Federal Register / Vol. 60, No. 245 / Thursday, December 21, 1995 / Rules and Regulations 66139

PART 602—OMB CONTROL NUMBERS

UNDER THE PAPERWORK

REDUCTION ACT

Par. 5. The authority citation for part

602 continues to read as follows:

Authority: 26 U.S.C. 7805.

§ 602.101 [Amended]

Par. 6. In § 602.101, paragraph (c) is

amended in the table by adding the

entry ‘‘1.305–5.........1545–1438’’ in

numerical order.

Margaret Milner Richardson,

Commissioner of Internal Revenue.

Approved: December 11, 1995.

Leslie Samuels,

Assistant Secretary of the Treasury.

[FR Doc. 95–30831 Filed 12–20–95; 8:45 am]

BILLING CODE 4830–01–U

26 CFR Parts 31 and 301

[TD 8636]

RIN 1545–AN57

Time for Furnishing Wage Statements

on Termination of Employer’s

Operations

AGENCY: Internal Revenue Service (IRS),

Treasury.

ACTION: Final regulations.

SUMMARY: This document contains final

regulations concerning the time for

furnishing wage statements to

employees and for filing wage

statements with the Social Security

Administration upon the termination of

an employer’s operations. These

regulations will affect employers and

their employees in the year the

employer ceases to pay wages. These

regulations are intended to improve the

wage reconciliation process between the

Social Security Administration and the

IRS.

EFFECTIVE DATE: These regulations are

effective January 1, 1997.

ADDRESSES: Send submissions to:

CC:DOM:CORP:T:R (EE–83–89), room

5228, Internal Revenue Service, POB

7604, Ben Franklin Station, Washington,

DC 20044. In the alternative,

submissions may be hand delivered

between the hours of 8 a.m. and 5 p.m.

to: CC:DOM:CORP:T:R (EE–83–89),

Courier’s Desk. Internal Revenue

Service, 1111 Constitution Avenue NW,

Washington, DC.

FOR FURTHER INFORMATION CONTACT: Jean

M. Casey, (202) 622–6040 (not a toll-free

number).

SUPPLEMENTARY INFORMATION:

Background

On December 22, 1994, the Federal

Register (59 FR 65982) published a

notice of proposed rulemaking which

required an employer to furnish Forms

W–2 to employees and to file Forms W–

2 and W–3 with the Social Security

Administration (SSA) at the same time

that the employer is required to file the

final Form 941 with the IRS.

Written comments responding to the

notice of proposed rulemaking were

received. A public hearing was held on

May 8, 1995, pursuant to a notice

published in the Federal Register on

March 24, 1995 (60 FR 15526). After

consideration of the comments that

were received in response to the notice

of proposed rulemaking and at the

hearing, the IRS and Treasury adopt the

proposed regulations, as amended and

revised by this Treasury decision.

Explanation of Revisions and Summary

of Comments

Availability of Forms W–2

The regulations, as proposed, would

have required an employer who ceases

paying wages to furnish Form W–2 to

employees and file Forms W–2 and W–

3 with SSA on or before the date on

which the final Form 941 is required to

be filed with the IRS. Form 941 is

generally due quarterly, on or before the

last day of the first calendar month

following the period for which it is

made (i.e., April 30, July 31, October 31,

and January 31). Consequently, if an

employer ceased paying wages in the

first quarter of the calendar year, the

Forms 941, W–2 and W–3 would be due

by April 30. Some commentators

expressed concern that Forms W–2 and

W–3 are not available in the first quarter

of the calendar year. Commentators

questioned whether using prior year

Forms W–2 was an acceptable

alternative if current year forms were

unavailable.

Under the Internal Revenue Code and

the existing regulations, an employee

may request the Form W–2 at any time

during the year if the employee is

terminated and there is no reasonable

expectation on the part of the employer

or the employee of further employment

during the calendar year. Therefore,

Forms W–2 are available from the IRS,

either through the mail or at the district

offices, in January of each year.

