[Federal Register Volume 75, Number 234 (Tuesday, December 7, 2010)]
[Rules and Regulations]
[Pages 75897-75904]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-30526]



[[Page 75897]]

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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Parts 1, 31, 40, and 301

[TD 9507]
RIN 1545-BJ13


Electronic Funds Transfer of Depository Taxes

AGENCY: Internal Revenue Service, Treasury.

ACTION: Temporary and final regulations.

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SUMMARY: This document contains temporary and final regulations 
relating to Federal tax deposits (FTDs) by Electronic Funds Transfer 
(EFT). In response to the decision of the Financial Management Service 
to discontinue the system that processes FTD coupons, the temporary and 
final regulations provide rules under which depositors must use EFT for 
all FTDs and eliminate the rules regarding FTD coupons. The temporary 
and final regulations affect all taxpayers that are required to make 
FTDs, in particular those taxpayers that currently use FTD coupons.

DATES: Effective Date: These regulations are effective on January 1, 
2011.
    Applicability Date: For dates of applicability, see Sec. Sec.  
1.6302-1(d), 1.6302-2(g), 1.6302-3(d), 1.6302-4(b), 31.6071(a)-1(g), 
31.6302-1(o), 31.6302-1T(n), 31.6302-2(d), 31.6302-4(e), 31.6302(c)-
3(c), 40.6302(c)-1(f), 40.6302(c)-2(c), 40.6302(c)-3(g), 301.6302-1(c), 
and 301.6656-1(c).

FOR FURTHER INFORMATION CONTACT: Michael E. Hara, (202) 622-4910 (not a 
toll-free number).

SUPPLEMENTARY INFORMATION:

Background

    This document contains final regulations amending the Income Tax 
Regulations (26 CFR part 1) and the Regulations on Procedure and 
Administration (26 CFR part 301), and temporary and final regulations 
amending the Employment Tax and Collection of Income Tax at Source 
Regulations (26 CFR part 31), and the Excise Tax Procedural Regulations 
(26 CFR part 40), to require the use of EFT for all FTDs and to 
eliminate the rules regarding FTD coupons.
    On August 23, 2010, the Treasury Department and IRS published in 
the Federal Register (75 FR 51707) proposed amendments to the 
regulations (REG-153340-09) to require EFT for all FTDs and to 
eliminate the rules regarding FTD coupons. Written public comments 
responding to the proposed regulations were received. No public hearing 
was held because the IRS did not receive any requests to speak at the 
public hearing.
    After consideration of all the comments, the proposed regulations 
are adopted as revised by this Treasury decision.

Explanation of Provisions and Summary of Comments

1. Burden on Small Businesses

    Many commentators expressed the concern that eliminating FTD 
coupons would burden small businesses. To help alleviate this perceived 
burden on small business, the regulations do not change the existing de 
minimis deposit rules allowing taxpayers with tax liabilities under 
certain thresholds to make a payment with a return. For example, under 
the de minimis deposit rules for employment taxes, that is, social 
security taxes, Medicare taxes, and withheld income taxes, an employer 
with a deposit liability of less than $2,500 for a return period may 
(1) Remit employment taxes with their quarterly or annual tax return, 
(2) voluntarily make deposits by EFT, or (3) use other methods of 
payment as provided by the instructions relating to the return.
    Several commentators asserted that many small businesses will have 
difficulty using EFT because they lack computers or internet access. 
Businesses without a computer may use the ACH debit option, which 
requires only a telephone call, to schedule a payment through the 
Electronic Federal Tax Payment System (EFTPS), an authorized method of 
EFT pursuant to Sec.  31.6302-1(h)(4). To assist taxpayers new to 
EFTPS, United States-based live operator customer support is available 
toll-free 24 hours a day, year-round.
    A commentator stated that requiring EFTPS will likely result in an 
increase in user errors based on taxpayers' computer illiteracy. 
Another commentator stated that requiring EFTPS will produce excessive 
costs in payment delays and requests for penalty abatement. According 
to IRS research, however, employers who pay electronically are 31 times 
less likely to make an error that results in interest or penalties than 
employers who use FTD coupons.
    Several commentators expressed a reluctance to move away from the 
FTD coupon system based on taxpayers' familiarity with the current 
system and the relationships they have developed with their local 
banks. In deciding to discontinue the FTD coupon system, the Financial 
Management Service (FMS) considered current market conditions. In the 
last 18 months, more than 100 financial institutions, large and small, 
have stopped accepting FTD coupons. In many states, few financial 
institutions still process FTD coupons. Additionally, many states now 
require employers to file or pay their state business taxes 
electronically.

2. Alternative Payment Methods

    Several commentators requested continued use of FTD coupons or the 
availability of alternative payment methods. These final regulations 
conform to the decision by FMS to eliminate the system that enables the 
processing of FTD coupons. As discussed above, many financial 
institutions no longer accept FTD coupons. If businesses are unwilling 
or unable to use EFTPS, they can arrange for a tax professional, 
financial institution, payroll service, or other trusted third party to 
make a deposit on their behalf using a master account. Businesses also 
can arrange for their financial institution to initiate a same-day tax 
wire payment on their behalf.
    One commentator requested that the IRS continue to allow taxpayers 
to make payments by sending a check or money order to an IRS address 
when a new entity has applied for, but has not received, an employer 
identification number (EIN). The time it takes to receive an EIN, 
however, should no longer be an impediment to using EFTPS. Businesses 
within the United States or U.S. territories can apply for an EIN 
online using the IRS Web site. Once the application is completed, the 
information is validated during the online session, and an EIN is 
issued immediately. United States and international applicants may also 
obtain an EIN instantly using the telephone.

