[Federal Register Volume 78, Number 39 (Wednesday, February 27, 2013)]
[Rules and Regulations]
[Pages 13221-13222]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-04680]


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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 1

[TD 9613]
RIN 1545-BI67


Reduced 2009 Estimated Income Tax Payments for Individuals With 
Small Business Income

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Final regulations and removal of temporary regulations.

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SUMMARY: This document contains final regulations under section 6654 of 
the Internal Revenue Code (Code) relating to reduced estimated income 
tax payments for qualified individuals with small business income for 
any taxable year beginning in 2009 and does not apply to any taxable 
years beginning before or after 2009. The final regulations implement 
changes to section 6654 made by the American Recovery and Reinvestment 
Act of 2009. The final regulations provide guidance for qualified 
individuals with small business income to certify that they satisfy the 
statutory gross income requirement for purposes of the reduction in 
their required 2009 estimated income tax payments.

DATES: Effective Date: These regulations are effective on February 27, 
2013.
    Applicability Date: These regulations apply for any taxable year 
that begins in 2009.

FOR FURTHER INFORMATION CONTACT: Janet Engel Kidd at (202) 622-4940 
(not a toll-free number).

SUPPLEMENTARY INFORMATION:

Background

    This document contains final amendments to the Income Tax 
Regulations (26 CFR part 1) under section 6654(d) of the Code relating 
to the addition to tax for failure by an individual to pay estimated 
income tax. Section 6654(d)(1)(D) was added by section 1212 of Division 
B of the American Recovery and Reinvestment Act of 2009, Public Law 
111-5 (123 Stat. 336 (2009)), effective for taxable years beginning in 
2009. It does not apply to any taxable years beginning before or after 
2009.
    Section 6654 imposes an addition to tax in the case of an 
individual taxpayer's underpayment of estimated tax. Estimated tax is 
payable in four installments throughout the taxable year, and the 
amount of each required installment is generally 25 percent of the 
required annual payment of estimated tax. Under section 6654(d)(1)(B), 
the required annual payment is the lesser of (i) 90 percent of the tax 
shown on the income tax return for the taxable year (or, if no return 
is filed, 90 percent of the tax for the year), or (ii) 100 percent of 
the tax shown on the taxpayer's return for the preceding taxable year 
(or 110 percent if the taxpayer's adjusted gross income for the 
preceding taxable year exceeded $150,000). The provision allowing for 
the payment of 100 (or 110) percent of the tax shown on the taxpayer's 
return for the preceding taxable year does not apply if the preceding 
taxable year was less than 12 months or if the taxpayer did not file a 
return for that year.
    Section 6654(d)(1)(D) provides a ``[s]pecial rule for 2009.'' Under 
this provision, the applicable percentage of tax shown on the return 
for the preceding taxable year (either 100 or 110 percent) is reduced 
to 90 percent for qualified individuals for taxable years that begin in 
2009. In other words, for taxable years that begin in 2009, a qualified 
individual's annual required payment of estimated tax is the lesser of 
(i) 90 percent of the tax shown on the return for the 2009 taxable year 
(or, if no return is filed, 90 percent of the tax for the year), or 
(ii) 90 percent of the tax shown on the individual's return for taxable 
year 2008.
    To implement the special rule for 2009, the Treasury Department and 
the IRS published in the Federal Register (75 FR 9141) on March 1, 
2010, a notice of proposed rulemaking (REG-117501-09) proposing 
amendments to Sec.  1.6654-2, which provides exceptions to the addition 
to tax for an individual's failure to pay estimated income tax. The 
notice of proposed rulemaking cross-referenced temporary regulations 
(TD 9480) published in the Federal Register (75 FR 9101) on the same 
day.
    The IRS received one written public comment responding to the 
proposed regulations. The comment is available for public inspection at 
http://www.regulations.gov or upon request. The commenter expressed 
appreciation for efforts to simplify tax reporting by small business 
owners. A public hearing was not requested or held.

