department and the IRS will continue to consider this suggestion and
may increase the threshold in the future. To accommodate any potential
increase to the threshold amount before final regulations are issued,
these temporary regulations contain a provision that allows the IRS to
increase the eligibility threshold by guidance published in the
Internal Revenue Bulletin. See Sec. 601.601(d)(2)(ii)(b).
Under Sec. Sec. 31.6011(a)-1T(a)(5) and 31.6011(a)-4T(a)(4) in
effect for taxable years beginning on or after January 1, 2009,
employers who estimate that their annual employment tax liability will
be $1,000 or less can contact the IRS to express their desire to file
Form 944 instead of Forms 941 for a taxable year. Only upon such a
request will the IRS send a notification letter to qualified employers
confirming that they may file Form 944 for that taxable year. Once
employers receive this notice they must file Form 944 and cannot file
Forms 941 instead for a taxable year until they contact the IRS to
change their filing requirement to Form 941 for that taxable year and
receive confirmation that their filing requirement has been changed.
The IRS will issue guidance published in the Internal Revenue
Bulletin informing employers how they can contact the IRS to
participate in the Form 944 Program and how they can
[[Page 79356]]
elect out if they later decide that they want to file Forms 941 instead
of Form 944. Under the 2006 regulations, employers were only eligible
to opt out if they estimated that their employment tax liability would
exceed the $1,000 threshold or if they wanted to e-file Forms 941
quarterly instead. Because the program is being made voluntary,
beginning in tax year 2010, employers will be able to opt out for any
reason if they follow procedures to be provided in future guidance.
Employers that have received notification of their qualification to
file Form 944, even if the notification was received prior to the
publication of these regulations, must continue to file Form 944 unless
they properly opt out of the Form 944 program.
In addition, a few clarifying revisions were made to the
regulations under section 6011. First, Sec. Sec. 31.6011(a)-1T(a) and
31.6011(a)-4T(a) were clarified by adding references to Sec. Sec.
31.6011(a)-1T(a)(5) and 31.6011(a)-4T(a)(4) to account for Form 944 in
Sec. Sec. 31.6011(a)-1T(a)(1) and 31.6011(a)-4T(a)(1). Second,
Sec. Sec. 31.6011(a)-1(a)(5) and 31.6011(a)-4(a)(4) were revised to
remove the details regarding the procedures to use for opting out of
the Form 944 program and provide that the IRS will issue guidance
published in the Internal Revenue Bulletin containing these procedures.
The IRS will issue procedures in other forms of guidance published in
the IRB regarding how to opt out of Form 944 for taxable year 2009 and
how to elect to file Form 944 for taxable year 2010 and beyond. This
will allow the IRS to administer the program more effectively, by
having the flexibility to adjust the procedures as necessary due to
changes in the program and taxpayer response.
Form 944--Regulations Concerning Deposit Requirements Under Section
6302
These temporary regulations revise the 2006 temporary regulation
concerning requirements for employers to make deposits of employment
taxes under section 6302 and Sec. 31.6302-1 to make a few clarifying
changes to Sec. 31.6302-1 related to Form 944. These temporary
regulations continue to permit employers who file Form 944 to deposit
or pay their accumulated employment taxes annually when they file their
Form 944 if they satisfy the provisions of the de minimis deposit rule,
as modified in Sec. 31.6302-1T(f)(4)(iii), rather than make monthly or
semi-weekly deposits. These temporary regulations continue to contain
the exception in Sec. 31.6302-1T(c)(6) for employers who filed Form
944 in the preceding year but who no longer qualify because their
annual employment tax liability exceeds the eligibility threshold.
Also, these temporary regulations continue to provide a different
lookback period for Form 944 filers to use to determine an employer's
status as a monthly or semi-weekly depositor. The lookback period was
changed in the 2006 temporary and proposed regulations because once an
employer begins to file annual Form 944 returns, it may not be possible
for the IRS to determine the employer's aggregate amount of employment
tax liability during the lookback period set forth in the existing
regulations (12-month period ending the preceding June 30) because the
employer may not have filed any quarterly returns during that period.
Under the 2006 temporary regulation, Sec. 31.6302-1T(b)(4)(i) provided
that the lookback period for employers who filed Form 944 during the
current, or preceding, calendar year is the second calendar year
preceding the current calendar year. For example, the lookback period
for calendar year 2009 is calendar year 2007.