3. Raising the De Minimis Amounts

    Several commentators requested raising the de minimis amounts above 
$2,500 for payments that may be made with a return. The de minimis 
deposit rules, however vary according to the type of tax involved. For 
example, the de minimis threshold is less than $2,500 per quarter for 
Form 720, Quarterly Federal Excise Tax Return, under Sec.  40.6302(c)-
1(e)(3), but less than $200 per calendar year for Form 1042, Annual 
Withholding Tax Return for U.S. Source Income of Foreign Persons, under 
Sec.  1.6302-2(a)(1)(iv). Changing the existing de minimis deposit 
rules would create additional complexity and confusion for taxpayers, 
would upset the current established regulatory scheme, and unduly 
complicate enforcement of EFTPS.

[[Page 75898]]

4. Security and Distrust of Electronic Payment Systems

    Several commentators expressed a distrust of electronic payment 
systems and their security. EFTPS is a safe and secure tax payment 
system. Online payments require three unique types of information for 
authentication: a Taxpayer Identification Number, a Personal 
Identification Number (PIN), and an Internet password. EFTPS provides 
an instant, printable confirmation number for every payment scheduled. 
Payments scheduled by phone require a taxpayer identification number 
and a PIN. Taxpayers who schedule an FTD by phone will receive an eight 
digit acknowledgement number for future reference.
    Moreover, IRS will only receive confirmation that the payment was 
made. The IRS will not have access to any taxpayer's financial account. 
Businesses that do not wish to use EFTPS can arrange for their tax 
professional, financial institution, payroll service, or other trusted 
third party to make an FTD on their behalf using a master account. 
Businesses also may arrange for their financial institution to initiate 
a same-day tax wire payment for them.

5. EFTPS Registration

    Several commentators asserted that EFTPS registration is time-
consuming, should be easier to use, and should make EFTPS available 
immediately. All taxpayers now using FTD coupons will be pre-enrolled 
in Treasury's free EFTPS. When they receive notification of pre-
enrollment, they can use the phone or Internet to activate their PIN, 
enter their financial account information, and begin scheduling 
payments on the same day.
    One commentator asked the IRS to change the EFTPS enrollment 
process to include a variable to identify fiscal tax year taxpayers 
because EFTPS sometimes rejects payments by entities that operate on a 
fiscal tax year due to tax year-end mismatches. This suggestion was not 
adopted because the IRS already autocorrects payments for fiscal year 
taxpayers. When a taxpayer schedules an FTD through EFTPS, the system 
will ask the taxpayer to select the year and quarter to which the 
payment should be applied. This process should ensure that EFTPS 
payments are applied correctly.

6. Foreign Taxpayers

    One commentator stated that U.S. banks are reluctant to open U.S. 
bank accounts for foreign corporations. Another commentator asserted 
that it is difficult for a U.S. citizen residing abroad to open or 
maintain a U.S. bank account. This commentator suggested that the IRS 
adapt the registration form and EFTPS software to allow for payments to 
the IRS from foreign bank accounts, and that the Treasury Department 
and IRS issue regulations requiring U.S. banks to open U.S. bank 
accounts for U.S. citizens residing abroad with a foreign address. 
These suggestions were not adopted. Foreign taxpayers may arrange for 
their financial institution to initiate a same-day wire payment on 
their behalf. Foreign taxpayers may also arrange for their qualified 
intermediary, tax professional, payroll service, or other trusted third 
party to make a deposit on their behalf using a master account.

7. One-Day Rule

    A commentator requested clarification of the One-Day Rule in Sec.  
31.6302-1(c) and Example 4 in Sec.  31.6302-1(d). The commentator 
argued that the One-Day Rule should be applied only when an employer 
has accumulated $100,000 or more in undeposited employment taxes within 
the deposit period applicable to its status as a monthly or semi-weekly 
depositor and that Example 4 should be modified consistent with this 
result. These suggestions were not adopted. The commentator 
misinterprets the existing rules, which use accumulated taxes rather 
than undeposited taxes to determine the application of the One-Day 
rule. The proposed rules merely updated the existing rules and examples 
to be consistent with the elimination of the FTD coupon system and did 
not modify this aspect of the existing rules.
    Example 4 in the proposed regulations correctly illustrates how the 
One-Day Rule applies in combination with a subsequent deposit 
obligation. Example 4 involves Employer D, a depositor subject to the 
semi-weekly rule for calendar year 2011. On Monday, January 10, 2011, D 
accumulates $115,000 in employment taxes. Because D has accumulated 
$100,000 or more in employment taxes, the One-Day Rule applies, and D 
therefore must deposit the $115,000 in employment taxes by the next 
business day, which is Tuesday, January 11, 2011. On Tuesday, January 
11, 2011, D accumulates an additional $30,000 in employment taxes. 
Because the $115,000 in employment taxes accumulated on Monday is 
already subject to the One-Day Rule, there are no other accumulated 
taxes to be taken into account in determining D's deposit obligation 
for the additional $30,000 in employment taxes accumulated on Tuesday. 
Therefore, D has an additional and separate deposit obligation of 
$30,000 on Tuesday that must be satisfied by the following Friday. This 
example is adopted in the final regulations without change.

8. Delay the January 1, 2011 Effective Date

    Several commentators requested a delay in the effective date of 
these temporary and final regulations. These regulations implement the 
decision of FMS to eliminate the system that enables the processing of 
FTD coupons as of January 2011. In order to facilitate the transition 
from FTD coupons, all taxpayers now using coupons will be pre-enrolled 
in EFTPS. The IRS has begun notifying taxpayers of the upcoming changes 
and, upon publication of these regulations, will increase efforts to 
notify affected taxpayers of the EFT requirement. Since April 2010, the 
Department of Treasury and IRS have been reaching out to critical 
external stakeholders, including the Small Business Administration and 
financial institutions and their associations, about the pending FTD 
changes, and will continue to offer informational sessions and free 
marketing materials to assist external stakeholders in informing and 
educating taxpayers about the new requirements.

