A bill to amend the Internal Revenue Code of 1986 to regulate payroll tax deposit agents.

Summary: Amends the Internal Revenue Code to require the Secretary of the Treasury to establish a registration system for payroll tax deposit agents. Requires such agents to: (1) submit to a bond or annual audit; (2) make certain disclosures to their clients concerning liability for payment of employment taxes; and (3) pay penalties for failing to collect or pay over employment taxes or for attempting to evade or defeat payment of such taxes.

SECTION 1. REGULATION OF PAYROLL TAX DEPOSIT AGENTS.

    (a) In General.--Chapter 77 of the Internal Revenue Code of 1986 
(relating to miscellaneous provisions) is amended by adding at the end 
the following new section:

``SEC. 7529. PAYROLL TAX DEPOSIT AGENTS.

    ``(a) Registration.--
            ``(1) In general.--The Secretary shall establish a system 
        to require the initial registration and the annual renewal of 
        the registration of persons seeking to act as payroll tax 
        deposit agents authorized to make Federal employment tax 
        deposits on behalf of employer taxpayers. Such system shall 
        also--
                    ``(A) establish a registration and renewal fee for 
                each payroll tax deposit agent in an amount not to 
                exceed $100,
                    ``(B) provide the payroll tax deposit agent the 
                option of either submitting a bond as specified in 
                subsection (b) or submitting to an annual audit as 
                specified in subsection (c),
                    ``(C) require such disclosures as are specified in 
                subsection (d),
                    ``(D) require that such agent ensure the direct 
                notification of the employer by any Federal employment 
                tax authority (and State employment tax authority if 
                such agent contracts to make State employment tax 
                deposits for the employer) regarding the nonpayment of 
                such employment taxes, and
                    ``(E) provide penalties for unregistered persons 
                acting as payroll tax deposit agents with respect to 
                Federal tax deposits in an amount not to exceed $10,000 
                for each 90 days of noncompliance.
            ``(2) Definition of payroll tax deposit agent.--For 
        purposes of this section, the term `payroll tax deposit agent' 
        means any person which provides payroll processing or tax 
        filing and deposit services to 1 or more employers (other than 
        an employer acting on its own behalf) if such person has the 
        contractual authority to access such employer's funds for the 
        purpose of making employment tax deposits. Such term shall not 
        include any person which only transfers such funds (regardless 
        if such person has the authority to determine the amount of 
        such transfer) and does not have the authority to impound such 
        funds for such purpose.
            ``(3) Employment tax.--For purposes of this section, the 
        term `employment tax' includes unemployment insurance 
        contributions.
    ``(b) Bonding.--
            ``(1) In general.--If a payroll tax deposit agent elects to 
        submit a bond under subsection (a)(1)(B), the amount of such 
        bond shall be not less than $50,000 nor more than $500,000, and 
        shall be determined with respect to each payroll tax deposit 
        agent under regulations prescribed by the Secretary.
            ``(2) Surety.--Any bond or security furnished pursuant to 
        this section shall be in such form and with such surety or 
        sureties as may be prescribed by regulations issued pursuant to 
        section 7101.
    ``(c) Annual Audits.--If a payroll tax deposit agent elects to 
submit to an annual audit under subsection (b)(1)(B), such audit shall 
be performed by an independent third party and shall be based on such 
audit principles as the Secretary determines necessary, including the 
following:
            ``(1) The escrow account of the payroll tax deposit agent 
        in which such agent holds its employers' taxes is balanced each 
        year to the total of the quarterly reconciliation statements.
            ``(2) The escrow account funds of the payroll tax deposit 
        agent are not commingled with such agent's operating funds.
            ``(3) No evidence that the payroll tax deposit agent used 
        any of the funds in such agent's escrow account to pay such 
        agent's own operating costs.
            ``(4) Receipt evidence that such agent paid the required 
        employment taxes on behalf of the employers to the proper 
        government employment tax authority.
    ``(d) Disclosure.--The Secretary shall require payroll tax deposit 
agents to disclose to each potential and existing client prior to or at 
the time of contracting for payroll services--
            ``(1) the client's continuing liability for payment of all 
        Federal and State employment taxes notwithstanding any 
        contractual relationship with a payroll tax deposit agent,
            ``(2) the mechanisms available to the client to verify the 
        amount and date of payment of all tax deposits made by the 
        payroll tax deposit agent on behalf of such client, including 
        the Internet address, postal address, and telephone number of 
        each Federal and State employment tax authority related to such 
        deposits, and
            ``(3) such other information that the Secretary determines 
        is necessary or appropriate to assist employers in the 
        selection and use of payroll tax deposit agents.
    ``(e) Tax Deposits and Returns.--Only persons registered under this 
section may--
            ``(1) make Federal tax deposits on behalf of an employer,
            ``(2) sign and file Federal employment tax returns on 
        behalf of a taxpayer, and
            ``(3) have access to confidential tax information relating 
        to such employer.
    ``(f) Regulations.--The Secretary shall prescribe such regulations 
as may be necessary to carry out the provisions of this section.''.
    (b) Payroll Tax Deposit Agents Subject to Penalty for Failure To 
Collect and Pay Over Tax, or Attempt To Evade or Defeat Tax.--
            (1) In general.--Section 6672(a) of the Internal Revenue 
        Code of 1986 is amended by inserting ``, including any payroll 
        tax deposit agent (as defined in section 7529(a)(2)),'' after 
        ``Any person''.
            (2) Construction.--The amendment made by paragraph (1) 
        shall not be construed to create any inference with respect to 
        the interpretation of section 6672 of the Internal Revenue Code 
        of 1986 as such section was in effect on the day before the 
        date of the enactment of this Act.
    (c) Clerical Amendment.--The table of sections for such chapter 77 
is amended by adding at the end the following new item:

``Sec. 7529. Payroll tax deposit agents.''.
    (d) Effective Dates.--
            (1) In general.--Except as provided in paragraph (2), the 
        amendments made by this section shall take effect on the date 
        of the enactment of this Act.
            (2) Penalty.--The amendments made by subsection (b) shall 
        apply to failures occurring after the date of the enactment of 
        this Act.