In these temporary regulations, Sec. 31.6302-1T(b)(4)(i) is
clarified to reflect that the lookback period is the second preceding
calendar year for employers who filed Form 944 for either of the two
previous calendar years, not just the one previous calendar year. This
clarification was needed because an employer would not have filed the
requisite quarterly returns to use the other lookback period (12-month
period ending June 30) if they filed Form 944 in either of the prior
years. For example, if an employer filed Form 944 in 2006 but not in
2007, the lookback period for 2008 would be 2006, because they would
not have filed quarterly returns for July through December 2006 and,
thus, it would be impossible to use July 2006-June 2007 as the lookback
period.
Section 31.6302-1T(b)(4)(i) also is revised to clarify that the
amount of tax reported during the lookback period is determined without
regard to the employer's filing requirement. In other words, in the
preceding example, if an employer is required to file Forms 941 for
2008 but filed Form 944 for the lookback period (2006), the amount of
employment tax liability reported for the lookback period would be the
amount of employment tax the employer reported on its Form 944 for 2006
even though the employer will file Forms 941 to report its 2008
liability. The reverse also is true. The employment tax liability
reported for the lookback period (2006) of an employer required to file
Form 944 for 2008 would be the sum of the liabilities it reported on
its four Forms 941 for 2006.
In addition, Sec. 31.6302-1T(b)(4)(ii) is revised by changing the
term ``supplemental'' to ``adjusted'' and deleting the reference to
Form 941c, ``Supporting Statement To Correct Information,'' due to the
revisions to the process of adjusting employment tax liability. Final
regulations (TD 9405) relating to employment tax adjustments were
published in the Federal Register (73 FR 37371) on July 1, 2008. For
periods ending on or before December 31, 2008, the employment tax
liability reported on the original return includes any prior period
adjustments reported on that return (for example, prior period
adjustments supported by a Form 941c attached to the return for a
subsequent period). For periods beginning on or after January 1, 2009,
employers can no longer make prior period adjustments on a return.
Instead, employers will use an adjusted return or claim for refund to
make corrections to the amounts reported on their original returns.
Last, Sec. 31.6302-1T is revised by adding references to Form 944 in
paragraphs (e)(2) and (g)(1).
Form 941--New Deposit Rule Safe Harbor Under Section 6302
In addition to revising the 2006 temporary regulation regarding
Form 944, these temporary regulations incorporate the safe harbor for
employers who file Forms 941 that was included in the 2006 proposed
regulation. The safe harbor helps small employers who file Form 941 and
have an unexpected increase in their deposit liability for a quarterly
return period. These temporary regulations provide an alternate method
for determining whether the employer's employment tax obligations are
de minimis, which is based on the employment taxes due for the prior
return period. This special rule applies only to employers filing
quarterly tax returns and, therefore, does not apply to employers who
file Form 944.
Generally, deposits of taxes reported on Form 941, ``Employer's
QUARTERLY Federal Tax Return,'' are due monthly or semi-weekly. If an
employer failed to make timely deposits of employment taxes, the
employer, absent reasonable cause, is subject to the penalty for
failure to deposit under section 6656. Prior to these temporary
regulations, Sec. 31.6302-1(f)(4) (the de minimis deposit rule)
provided that, for quarterly and annual return periods, if the
aggregate amount of employment taxes for the return period is less than
$2,500 and that amount was deposited or paid
[[Page 79357]]
with a timely filed return for that return period, the amount was
deemed to have been timely deposited and the employer was not subject
to the penalty for failure to deposit. Accordingly, employers who paid
their employment taxes when they timely filed their quarterly returns
were deemed to have timely deposited their taxes if the amount of taxes
due was less than $2,500 for that quarter. Similarly, employers who
paid their employment taxes when they timely filed their annual returns
were deemed to have timely deposited if the amount of taxes due was
less than $2,500 for the entire year.
Under these temporary regulations, pursuant to Sec. 31.6302-
1T(f)(4)(i) and (ii), employers may pay their employment taxes when
they timely file their quarterly returns and be deemed to have timely
deposited if the amount of the taxes due for the current quarter or for
the prior quarter is less than $2,500.
This special rule can be illustrated by the following example: An
employer has less than $50,000 in employment taxes reported during the
lookback period and is therefore a monthly depositor under Sec.
31.6302-1(b)(2). The employer's employment tax liabilities for the
first and second quarters of 2010 are $2,450 and $2,400, respectively.
In the third quarter of 2010, however, the employer's employment tax
liability is $2,550. Under the de minimis deposit rule in effect prior
to these temporary regulations, if the employer pays the $2,550 with
its return for the third quarter of 2010, the amount would not be
considered timely deposited for that quarter and, therefore, the
employer would be assessed the section 6656 penalty for failure to
deposit.