9. Business Days and Legal Holidays

    Prior to the advent of EFTPS, taxpayers made FTDs using an FTD 
coupon at a government depository bank. Because FTDs could only be made 
on days the banks were open, the timeliness of deposits under section 
6302 was determined by reference to banking days. Furthermore, because 
many banks are closed on statewide legal holidays, the IRS treated 
statewide legal holidays as legal holidays in determining the 
timeliness of deposits.
    Since a taxpayer will no longer be able to use a government 
depository bank to make an FTD using an FTD coupon, these regulations 
remove references to ``banking days'' and instead determine the 
timeliness of deposits by reference to ``business days,'' meaning every 
calendar day that is not a Saturday, Sunday, or legal holiday under 
section 7503. Additionally, because EFTPS is available 24 hours a day, 
seven days a week, the final regulations provide that, consistent with 
section 7503, the term ``legal holiday'' for FTD purposes includes only 
those legal holidays in the District of Columbia. Thus, a statewide 
legal holiday will no longer be considered a legal holiday unless the 
holiday coincides with a legal holiday in the District of Columbia. The 
following days

[[Page 75899]]

are currently legal holidays in the District of Columbia: New Year's 
Day, Birthday of Martin Luther King, Jr., Washington's Birthday, 
District of Columbia Emancipation Day, Memorial Day, Independence Day, 
Labor Day, Columbus Day, Veteran's Day, Thanksgiving Day, Christmas 
Day, and the day of the inauguration of the President, in every fourth 
year. The final regulations include several minor changes from the 
proposed regulations to reflect this application of the legal holiday 
rule and provide an additional example to illustrate it. See Sec.  
31.6302-1(d) Example 5.
    A separate notice is being issued with these final regulations to 
provide transitional relief. Notice 2010--states that the IRS will not 
assert penalties for FTDs made in 2011 that would be considered timely 
if statewide legal holidays were taken into account.

10. Other Differences From the Proposed Regulations

    In addition to the changes described earlier in this preamble, the 
final regulations include four minor revisions that vary from the text 
of the proposed regulations. Sections 31.6071(a)-1(a) and (c) are 
revised, consistent with the intent of the proposed regulations, to 
eliminate the rules for FTD coupons. The table of contents in Sec.  
31.6302-0 was updated to reflect the changes to the regulation 
headings. The heading to Sec.  40.6302(c)-1T has been revised to remove 
the reference to government depositaries. Additionally, Sec.  
40.6302(c)-3 is further revised to illustrate the computation of the 
three business day rule for excise taxes when an intervening day is a 
holiday consistent with the rules in Sec.  31.6302-1(c)(2)(iii) for 
employment taxes.

Special Analyses

    It has been determined that this final rule 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 and because these regulations do 
not impose a collection of information on small entities, the 
Regulatory Flexibility Act (5 U.S.C. chapter 6) does not apply.
    Pursuant to section 7805(f) of the Code, the notice of proposed 
rulemaking preceding these regulations was submitted to the Chief 
Counsel for Advocacy of the Small Business Administration for comment 
on its impact on small business.

Drafting Information

    The principal author of these final regulations is Michael E. Hara, 
Office of the Associate Chief Counsel (Procedure and Administration).

List of Subjects

26 CFR Part 1

    Income taxes, Reporting and recordkeeping requirements.

26 CFR Part 31

    Employment taxes, Income taxes, Penalties, Pensions, Railroad 
retirement, Reporting and recordkeeping requirements, Social Security, 
Unemployment compensation.

26 CFR Part 40

    Excise taxes, Reporting and recordkeeping requirements.

26 CFR Part 301

    Employment taxes, Estate taxes, Excise taxes, Gift taxes, Income 
taxes, Penalties, Reporting and recordkeeping requirements.

Amendments to the Regulations

0
Accordingly, 26 CFR parts 1, 31, 40, and 301 are amended as follows:

PART 1--INCOME TAXES

0
Paragraph 1. The authority citation for part 1 is amended by revising 
the entries for sections 1.6302-1 through 1.6302-4 to read in part as 
follows:

    Authority:  26 U.S.C. 7805 * * *
    Sections 1.6302-1, 1.6302-2, 1.6302-3 and 1.6302-4 also issued 
under 26 U.S.C. 6302(h). * * *


0
Par. 2. Section 1.1461-1 is amended by revising paragraph (a)(1), first 
sentence, to read as follows:


Sec.  1.1461-1  Payment and returns of tax withheld.

    (a) Payment of withheld tax--(1) Deposits of tax. Every withholding 
agent who withholds tax pursuant to chapter 3 of the Internal Revenue 
Code (Code) and the regulations under such chapter shall deposit such 
amount of tax as provided in Sec.  1.6302-2(a). * * *
* * * * *

0
Par. 3. Section 1.6302-1 is amended by:
0
1. Revising the heading.
0
2. Revising paragraph (a).
0
3. Removing paragraph (b)(1), redesignating paragraph (b)(2) as 
paragraph (b), and revising the heading for paragraph (b).
0
4. Removing paragraph (c).
0
5. Redesignating paragraph (d) as paragraph (c).
0
6. Adding paragraph (d).
    The revisions and additions read as follows:


Sec.  1.6302-1  Deposit rules for corporation income and estimated 
income taxes and certain taxes of tax-exempt organizations.

    (a) Requirement. A corporation, any organization subject to the tax 
imposed by section 511, and any private foundation subject to the tax 
imposed by section 4940, shall deposit all payments of tax imposed by 
chapter 1 of the Internal Revenue Code (or treated as so imposed by 
section 6154(h)), including any payments of estimated tax, on or before 
the date otherwise prescribed for paying such tax. This paragraph (a) 
does not apply to a foreign corporation or entity that has no office or 
place of business in the United States.
    (b) Deposits by electronic funds transfer. * * *
* * * * *
    (d) Effective/applicability date. This section applies to deposits 
and payments made after December 31, 2010.