Explanation of Provisions

    The final regulations adopt the proposed regulations without 
change. The final regulations explain who is a qualified individual 
under section 6654(d)(1)(D) and how a taxpayer establishes that the 
taxpayer is a qualified individual. A qualified individual is any 
individual (1) whose adjusted gross income shown on the individual's 
return for the preceding taxable year (prior to the taxable year that 
begins in 2009) is less than $500,000, and (2) who certifies that more 
than 50 percent of the gross income shown on that return was income 
from a small business. See section 6654(d)(1)(D)(ii). If an individual 
is married within the meaning of section 7703, and files a separate 
return for a taxable year that begins in 2009, then to qualify, the 
individual's adjusted gross income shown on the preceding year's return 
must be less than $250,000, rather than $500,000. See section 
6654(d)(1)(D)(iv). Pursuant to section 6654(d)(1)(D)(ii)(II), the 
Secretary shall prescribe by regulation the form, manner, and time for 
filing a certification. Additionally, section 6654(m) authorizes the 
Secretary to prescribe regulations as necessary to carry out the 
purposes of section 6654.
    Income from a small business is defined in general terms in section 
6654(d)(1)(D)(iii) as income from a trade or business the average 
number of employees of which was less than 500 for calendar year 2008. 
The final regulations specify that the trade or business must be a bona 
fide trade or business of which the individual was an owner. The final 
regulations provide that a trade or business may be organized as, or 
take the legal form of, a corporation, partnership, limited

[[Page 13222]]

liability company, or sole proprietorship.
    The final regulations also provide that a qualified individual 
shall file a certification with the IRS in the manner and at the time 
prescribed in forms, publications, or other guidance, such as Form 
2210, ``Underpayment of Estimated Tax by Individuals, Estates, and 
Trusts'' (or any successor form and its instructions).
    The final regulations will be applicable for taxable years that 
begin in 2009. The reduced percentage in section 6654(d)(1)(D) is 
limited to taxable years that begin in 2009 and does not apply to 
taxable years that begin before or after 2009.

Special Analyses

    It has been determined that this Treasury decision is not a 
significant regulatory action as defined in Executive Order 12866, as 
supplemented by Executive Order 13563. 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 the 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 that 
preceded these final regulations was submitted to the Chief Counsel for 
Advocacy of the Small Business Administration for comment on its impact 
on small business and no comments were received.

Drafting Information

    The principal author of these regulations is Janet Engel Kidd, 
Office of the Associate Chief Counsel, Procedure and Administration.

List of Subjects in 26 CFR Part 1

    Income taxes, Reporting and recordkeeping requirements.

Adoption of Amendments to the Regulations

    Accordingly, 26 CFR part 1 is amended as follows:

PART 1--INCOME TAXES

0
Paragraph 1. The authority citation for part 1 continues to read in 
part as follows:

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

    Section 1.6654-2 also issued under 26 U.S.C. 6654(m).


0
Par. 2. Section 1.6654-2 is amended by revising paragraphs (a) 
introductory text, (a)(1)(ii), and (f) to read as follows:


Sec.  1.6654-2  Exceptions to imposition of the addition to the tax in 
the case of individuals.

    (a) In general. The addition to the tax under section 6654 will not 
be imposed for any underpayment of any installment of estimated tax if, 
on or before the date prescribed for payment of the installment, the 
total amount of all payments of estimated tax made equals or exceeds 
the lesser of the amount in Sec.  1.6654-2(a)(1) or the amount in Sec.  
1.6654-2(a)(2).
    (1) * * *
    (ii) Special rule for taxable years beginning in 2009. For any 
taxable year beginning in 2009, for a qualified individual, the amount 
described in paragraph (a)(1)(i) of this section is reduced to 90 
percent of that amount.
    (A) Qualified individual means any individual whose adjusted gross 
income shown on the individual's return for the preceding taxable year 
is less than $500,000 and who certifies, as prescribed in paragraph 
(a)(1)(ii)(D) of this section, that more than 50 percent of the gross 
income shown on the return for the preceding taxable year was income 
from a small business.
    (B) Income from a small business means income from the operation of 
a bona fide trade or business of which the individual was an owner 
during calendar year 2009, and that on average had fewer than 500 
employees in calendar year 2008.
    (C) The trade or business may be organized as, or take the legal 
form of, a corporation, partnership, limited liability company, or sole 
proprietorship.
    (D) A qualified individual shall file a certification of the 
individual's qualification in the manner and at the time prescribed by 
the Internal Revenue Service in forms, publications, or other guidance.
* * * * *
    (f) Effective/applicability date. Paragraph (a)(1)(ii) of this 
section applies to any taxable year beginning in 2009 and does not 
apply to any taxable years beginning before or after 2009.


Sec.  1.6654-2T  [Removed]

0
Par. 3. Section 1.6654-2T is removed.

Steven T. Miller,
Deputy Commissioner for Services and Enforcement.
    Approved: February 22, 2013.
Mark J. Mazur,
Assistant Secretary of the Treasury (Tax Policy).
[FR Doc. 2013-04680 Filed 2-25-13; 4:15 pm]
BILLING CODE 4830-01-P