Modifying the de minimis deposit rule to allow employers to base
the determination on the employment taxes due for the immediately
preceding quarter provides a safe harbor for employers regarding their
deposit obligations. Thus, in this example, when the employer had an
increase in its employment tax liability for the third quarter of 2010,
its remittance still would be deemed to have been timely deposited
because the taxes for the immediately preceding return period were de
minimis. These regulations have no application to the One-Day rule in
Sec. 31.6302-1(c)(2), which requires employers to make a deposit on
the next banking day if they accumulate $100,000 or more of employment
taxes on any day during a deposit period. Therefore, if an employer
accumulates $100,000 or more of employment taxes during a deposit
period, the employer must make a deposit on the next banking day even
if the employer's employment tax liability for the prior quarter was de
minimis. Due to the programming changes necessary to implement this
safe harbor, the safe harbor will be available for deposit periods
beginning on or after January 1, 2010.
Special Analyses
It has been determined that this Treasury decision is not a
significant regulatory action as defined in Executive Order 12866.
Therefore, a regulatory assessment is not required. It also has been
determined that section 553(b) of the Administrative Procedure Act (5
U.S.C. chapter 5) does not apply to these regulations. For
applicability of the Regulatory Flexibility Act, please refer to the
Special Analyses section of the preamble to the cross-referenced notice
of proposed rulemaking published in the Proposed Rules section in this
issue of the Federal Register. Pursuant to section 7805(f) of the
Internal Revenue Code, these regulations will be submitted to the Chief
Counsel for Advocacy of the Small Business Administration for comment
on their impact on small business.
Drafting Information
The principal authors of these final regulations are Raymond Bailey
and Audra M. Dineen of the Office of the Associate Chief Counsel
(Procedure and Administration).
List of Subjects 26 CFR Part 31
Employment taxes, Income taxes, Penalties, Pensions, Railroad
retirement, Reporting and recordkeeping requirements, Social security,
Unemployment compensation.
Amendments to the Regulations
0
Accordingly, 26 CFR part 31 is amended as follows:
PART 31--EMPLOYMENT TAXES AND COLLECTION OF INCOME TAX AT SOURCE
0
Paragraph. 1. The authority citation for part 31 continues to read in
part as follows:
Authority: 26 U.S.C. 7805 * * *
0
Par. 2. Section 31.6011(a)-1 is amended by revising paragraph (a)(1)
and adding paragraph (g) to read as follows:
Sec. 31.6011(a)-1 Returns under Federal Insurance Contributions Act.
(a) * * * (1) [Reserved]. For further guidance, see Sec.
31.6011(a)-1T(a)(1).
* * * * *
(g) [Reserved]. For further guidance, see Sec. 31.6011(a)-1T(g).
0
Par. 3. Section 31.6011(a)-1T is revised to read as follows:
Sec. 31.6011(a)-1T Returns under Federal Insurance Contributions Act
(temporary).
(a) Requirement--(1) In general. Except as otherwise provided in
Sec. 31.6011(a)-5, every employer required to make a return under the
Federal Insurance Contributions Act, as in effect prior to 1955, for
the calendar quarter ended December 31, 1954, in respect of wages other
than wages for agricultural labor, shall make a return for each
subsequent calendar quarter (whether or not wages are paid in such
quarter) until he has filed a final return in accordance with Sec.
31.6011(a)-6. Except as otherwise provided in Sec. 31.6011(a)-5, every
employer not required to make a return for the calendar quarter ended
December 31, 1954, shall make a return for the first calendar quarter
thereafter in which he pays wages, other than wages for agricultural
labor, subject to the tax imposed by the Federal Insurance
Contributions Act as in effect after 1954, and shall make a return for
each subsequent calendar quarter (whether or not wages are paid
therein) until he has filed a final return in accordance with Sec.
31.6011(a)-6. Except as otherwise provided in Sec. 31.6011(a)-8 and in
Sec. 31.6011(a)-1(a)(3), (a)(4), and (a)(5), Form 941, ``Employer's
QUARTERLY Federal Tax Return,'' is the form prescribed for making the
return required by this subparagraph. Such return shall not include
wages for agricultural labor required to be reported on any return
prescribed by Sec. 31.6011(a)-1(a)(2). The return shall include wages
received by an employee in the form of tips only to the extent of the
tips reported by the employee to the employer in a written statement
furnished to the employer pursuant to section 6053(a).
(a)(2) through (a)(4) [Reserved]. For further guidance, see Sec.