0
Par. 4. Section 1.6302-2 is amended by:
0
1. Revising the heading.
0
2. Revising paragraphs (a)(1)(i), (ii), and (iv).
0
3. Revising the heading for paragraph (b).
0
4. Revising paragraph (b)(1).
0
5. Removing paragraph (b)(6).
0
6. Adding a sentence to the end of paragraph (g).
    The revisions and additions read as follows:


Sec.  1.6302-2  Deposit rules for tax withheld on nonresident aliens 
and foreign corporations.

    (a) Time for making deposits--(1) Deposits--(i) Monthly deposits. 
Except as provided in paragraphs (a)(1)(ii) and (iv) of this section, 
every withholding agent that, pursuant to chapter 3 of the Internal 
Revenue Code, has accumulated at the close of any calendar month an 
aggregate amount of undeposited taxes of $200 or more shall deposit 
such aggregate amount by the 15th day of the following month. However, 
the preceding sentence shall not apply if the withholding agent has 
made a deposit of taxes pursuant to paragraph (a)(1)(ii) of this 
section to a quarter-monthly period that occurred during such month. If 
the 15th day of the following month is a Saturday, Sunday, or legal 
holiday in the District of Columbia under section 7503, taxes will be 
treated as timely deposited if deposited on the next succeeding day 
which is not a Saturday, Sunday, or legal holiday. With respect to 
section

[[Page 75900]]

1446, this section applies only to a publicly traded partnership 
described in Sec.  1.1446-4.
    (ii) Quarter-monthly deposits. If at the close of any quarter-
monthly period within a calendar month, the aggregate amount of 
undeposited taxes required to be withheld pursuant to chapter 3 of the 
Internal Revenue Code is $2,000 or more, the withholding agent shall 
deposit such aggregate amount within 3 business days after the close of 
such quarter-monthly period. Business days include every calendar day 
other than Saturdays, Sundays, or legal holidays in the District of 
Columbia under section 7503. If any of the three weekdays following the 
close of a quarter-monthly period is a legal holiday under section 
7503, the withholding agent has an additional day for each day that is 
a legal holiday by which to make the required deposit. For example, if 
the Monday following the close of a quarter-monthly period is New 
Year's Day, a legal holiday, the required deposit for the quarter-
monthly period is not due until the following Thursday rather than the 
following Wednesday.
* * * * *
    (iv) Annual deposits. If at the close of December of each calendar 
year, the aggregate amount of undeposited taxes required to be withheld 
pursuant to chapter 3 of the Internal Revenue Code is less than $200, 
the withholding agent may deposit such aggregate amount by March 15 of 
the following calendar year. If such aggregate amount is not so 
deposited, it shall be remitted in accordance with paragraph (a)(1) of 
Sec.  1.1461-1.
* * * * *
    (b) Manner of payment--(1) Payments not required by electronic 
funds transfer. A payment that is not required to be deposited by this 
section shall be made separately from a payment required by any other 
section. The payment may be submitted with the filed return. The 
timeliness of the payment will be determined by the date payment is 
received by the Internal Revenue Service at the place prescribed for 
filing by regulations or forms and instructions, or if section 7502(a) 
applies, by the date the payment is treated as received under section 
7502(a), or on the last day prescribed for filing the return 
(determined without regard to any extension of time for filing the 
return), whichever is later. Each withholding agent making payments 
under this section shall report on the return, for the period to which 
such payments are made, information regarding such payments according 
to the instructions that apply to such return.
* * * * *
    (g) * * * Paragraph (b)(1) of this section applies to deposits and 
payments made after December 31, 2010.

0
Par. 5. Section 1.6302-3 is amended by:
0
1. Revising the heading.
0
2. Revising paragraph (a).
0
3. Revising paragraph (c).
0
4. Adding paragraph (d).
    The revisions and additions read as follows:


Sec.  1.6302-3  Deposit rules for estimated taxes of certain trusts.

    (a) Requirement. A bank or other financial institution described in 
paragraph (b) of this section shall deposit all payments of estimated 
tax under section 6654(l) with respect to trusts for which such 
institution acts as a fiduciary by the date otherwise prescribed for 
paying such tax in the manner set forth in published guidance, 
publications, forms and instructions.
* * * * *
    (c) Cross-references. For the requirement to deposit estimated tax 
payments of taxable trusts by electronic funds transfer, see Sec.  
31.6302-1(h) of this chapter.
    (d) Effective/applicability date. This section applies to deposits 
and payments made after December 31, 2010.

0
Par. 6. Section 1.6302-4 is revised to read as follows:


Sec.  1.6302-4  Voluntary payments by electronic funds transfer.

    (a) Electronic funds transfer. Any person may voluntarily remit by 
electronic funds transfer any payment of tax imposed by subtitle A of 
the Internal Revenue Code, including any payment of estimated tax. Such 
payment must be made in the manner set forth in published guidance, 
publications, forms and instructions.
    (b) Effective/applicability date. This section applies to deposits 
and payments made after December 31, 2010.

PART 31--EMPLOYMENT TAXES AND COLLECTION OF INCOME TAX AT THE 
SOURCE

0
Par. 7. The authority citation for part 31 is amended by removing the 
entries for sections 31.6071-1, 31.6302-1 through 6302-3, 31.6302-3, 
31.6302-4, 31.6302(c)-2A and 31.6302(c)-3 and adding entries in 
numerical order to read in part as follows:

    Authority:  26 U.S.C. 7805 * * *
    Section 31.6071(a)-1 also issued under 26 U.S.C.6071.
* * * * *
    Section 31.6302-1 also issued under 26 U.S.C. 6302(a) and (h).
    Section 31.6302-1T also issued under 26 U.S.C. 6302(a) and (h).
    Section 31.6302-2, 31.6302-3, and 31.6302-4 also issued under 26 
U.S.C. 6302(a) and (h).
    Section 31.6302(c)-2A also issued under 26 U.S.C. 6157(d) and 
6302(a) and (h).
    Section 31.6302(c)-3 also issued under 26 U.S.C. 6302(a) and 
(h).* * *


0
Par. 8. Section 31.6071(a)-1 is amended by
0
1. Revising paragraphs (a)(1) and (c).
0
2. Adding paragraph (g).
    The revisions and the addition read as follows:


Sec.  31.6071(a)-1  Time for filing returns and other documents.

    (a) Federal Insurance Contributions Act and income tax withheld 
from wages and from nonpayroll payments--(1) Quarterly or annual 
returns. Except as provided in paragraph (a)(4) of this section, each 
return required to be made under Sec. Sec.  31.6011(a)-1 and 
31.6011(a)-1T, in respect of the taxes imposed by the Federal Insurance 
Contributions Act (26 U.S.C. 3101-3128), or required to be made under 
Sec. Sec.  31.6011(a)-4 and 31.6011(a)-4T, in respect of income tax 
withheld, shall be filed on or before the last day of the first 
calendar month following the period for which it is made. However, a 
return may be filed on or before the 10th day of the second calendar 
month following such period if timely deposits under section 6302(c) of 
the Code and the regulations have been made in full payment of such 
taxes due for the period.
* * * * *
    (c) Federal Unemployment Tax Act. Each return of the tax imposed by 
the Federal Unemployment Tax Act required to be made under Sec.  
31.6011(a)-3 shall be filed on or before the last day of the first 
calendar month following the period for which it is made. However, a 
return may be filed on or before the 10th day of the second calendar 
month following such period if timely deposits under section 6302(c) of 
the Code and the regulations thereunder have been made in full payment 
of such taxes due for the period.
* * * * *
    (g) Effective/applicability date. The elimination of the rules of 
paragraph (a) and (c) of this section regarding the timeliness of 
deposits apply to deposits and payments made after December 31, 2010.

[[Page 75901]]

Sec.  31.6302-0  [Amended]

0
Par. 9. Section 31.6302-0 is amended by revising the entries for Sec.  
31.6302-1(c), (c)(2), (c)(2)(iii), (c)(4), (h), (h)(2), (h)(2)(ii), 
(h)(2)(iii), (i), (i)(3), (j), (n), and Sec.  31.6302-2 (c) and (d), 
and by adding entries for Sec.  31.6302-1 (h)(2)(iv) and (o) and Sec.  
31.6302-4 to read as follows:


Sec.  31.6302-0  Table of Contents.

* * * * *


Sec.  31.6302-1  Deposit rules for taxes under the Federal Insurance 
Contributions Act (FICA) and withheld income taxes.

* * * * *
    (c) Deposit rules.
* * * * *
    (2) Semi-Weekly rule.
* * * * *
    (iii) Special rule for computing days.
* * * * *
    (4) Deposits required only on business days.
* * * * *
    (h) Time and manner of deposit--deposits required to be made by 
electronic funds transfer.
* * * * *
    (2) Applicability of requirement.
* * * * *
    (ii) Deposits for return periods beginning after December 31, 1999, 
and made before January 1, 2011.
    (iii) Deposits made after December 31, 2010.
    (iv) Voluntary deposits.
* * * * *
    (i) Time and manner of deposit.
* * * * *
    (3) Time deemed paid.
    (j) Voluntary payments by electronic funds transfer.
* * * * *
    (n) [Reserved]. For further guidance, see Sec.  31.6302-0T, the 
entry for Sec.  31.6302-1T(n).
    (o) Effective/Applicability date.


Sec.  31.6302-2  Deposit rules for taxes under the Railroad Retirement 
Tax Act (R.R.T.A.).

* * * * *
    (c) Modification of Monthly rule determination.
* * * * *
    (d) Effective/Applicability date.
* * * * *


Sec.  31.6302-4  Deposit rules for withheld income taxes attributable 
to nonpayroll taxes.

0
Par. 10. Section 31.6302-1 is amended by:
0
1. Revising the heading.
0
2. Revising paragraphs (c)(1), (c)(2), (c)(3), and (c)(4).
0
3. Revising paragraph (d), Example 1, Example 2, Example 3, Example 4, 
and Example 5.
0
4. Revising paragraph (h)(2)(ii).
0
5. Redesignating paragraph (h)(2)(iii) as paragraph (h)(2)(iv) and 
revising newly-designated paragraph (h)(2)(iv).
0
6. Adding new paragraphs (h)(2)(iii) and (iv).
0
7. Revising paragraph (i)(1) and (i)(3).
0
8. Removing paragraphs (i)(4), (i)(5) and (i)(6).
0
9. Adding paragraph (o).
    The revisions and additions read as follows:


Sec.  31.6302-1  Deposit rules for taxes under the Federal Insurance 
Contributions Act (FICA) and withheld income taxes.

* * * * *
    (c) Deposit rules--(1) Monthly rule. An employer that is a monthly 
depositor must deposit employment taxes accumulated with respect to 
payments made during a calendar month by electronic funds transfer by 
the 15th day of the following month. If the 15th day of the following 
month is a Saturday, Sunday, or legal holiday in the District of 
Columbia under section 7503, taxes will be treated as timely deposited 
if deposited on the next succeeding day which is not a Saturday, 
Sunday, or legal holiday.
    (2) Semi-Weekly rule--(i) In general. An employer that is a semi-
weekly depositor for a calendar year must deposit employment taxes by 
electronic funds transfer by the dates set forth below:

----------------------------------------------------------------------------------------------------------------
      Payment dates/semi-weekly periods                                   Deposit date
----------------------------------------------------------------------------------------------------------------
(A) Wednesday, Thursday and/or Friday........  On or before the following Wednesday.
(B) Saturday, Sunday, Monday and/or Tuesday..  On or before the following Friday.
----------------------------------------------------------------------------------------------------------------