31.6011(a)-1(a)(2) through (a)(4).
(5) Employers in the Employers' Annual Federal Tax Program (Form
944)--(i) In general. Employers notified of their qualification for the
Employers' Annual Federal Tax Program (Form 944) are required to file
Form 944, ``Employer's ANNUAL Federal Tax Return,'' instead of Form 941
to make a return as required by paragraph (a)(1) of this section. Upon
proper request by the employer, the Internal Revenue Service (IRS) will
notify employers in writing of their qualification for the Employers'
Annual Federal Tax Program (Form 944). Qualified employers are those
with an estimated annual employment tax liability (that is, social
security, Medicare, and withheld Federal income
[[Page 79358]]
taxes) of $1,000 or less for the entire calendar year, except employers
required under Sec. 31.6011(a)-1(a)(2) to make a return on Form 943,
``Employer's Annual Federal Tax Return For Agricultural Employees,'' or
Sec. 31.6011(a)-1(a)(3) to make a return on Schedule H (Form 1040),
``Household Employment Taxes.'' The IRS may increase the amount of the
estimated annual employment tax liability that qualifies employers to
file Form 944 through a revenue procedure, notice, or other IRS
guidance published in the Internal Revenue Bulletin. The IRS will
notify employers when they no longer qualify for the Employers' Annual
Federal Tax Program (Form 944) and must file Forms 941 instead.
(ii) Requests to participate and eligibility to opt out of the
Employers' Annual Federal Tax Program (Form 944). The IRS will
establish procedures in a revenue procedure, notice, or other guidance
published in the Internal Revenue Bulletin for employers to follow to
request to receive notification to participate in the Employers' Annual
Federal Tax Program (Form 944) and to be removed from the Employers'
Annual Federal Tax Program (Form 944) after becoming a participant in
order to file Forms 941 instead.
(b) through (f) [Reserved]. For further guidance, see Sec.
31.6011(a)-1(b) through (f).
(g) Effective/applicability dates--(1) In general. Paragraphs
(a)(1) and (a)(5) of this section apply to taxable years beginning on
or after December 30, 2008. The rules of paragraph (a)(1) of this
section that apply to taxable years beginning before December 30, 2008,
are contained in Sec. 31.6011(a)-1. The rules of paragraph (a)(5) of
this section that apply to taxable years beginning before December 30,
2008, are contained in Sec. 31.6011(a)-1T in effect prior to December
30, 2008.
(2) Expiration date. The applicability of this section will expire
on or before December 23, 2011.
0
Par. 4. Section 31.6011(a)-4 is amended by revising paragraph (a)(1)
and adding paragraph (d) to read as follows:
Sec. 31.6011(a)-4 Returns of income tax withheld.
(a) * * * (1) [Reserved]. For further guidance, see Sec.
31.6011(a)-4T(a)(1).
* * * * *
(d) [Reserved]. For further guidance, see Sec. 31.6011(a)-4T(d).
0
Par. 5. Section 31.6011(a)-4T is revised to read as follows:
Sec. 31.6011(a)-4T Returns of income tax withheld (temporary).
(a) Withheld from wages--(1) In general. Except as otherwise
provided in Sec. 31.6011(a)-4(a)(2), (a)(3), (a)(4), and (b), and in
Sec. 31.6011(a)-5, every person required to make a return of income
tax withheld from wages pursuant to section 3402 shall make a return
for the first calendar quarter in which the person is required to
deduct and withhold such tax and for each subsequent calendar quarter,
whether or not wages are paid therein, until the person has filed a
final return in accordance with Sec. 31.6011(a)-6. Except as otherwise
provided in Sec. 31.6011(a)-4(a)(2), (a)(3), (a)(4) and (b), and in
Sec. 31.6011(a)-8, Form 941, ``Employer's QUARTERLY Federal Tax
Return,'' is the form prescribed for making the return required under
this paragraph (a)(1).
(a)(2) through (a)(3) [Reserved]. For further guidance, see Sec.
31.6011(a)-4(a)(2) through (a)(3).
(4) Employers in the Employers' Annual Federal Tax Program (Form
944)--(i) In general. Employers notified of their qualification for the
Employers' Annual Federal Tax Program (Form 944) are required to file
Form 944, ``Employer's ANNUAL Federal Tax Return,'' instead of Form 941
to make a return of income tax withheld from wages pursuant to section
3402. Upon proper request by the employer, the Internal Revenue Service
(IRS) will notify employers in writing of their qualification for the
Employers' Annual Federal Tax Program (Form 944). Qualified employers
are those with an estimated annual employment tax liability (that is,
social security, Medicare, and withheld federal income taxes) of $1,000
or less for the entire calendar year, except employers required under
Sec. 31.6011(a)-4(a)(2) to make a return on Schedule H (Form 1040),
``Household Employment Taxes,'' or Sec. 31.6011(a)-4(a)(3) to make a
return on Form 943, ``Employer's Annual Federal Tax Return For
Agricultural Employees.'' The IRS may increase the amount of the
estimated annual employment tax liability that qualifies employers to
file Form 944 through a revenue procedure, notice or other IRS guidance
published in the Internal Revenue Bulletin. The IRS will notify
employers when they no longer qualify for the Employers' Annual Federal
Tax Program (Form 944) and must file Forms 941 instead.
(ii) Request to participate and eligibility to opt out of the
Employers' Annual Federal Tax Program (Form 944). The IRS will
establish procedures in a revenue procedure, notice, or other IRS
guidance published in the Internal Revenue Bulletin for employers to
follow to request to receive notification to participate in the
Employers' Annual Federal Tax Program (Form 944) and to be removed from
the Employers' Annual Federal Tax Program (Form 944) after becoming a
participant in order to file Forms 941 instead.
(b) through (c) [Reserved]. For further guidance, see Sec.
31.6011(a)-4(b) through (c).
(d) Effective/applicability dates--(1) In general. Paragraphs
(a)(1) and (a)(4) of this section apply to taxable years beginning on
or after December 30, 2008. The rules of paragraph (a)(1) of this
section that apply to taxable years beginning before December 30, 2008,
are contained in Sec. 31.6011(a)-4. The rules of paragraph (a)(4) of
this section that apply to taxable years beginning before December 30,
2008, are contained in Sec. 31.6011(a)-4T in effect prior to December
30, 2008.
(2) Expiration date. The applicability of this section will expire
on or before December 23, 2011.
0
Par. 6. Section 31.6302-0 is amended by revising the entries for Sec.
31.6302-1(f)(4)(i), (g)(1) and (n) to read as follows:
Sec. 31.6302-0 Table of contents.
* * * * *
Sec. 31.6302-1 Federal tax deposit rules for withheld income taxes
and taxes under the Federal Insurance Contributions Act (FICA)
attributable to payments made after December 31, 1992.
* * * * *
(f) * * *
(4) * * *
(i) [Reserved]. For further guidance, see Sec. 31.6302-0T, the
entry for Sec. 31.6302-1T(f)(4)(i).
* * * * *
(g) * * *
(1) [Reserved]. For further guidance, see Sec. 31.6302-0T, the
entry for Sec. 31.6302-1T(g)(1).
* * * * *
(n) [Reserved]. For further guidance, see Sec. 31.6302-0T, the
entry for Sec. 31.6302-1T(n).
0
Par. 7. Section 31.6302-0T is added to read as follows:
Sec. 31.6302-0T Table of contents (temporary).
This section lists the captions that appear in Sec. 31.6302-1T.
[[Page 79359]]
Section 31.6302-1T Federal tax deposit rules for withheld income taxes
and taxes under the Federal Insurance Contributions Act (FICA)
attributable to payments made after December 31, 1992 (temporary).
(a) through (b)(3) [Reserved]. For further guidance, see Sec.
31.6302-0, the entries for Sec. 31.6302-1(a) through (b)(3).
(4) Lookback period.
(i) In general.
(ii) Adjustments and claims for refund.
(c)(1) through (c)(4) [Reserved]. For further guidance, see Sec.
31.6302-0, the entries for Sec. 31.6302-1(c)(1) through (c)(4).
(c)(5) Exception to the monthly and semi-weekly deposit rules for
employers in the Employers' Annual Federal Tax Program (Form 944).
(c)(6) Extension of time to deposit for employers in the Employers'
Annual Federal Tax Program (Form 944) during the preceding year.
(d) Examples 1 through 5 [Reserved]. For further guidance, see
Sec. 31.6302-0, the entries for Sec. 31.6302-1(d) Examples 1 through
5.
Example 6. Extension of time to deposit for employers in the
Employer's Annual Federal Tax Program (Form 944) during the preceding
year satisfied.
(e) through (f)(3) [Reserved]. For further guidance, see Sec.
31.6302-0, the entries for Sec. 31.6302-1(e) through (f)(3).
(4) De minimis rule.
(i) De minimis deposit rules for quarterly and annual return
periods beginning or after January 1, 2001.