     (ii) Semi-weekly period spanning two return periods. If the return 
period ends during a semi-weekly period in which an employer has two or 
more payment dates, two deposit obligations may exist. For example, if 
one quarterly return period ends on Thursday and a new quarterly return 
period begins on Friday, employment taxes from payments on Wednesday 
and Thursday are subject to one deposit obligation, and employment 
taxes from payments on Friday are subject to a separate deposit 
obligation. Two separate federal tax deposits are required.
    (iii) Special rule for computing days. Semi-weekly depositors have 
at least three business days following the close of the semi-weekly 
period by which to deposit employment taxes accumulated during the 
semi-weekly period. Business days include every calendar day other than 
Saturdays, Sundays, or legal holidays in the District of Columbia under 
section 7503. If any of the three weekdays following the close of a 
semi-weekly period is a legal holiday, the employer has an additional 
day for each day that is a legal holiday by which to make the required 
deposit. For example, if the Monday following the close of a Wednesday 
to Friday semi-weekly period is Memorial Day, a legal holiday, the 
required deposit for the semi-weekly period is not due until the 
following Thursday rather than the following Wednesday.
    (3) Exception--One-Day rule. Notwithstanding paragraphs (c)(1) and 
(c)(2) of this section, if on any day within a deposit period (monthly 
or semi-weekly) an employer has accumulated $100,000 or more of 
employment taxes, those taxes must be deposited by electronic funds 
transfer in time to satisfy the tax obligation by the close of the next 
day. If the next day is a Saturday, Sunday, or legal holiday in the 
District of Columbia under section 7503, the taxes will be treated as 
timely deposited if deposited on the next succeeding day which is not a 
Saturday, Sunday, or legal holiday. For purposes of determining whether 
the $100,000 threshold is met--
    (i) A monthly depositor takes into account only those employment 
taxes accumulated in the calendar month in which the day occurs; and
    (ii) A semi-weekly depositor takes into account only those 
employment taxes accumulated in the Wednesday-Friday or Saturday-
Tuesday semi-weekly period in which the day occurs.
    (4) Deposits required only on business days. No taxes are required 
to be deposited under this section on any day that is a Saturday, 
Sunday, or legal holiday. Deposits are required only on business days. 
Business days include every calendar day other than Saturdays, Sundays, 
or legal holidays. For purposes of this paragraph (c), legal holidays 
shall have the same meaning provided in section 7503. Pursuant to 
section 7503, the term legal holiday means a legal holiday in the 
District of Columbia. For purposes of this

[[Page 75902]]

paragraph (c), the term ``legal holiday'' does not include other 
Statewide legal holidays.
* * * * *
    (d) * * *
    Example 1. Monthly depositor. (i) Determination of status. For 
calendar year 2011, Employer A determines its depositor status using 
the lookback period July 1, 2009 to June 30, 2010. For the four 
calendar quarters within this period, A reported aggregate 
employment tax liabilities of $42,000 on its quarterly Forms 941. 
Because the aggregate amount did not exceed $50,000, A is a monthly 
depositor for the entire calendar year 2011.
    (ii) Monthly rule. During December 2011, A (a monthly depositor) 
accumulates $3,500 in employment taxes. A has a $3,500 deposit 
obligation that must be satisfied by the 15th day of the following 
month. Since January 15, 2012, is a Sunday, and January 16, 2012, 
Dr. Martin Luther King, Jr.'s Birthday, is a legal holiday, A's 
deposit obligation will be satisfied if the deposit is made by 
electronic funds transfer by the next business day, January 17, 
2012.

    Example 2. Semi-weekly depositor. (i) Determination of status. 
For the calendar year 2011, Employer B determines its depositor 
status using the lookback period July 1, 2009 to June 30, 2010. For 
the four calendar quarters within this period, B reported aggregate 
employment tax liabilities of $88,000 on its quarterly Forms 941. 
Because that amount exceeds $50,000, B is a semi-weekly depositor 
for the entire calendar year 2011.
    (ii) Semi-weekly rule. On Friday, January 7, 2011, B (a semi-
weekly depositor) has a pay day on which it accumulates $4,000 in 
employment taxes. B has a $4,000 deposit obligation that must be 
satisfied by the following Wednesday, January 12, 2011.
    (iii) Deposit made within three business days. On Friday, 
January 14, 2011, B (a semi-weekly depositor) has a pay day on which 
it accumulates $4,200 in employment taxes. Generally, B would have a 
required deposit obligation of employment taxes that must be 
satisfied by the following Wednesday, January 19, 2011. Because 
Monday, January 17, 2011, is Dr. Martin Luther King, Jr.'s Birthday, 
a legal holiday, B has an additional day to make the required 
deposit. B has a $4,200 deposit obligation that must be satisfied by 
the following Thursday, January 20, 2011.

    Example 3. One-Day rule. On Monday, January 10, 2011, Employer C 
accumulates $110,000 in employment taxes with respect to wages paid 
on that date. C has a deposit obligation of $110,000 that must be 
satisfied by the next business day. If C was not subject to the 
semi-weekly rule on January 10, 2011, C becomes subject to that rule 
as of January 11, 2011. See paragraph (b)(2)(ii) of this section.
    Example 4. One-Day rule in combination with subsequent deposit 
obligation. Employer D is subject to the semi-weekly rule for 
calendar year 2011. On Monday, January 10, 2011, D accumulates 
$115,000 in employment taxes. D has a deposit obligation that must 
be satisfied by the next business day. On Tuesday, January 11, D 
accumulates an additional $30,000 in employment taxes. Although D 
has a $115,000 deposit obligation incurred earlier in the semi-
weekly period, D has an additional and separate deposit obligation 
of $30,000 on Tuesday that must be satisfied by the following 
Friday.