(ii) De minimis deposit rule for quarterly return periods beginning
on or after January 1, 2010.
(iii) De minimis deposit rule for employers who file Form 944.
(f)(5) Examples 1 and 2 [Reserved]. For further guidance, see Sec.
31.6302-0, the entries for Sec. 31.6302-1(f)(5) Examples 1 and 2.
Example 3. De minimis deposit rule for employers who file Form 944
satisfied.
(g) [Reserved]. For further guidance, see Sec. 31.6302-0, the
entry for Sec. 31.6302-1(g).
(1) In general.
(g)(2) through (m) [Reserved]. For further guidance, see Sec.
31.6302-0, the entries for Sec. 31.6302-1(g)(2) through (m).
(n) Effective/applicability dates.
0
Par. 8. Section 31.6302-1 is amended by revising paragraphs (e)(2),
(f)(4)(i), (g)(1) and (n) and adding paragraph (f)(4)(ii) to read as
follows:
* * * * *
(e) * * *
(2) [Reserved]. For further guidance, see Sec. 31.6302-1T(e)(2).
(f) * * *
(4) * * * (i) and (ii) [Reserved]. For further guidance, see Sec.
31.6302-1T(f)(4)(i) and (ii).
* * * * *
(g) * * * (1) [Reserved]. For further guidance, see Sec. 31.6302-
1T(g)(1).
* * * * *
(n) [Reserved]. For further guidance, see Sec. 31.6302-1T(n).
0
Par. 9. Section 31.6302-1T is revised to read as follows:
Sec. 31.6302-1T Federal tax deposit rules for withheld income taxes
and taxes under the Federal Insurance Contributions Act (FICA)
attributable to payments made after December 31, 1992 (temporary).
(a) through (b)(3) [Reserved]. For further guidance, see Sec.
31.6302-1(a) through (b)(3).
(4) Lookback period--(i) In general. For employers who file Form
941, ``Employer's QUARTERLY Federal Tax Return,'' the lookback period
for each calendar year is the twelve month period ended the preceding
June 30. For example, the lookback period for calendar year 2006 is the
period July 1, 2004, to June 30, 2005. The lookback period for
employers who file Form 944, ``Employer's ANNUAL Federal Tax Return,''
or filed Form 944 either of the two previous calendar years, is the
second calendar year preceding the current calendar year. For example,
the lookback period for calendar year 2006 is calendar year 2004. In
determining status as either a monthly or semi-weekly depositor, an
employer should determine the aggregate amount of employment tax
liabilities reported on its return(s) (Form 941 or Form 944) for the
lookback period. The amount of employment tax liabilities reported for
the lookback period is the amount the employer reported on either Form
941 or Form 944 even if the employer is required to file the other
form(s) for the current calendar year. New employers shall be treated
as having employment tax liabilities of zero for any part of the
lookback period before the date the employer started or acquired its
business.
(ii) Adjustments and claims for refund. The employment tax
liability reported on the original return for the return period is the
amount taken into account in determining whether the aggregate amount
of employment taxes reported for the lookback period exceeds $50,000.
Any amounts reported on adjusted returns or claims for refund pursuant
to sections 6205, 6402, 6413 and 6414 filed after the due date of the
original return are not taken into account when determining the
aggregate amount of employment taxes reported for the lookback period.
However, prior period adjustments reported on Forms 941 or 944 for 2008
and earlier years are taken into account in determining the employment
tax liability for the return period in which the adjustments are
reported.
(c)(1) through (c)(4) [Reserved]. For further guidance, see Sec.
31.6302-1(c)(1) through (c)(4).
(5) Exception to the monthly and semi-weekly deposit rules for
employers in the Employers' Annual Federal Tax Program (Form 944).
Generally, an employer who files Form 944 for a taxable year may remit
its accumulated employment taxes with its timely filed return for that
taxable year and is not required to deposit under either the monthly or
semi-weekly rules set forth in Sec. 31.6302-1(c)(1) and (2) during
that taxable year. An employer who files Form 944 whose actual
employment tax liability exceeds the eligibility threshold, as set
forth in Sec. Sec. 31.6011(a)-1T(a)(5) and 31.6011(a)-4T(a)(4), will
not qualify for this exception and should follow the deposit rules set
forth in this section.
(6) Extension of time to deposit for employers in the Employers'
Annual Federal Tax Program (Form 944) during the preceding year. An
employer who filed Form 944 for the preceding year but will file Forms
941 instead for the current year will be deemed to have timely
deposited its current year's January deposit obligation(s) under Sec.
31.6302-1(c)(1) through (4) if the employer deposits the amount of such
deposit obligation(s) by March 15 of that year.
(d) Examples 1 through 5 [Reserved]. For further guidance, see
Sec. 31.6302-1(d) Examples 1 through 5.
Example 6. Extension of time to deposit for employers who filed
Form 944 for the preceding year satisfied. F (a monthly depositor)
was notified to file Form 944 to report its employment tax
liabilities for the 2006 calendar year. F filed Form 944 on January
31, 2007, reporting a total employment tax liability for 2006 of
$3,000. Because F's annual employment tax liability for the 2006
taxable year exceeded $1,000 (the applicable eligibility threshold
for that taxable year), the Internal Revenue Service (IRS) notified
F to file Forms 941 for calendar year 2007 and thereafter. Based on
F's liability during the lookback period (calendar year 2005,
pursuant to paragraph (b)(4)(i) of this section), F is a monthly
depositor for 2007. F accumulates $1,000 in employment taxes during
January 2007. Because F is a monthly depositor, F's January deposit
obligation is due February 15, 2007. F does not deposit these
accumulated employment taxes on February 15, 2007. F accumulates
$1,500 in employment taxes during February 2007. F's February
deposit is due March 15, 2007. F deposits the $2,500 of employment
taxes accumulated during January and
[[Page 79360]]
February on March 15, 2007. Pursuant to Sec. 31.6302-1(c)(6), F
will be deemed to have timely deposited the employment taxes due for
January 2007, and, thus, the IRS will not impose a failure-to-
deposit penalty under section 6656 for that month.
(e)(1) [Reserved]. For further guidance, see Sec. 31.6302-1(e)(1).
(2) The term employment taxes does not include taxes with respect
to wages for domestic service in a private home of the employer, unless
the employer is otherwise required to file a Form 941 or Form 944 under
Sec. 31.6011(a)-4, Sec. 31.6011(a)-4T, or Sec. 31.6011(a)-5. In the
case of employers paying advance earned income credit amounts, the
amount of taxes required to be deposited shall be reduced by advance
amounts paid to employees. Also, see Sec. 31.6302-3 concerning a
taxpayer's option with respect to payments made before January 1, 1994,
to treat backup withholding amounts under section 3406 separately.
(f)(1) through (f)(3) [Reserved]. For further guidance, see Sec.
31.6302-1(f)(1) through (f)(3).
(4) De minimis rule--(i) De minimis deposit rules for quarterly and
annual return periods beginning on or after January 1, 2001. If the
total amount of accumulated employment taxes for the return period is
de minimis and the amount is fully deposited or remitted with a timely
filed return for the return period, the amount deposited or remitted
will be deemed to have been timely deposited. The total amount of
accumulated employment taxes is de minimis if it is less than $2,500
for the return period or if it is de minimis pursuant to paragraph
(f)(4)(ii) of this section.
(ii) De minimis deposit rule for quarterly return periods beginning
on or after January 1, 2010. For purposes of paragraph (f)(4)(i) of
this section, if the total amount of accumulated employment taxes for
the immediately preceding quarter was less than $2,500, unless Sec.
31.6302-1(c)(3) applies to require a deposit at the close of the next
banking day, then the employer will be deemed to have timely deposited
the employer's employment taxes for the current quarter if the employer
complies with the time and method payment requirements contained in
paragraph (f)(4)(i) of this section.
(iii) De minimis deposit rule for employers who file Form 944. An
employer who files Form 944 whose employment tax liability for the year
equals or exceeds $2,500 but whose employment tax liability for a
quarter of the year is de minimis pursuant to paragraph (f)(4)(i) of
this section will be deemed to have timely deposited the employment
taxes due for that quarter if the employer fully deposits the
employment taxes accumulated during the quarter by the last day of the
month following the close of that quarter. Employment taxes accumulated
during the fourth quarter can be either deposited by January 31 or
remitted with a timely filed return for the return period.
(5) Examples 1 and 2 [Reserved]. For further guidance, see Sec.
31.6302-1(f)(5) Examples 1 and 2.
Example 3. De minimis deposit rule for employers who file Form
944 satisfied. K (a monthly depositor) was notified to file Form 944
to report its employment tax liabilities for the 2006 calendar year.