    Example 5. Legal Holidays. Employer E conducts business in State 
X. Wednesday, August 31, 2011, is a statewide legal holiday in State 
X which is not a legal holiday in the District of Columbia. On 
Friday, August 26, 2011, E (a semi-weekly depositor) has a pay day 
on which it accumulates $4,000 in employment taxes. E has a $4,000 
deposit obligation that must be satisfied on or before the following 
Wednesday, August 31, 2011, notwithstanding that the day is a 
statewide legal holiday in State X.
* * * * *
    (h) * * *
    (2) * * *
    (ii) Deposits for return periods beginning after December 31, 1999, 
and made before January 1, 2011. Unless exempted under paragraph (h)(5) 
of this section, for deposits for return periods beginning after 
December 31, 1999, and made before January 1, 2011, a taxpayer that 
deposits more than $200,000 of taxes described in paragraph (h)(3) of 
this section during a calendar year beginning after December 31, 1997, 
must use electronic funds transfer (as defined in paragraph (h)(4) of 
this section) to make all deposits of those taxes that are required to 
be made for return periods beginning after December 31 of the following 
year and must continue to deposit by electronic funds transfer in all 
succeeding years. As an example, a taxpayer that exceeds the $200,000 
deposit threshold during calendar year 1998 is required to make 
deposits for return periods beginning in or after calendar year 2000 by 
electronic funds transfer.
    (iii) Deposits made after December 31, 2010. Unless exempted under 
paragraph (h)(5) of this section, a taxpayer that has a required tax 
deposit obligation described in paragraph (h)(3) of this section must 
use electronic funds transfer (as defined in paragraph (h)(4) of this 
section) to make all deposits of those taxes made after December 31, 
2010.
    (iv) Voluntary deposits. A taxpayer that is authorized to make 
payment of taxes with a return under regulations may voluntarily make a 
deposit by electronic funds transfer.
* * * * *
    (i) Time and manner of remittance with a return--(1) General rules. 
A remittance required to be made by this section that is authorized to 
be made with a return under regulations and is made with a return must 
be made separately from a remittance required by any other section. 
Further, a remittance for a deposit period in one return period must be 
made separately from a remittance for a deposit period in another 
return period.
* * * * *
    (3) Time deemed paid. In general, amounts remitted with a return 
under this section will be considered as paid on the date payment is 
received by the Internal Revenue Service at the place prescribed for 
filing by regulations or forms and instructions (or if section 7502(a) 
applies, by the date the payment is treated as received under section 
7502(a)), or on the last day prescribed for filing the return 
(determined without regard to any extension of time for filing the 
return), whichever is later. In the case of the taxes imposed by 
chapter 21 and 24 of the Internal Revenue Code, solely for purposes of 
section 6511 and the regulations thereunder (relating to the period of 
limitation on credit or refund), if an amount is remitted with a return 
under this section prior to April 15th of the calendar year immediately 
succeeding the calendar year that contains the period for which the 
amount was remitted, the amount will be considered paid on April 15th 
of the succeeding calendar year.
* * * * *
    (o) Effective/applicability date. Paragraphs (c), (d) Examples 1 
through 5, (h)(2)(ii), (h)(2)(iii), (h)(2)(iv),(i)(1) and (i)(3) of 
this section apply to deposits and payments made after December 31, 
2010.

0
Par. 11. Section 31.6302-1T is amended by revising paragraphs (g)(1) 
and (n)(1) 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).

* * * * *
    (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

[[Page 75903]]

addition, Form 943 taxes and Form 941 or Form 944 taxes must be 
deposited separately. (See Sec.  31.6302-1(b) for rules for determining 
an agricultural employer's deposit status for Form 941 taxes.) Whether 
an agricultural employer is a monthly or semi-weekly depositor of Form 
943 taxes is determined according to the rules of this paragraph (g).
* * * * *
    (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 before 
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 
before 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. The rules of paragraph (g) of this section eliminating use of 
Federal tax deposit coupons apply to deposits and payments made after 
December 31, 2010.
* * * * *

0
Par. 12. Section 31.6302-2 is amended by:
0
1. Revising the heading.
0
2. Revising paragraph (d).
    The revisions read as follows.


Sec.  31.6302-2  Deposit rules for taxes under the Railroad Retirement 
Tax Act (RRTA).

* * * * *
    (d) Effective/applicability date. This section applies to deposits 
and payments made after December 31, 2010.

0
Par. 13. Section 31.6302-4 is amended by:
0
1. Revising the heading.
0
2. Revising paragraph (d).
0
3. Adding paragraph (e).
    The revisions and additions read as follows:


Sec.  31.6302-4  Deposit rules for withheld income taxes attributable 
to nonpayroll payments.

* * * * *
    (d) Special rules. A taxpayer must treat nonpayroll withheld taxes, 
which are reported on Form 945, ``Annual Return of Withheld Federal 
Income Tax,'' separately from taxes reportable on Form 941, 
``Employer's QUARTERLY Federal Tax Return'' (or any other return, for 
example, Form 943, ``Employer's Annual Federal Tax Return for 
Agricultural Employees''). Taxes reported on Form 945 and taxes 
reported on Form 941 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, taxes reported on Form 945 and taxes reported on Form 941 
must be deposited separately. (See paragraph (b) of Sec.  31.6302-1 for 
rules for determining an employer's deposit status for taxes reported 
on Form 941.) Taxes reported on Form 945 for one calendar year must be 
deposited separately from taxes reported on Form 945 for another 
calendar year.
    (e) Effective/applicability date. Section 31.6302-4(d) applies to 
deposits and payments made after December 31, 2010.


Sec.  31.6302(c)-2A  [Removed]

0
Par. 14. Section 31.6302(c)-2A is removed.

0
Par. 15. Section 31.6302(c)-3 is amended by:

0
1. Revising the heading.
0
2. Revising paragraph (a)(1), introductory text.
0
3. Revising paragraph (a)(1)(i).
0
4. Revising paragraph (a)(1)(ii), introductory text.
0
5. Removing paragraph (a)(3).
0
6. Revising paragraph (b).
0
7. Revising paragraph (c).
0
8. Removing paragraph (d).
    The revisions read as follows:


Sec.  31.6302(c)-3  Deposit rules for taxes under the Federal 
Unemployment Tax Act.