In the first quarter of 2006, K accumulates employment taxes in the
amount of $1,000. On April 28, 2006, K deposits the $1,000 of
employment taxes accumulated in the 1st quarter. K accumulates
another $1,000 of employment taxes during the second quarter of
2006. On July 31, 2006, K deposits the $1,000 of employment taxes
accumulated in the 2nd quarter. K's business grows and accumulates
$1,500 in employment taxes during the third quarter of 2006. On
October 31, 2006, K deposits the $1,500 of employment taxes
accumulated in the 3rd quarter. K accumulates another $2,000 in
employment taxes during the fourth quarter. K files Form 944 on
January 31, 2007, reporting a total employment tax liability for
2006 of $5,500 and submits a check for the remaining $2,000 of
employment taxes with the return. K will be deemed to have timely
deposited the employment taxes due for all of 2006, because K
complied with the de minimis deposit rule provided in paragraph
(f)(4)(iii) of this section. Therefore, the IRS will not impose a
failure-to-deposit penalty under section 6656 for any month of the
year. Under this de minimis deposit rule, as K was required to file
Form 944 for calendar year 2006, if K's employment tax liability for
a quarter is de minimis, then K may deposit that quarter's liability
by the last day of the month following the close of the quarter.
This de minimis rule allows K to have the benefit of the same
quarterly de minimis amount K would have received if K filed Form
941 each quarter instead of Form 944 annually. Thus, as K's
employment tax liability for each quarter was de minimis, K could
deposit quarterly.
(g) Agricultural employers--special rules--(1) In general. An
agricultural employer reports wages paid to farm workers annually on
Form 943 (Employer's Annual Tax Return for Agricultural Employees) and
reports wages paid to nonfarm workers quarterly on Form 941 or annually
on Form 944. Accordingly, an agricultural employer must treat
employment taxes reportable on Form 943 (``Form 943 taxes'') separately
from employment taxes reportable on Form 941 or Form 944 (``Form 941 or
Form 944 taxes''). Form 943 taxes and Form 941 or Form 944 taxes are
not combined for purposes of determining whether a deposit of either is
due, whether the One-Day rule of Sec. 31.6302-1(c)(3) applies, or
whether any safe harbor is applicable. In addition, separate Federal
tax deposit coupons must be used to deposit Form 943 taxes and Form 941
or Form 944 taxes. (See Sec. 31.6302-1(b) for rules for determining an
agricultural employer's deposit status for Form 941 taxes.) The
determination of whether an agricultural employer is a monthly or semi-
weekly depositor of Form 943 taxes is made according to the rules of
this paragraph (g).
(g)(2) through (m) [Reserved]. For further guidance, see Sec.
31.6302-1(g)(2) through (m).
(n) Effective/applicability dates--(1) In general. Sections
31.6302-1 through 31.6302-3 apply with respect to the deposit of
employment taxes attributable to payments made after December 31, 1992.
To the extent that the provisions of Sec. Sec. 31.6302-1 through
31.6302-3 are inconsistent with the provisions of Sec. Sec.
31.6302(c)-1 and 31.6302(c)-2, a taxpayer will be considered to be in
compliance with Sec. Sec. 31.6301-1 through 31.6302-3 if the taxpayer
makes timely deposits during 1993 in accordance with Sec. Sec.
31.6302(c)-1 and 31.6302(c)-2. Paragraphs (b)(4), (c)(5), (c)(6), (d)
Example 6, (e)(2), (f)(4)(i), (f)(4)(iii), (f)(5) Example 3, and (g)(1)
of this section apply to taxable years beginning on or after December
30, 2008. Paragraph (f)(4)(ii) of this section applies to taxable years
beginning on or after January 1, 2010. The rules of paragraphs (e)(2)
and (g)(1) of this section that apply to taxable years beginning before
December 30, 2008, are contained in Sec. 31.6302-1 in effect prior to
December 30, 2008. The rules of paragraphs (b)(4), (c)(5), (c)(6), (d)
Example 6, (f)(4)(i), (f)(4)(iii), and (f)(5) Example 3 of this section
that apply to taxable years beginning on or after January 1, 2006 and
before December 30, 2008, are contained in Sec. 31.6302-1T in effect
prior to December 30, 2008. The rules of paragraphs (b)(4) and (f)(4)
of this section that apply to taxable years beginning before January 1,
2006, are contained in Sec. 31.6302-1 in effect prior to January 1,
2006.
[[Page 79361]]
(2) Expiration date. The applicability of this section will expire
on or before December 23, 2011.
Linda E. Stiff,
Deputy Commissioner for Services and Enforcement.
Approved: December 18, 2008.
Eric Solomon,
Assistant Secretary of the Treasury (Tax Policy).
[FR Doc. E8-30582 Filed 12-24-08; 8:45 am]
BILLING CODE 4830-01-P