    (a) Requirement--(1) In general. Except as provided in paragraph 
(a)(2) of this section, every person that, by reason of the provisions 
of section 6157, computes the tax imposed by section 3301 on a 
quarterly or other time period basis shall--
    (i) If the person is described in section (a)(1) of section 6157, 
deposit the amount of such tax by the last day of the first calendar 
month following the close of each of the first three calendar quarters 
in the calendar year; or
    (ii) If the person is other than a person described in section 
(a)(1) of section 6157, deposit the amount of such tax by the last day 
of the first calendar month following the close of--
* * * * *
    (b) Manner of deposit--(1) In general. A deposit required to be 
made by an employer under this section shall be made separately from a 
deposit required by any other section. An employer may make one, or 
more than one, remittance of the amount required to be deposited. An 
employer that is not required to deposit an amount of tax by this 
section may nevertheless voluntarily make that deposit. For the 
requirement to deposit tax under the Federal Unemployment Tax Act by 
electronic funds transfer, see Sec.  31.6302-1(h).
    (2) Time deemed paid. For the time an amount deposited by 
electronic funds transfer is deemed paid, see Sec.  31.6302-1(h)(9). 
For the time an amount remitted with a return is deemed paid, see Sec.  
31.6302-1(i)(3).
    (c) Effective/applicability date. This section applies to deposits 
and payments made after December 31, 2010.

PART 40--EXCISE TAX PROCEDURAL REGULATIONS

0
Par. 16. The authority citation for part 40 continues to read in part 
as follows:

    Authority:  26 U.S.C. 7805 * * *


0
Par. 17. Section 40.6302(c)-1 is amended by:
0
1. Revising the heading.
0
2. In paragraph (b)(2)(v), removing the language ``that failure may be 
reported to the appropriate IRS office and''.
0
3. Revising paragraphs (d) and (f).
    The revisions read as follows:


Sec.  40.6302(c)-1  Deposits.

* * * * *
    (d) Deposits required by electronic funds transfer. All deposits 
required by this part must be made by electronic funds transfer, as 
that term is defined in Sec.  31.6302-1(h)(4) of this chapter.
* * * * *
    (f) Effective/applicability date. This section applies to deposits 
and payments made after December 31, 2010.
* * * * *

0
Par. 18. Section 40.6302(c)-1T is amended by revising the section 
heading to read as follows:

[[Page 75904]]

Sec.  40.6302(c)-1T  Deposits (temporary).

* * * * *


Sec.  40.6302(c)-2  [Amended]

0
Par. 19. Section 40.6302(c)-2, paragraph (c), is amended by removing 
the language ``2001'' and adding ``2001, except that paragraph (b) of 
this section does not apply after December 31, 2010'' in its place.

0
Par. 20. Section 40.6302(c)-3 is amended as follows:
0
1. The heading is revised.
0
2. Paragraph (c) is revised.
0
3. In paragraph (g), the language ``2004'' is removed and ``2004, and 
except that paragraph (f)(5) of this section does not apply after 
December 31, 2010'' is added in its place.
    The revisions read as follows:


Sec.  40.6302(c)-3  Deposits under chapter 33.

* * * * *
    (c) Time to deposit. Under the alternative method, the deposit of 
tax for any semimonthly period must be made by the third business day 
after the seventh day of that semimonthly period. For purposes of this 
paragraph (c), a ``business day'' is any calendar day other than a 
Saturday, Sunday, or legal holiday. The term ``legal holiday'' means a 
legal holiday in the District of Columbia as defined in section 7503. 
Thus, for example, the deposit for the semimonthly period beginning on 
January 1, 2011 (relating to amounts billed between December 1st and 
December 15, 2010) is due by January 12, 2011, three business days 
after January 7, the seventh day of the semimonthly period. The deposit 
for the semimonthly period beginning on October 1, 2011 (relating to 
amounts billed between September 1st and September 15, 2011), is due by 
October 13, 2011, due to the October 10, 2011, Columbus Day holiday.
* * * * *

PART 301--PROCEDURE AND ADMINISTRATION

0
Par. 21. The authority citation for part 301 is amended to read in part 
as follows:

    Authority:  26 U.S.C. 7805 * * *


0
Par. 22. Section 301.6302-1 is revised to read as follows:


Sec.  301.6302-1  Manner or time of collection of taxes.

    (a) Employment and excise taxes. For provisions relating to the 
manner or time of collection of certain employment and excise taxes and 
deposits in connection with the payment thereof, see the regulations 
relating to the particular tax.
    (b) Income taxes. (1) For provisions relating to the deposits of 
income and estimated income taxes of certain corporations, see Sec.  
1.6302-1 of this chapter (Income Tax Regulations).
    (2) For provisions relating to the deposits of tax required to be 
withheld under chapter 3 of the Code on nonresident aliens and foreign 
corporations and tax-free covenant bonds, see Sec.  1.6302-2 of this 
chapter.
    (c) Effective/applicability date. This section applies to deposits 
and payments made after December 31, 2010.

0
Par. 23. Section 301.6656-1 is amended by:
0
1. Revising paragraph (b).
0
2. Revising paragraph (c).
    The revisions read as follows:


Sec.  301.6656-1  Abatement of penalty.

* * * * *
    (b) Deposit sent to Secretary. The Secretary may abate the penalty 
imposed by section 6656(a) if the first time a taxpayer is required to 
make a deposit, the amount required to be deposited is inadvertently 
sent to the Secretary rather than deposited by electronic funds 
transfer.
    (c) Effective/applicability date. This section applies to deposits 
and payments made after December 31, 2010.


Sec.  301.7502-2  [Removed]

0
Par. 24. Section 301.7502-2 is removed.

Steven T. Miller,
Deputy Commissioner for Services and Enforcement.
    Approved: November 30, 2010.
Michael Mundaca,
Assistant Secretary of the Treasury (Tax Policy).
[FR Doc. 2010-30526 Filed 12-2-10; 11:15 am]
BILLING CODE 4830-01-P