Specifications for the private printing of

substitute Forms W–2, however, are not

always available during the first quarter

of the calendar year. Thus, during this

period, employers may be limited to

using the Forms W–2 printed by the

IRS. Neither prior year Forms W–2 nor

the prior year specifications for the

private printing of substitute Forms W–

2 should be used for filing Forms W–2

on an expedited basis for the current

year because such procedures could

result in significant processing errors.

Availability of Magnetic Media

Specifications

Commentators questioned whether

magnetic media specifications would be

available in the first quarter of the

calendar year for employers who are

required to file on an expedited basis

under the proposed regulations.

Regulation section 301.6011–2 and

Notice 90–15, 1990–1 C.B. 326,

generally require an employer to file

Forms W–2 with SSA on magnetic

media if the employer is required to file

250 or more Forms W–2 in a calendar

year. Employers who do not meet the

250 return threshold may also file their

Forms W–2 with SSA on magnetic

media.

It is not certain that magnetic media

specifications, which are issued by SSA,

will be available in the first quarter of

the calendar year for employers who are

required to file on an expedited basis.

The Commissioner has the authority to

provide for reasonable extensions of

time, upon written application, for an

employer to furnish Forms W–2 to

employees and file Forms W–2 and W–

3 with SSA. To assure that filers need

not shift from magnetic media to paper

filings in order to comply with the

expedited filing requirements, the final

regulations affirm that the

Commissioner may adopt automatic

extension procedures where

appropriate.

It is anticipated that the

Commissioner will establish automatic

extension procedures to the extent

necessary to permit employers that

terminate operations a reasonable

period of time, after the issuance of

specifications, to make their filings on

magnetic media.

It is further anticipated that these

procedures will include appropriate

automatic extensions of time to file
66140 Federal Register / Vol. 60, No. 245 / Thursday, December 21, 1995 / Rules and Regulations

expedited Forms W–2 both for

employers required to file on magnetic

media and for employers who have filed

on magnetic media in the past whether

or not required to do so. Even though

Forms W–2 are furnished to employees

on paper, the automatic extension

procedures are anticipated to apply to

the employee copy of the Form W–2 as

well as the SSA copy in order to avoid

the complexities and potential errors

that could arise from processing these

forms at significantly different times.

It is also anticipated that the

published procedure will provide for an

automatic extension to a specified date

which permits employers a reasonable

period of time after the issuance of

specifications to make their filings on

magnetic media. This date will be

communicated to filers sufficiently early

in the year to permit adequate systems

planning. In providing for these

procedures, it is necessary to balance

the practical issues of compliance with

the concern for timely submission of

information to SSA. Thus, if prior to a

future year, it is anticipated that

specifications will be issued sufficiently

early in the year to permit a reasonable

period of time for filing, while still

complying with the due dates otherwise

required in this regulation, the

Commissioner may suspend the

automatic extension procedures for that

year. Discretionary extensions would

continue to be considered on a case-bycase basis.

Comments are requested on the

automatic extension procedures and

their implementation.

Regulation section 301.6011–2(c)(4)

provides that the Commissioner may,

upon application, waive the

requirement to file on magnetic media

in the case of hardship. The final

regulations clarify that the

unavailability of the specifications for

magnetic media filing of Form W–2 will

be treated as creating a hardship.

Therefore, an employer has the option

of applying for a waiver from the

requirement to file Forms W–2 on

magnetic media and may instead file the

Forms W–2 on paper. The employer

must apply for a waiver within 45 days

of the due date of the return.

Employers may also contact their

local SSA Magnetic Media Coordinator

for guidance on how to report on

magnetic media. The Coordinators are

listed in the annual Technical

Instructions Bulletin (TIB–4) published

by SSA.

Extension Procedures

Regulation section 31.6051–1(d)(2)

provides procedures for an employer to

request an extension of time to furnish

Forms W–2 to employees. Regulation

section 31.6081(a)-1 provides similar

procedures for employers to request an

extension of time to file Forms W–2 and

W–3 with SSA. These procedures apply

to employers who are required to

furnish Forms W–2 to employees or file

Forms W–2 and W–3 with SSA on an

expedited basis. Thus, an employer

who, under the final regulations, is

required to furnish and file the Forms

W–2 on an expedited basis may request

an extension of time if necessary.

Additional month to provide Forms W–

2 and W–3 to SSA

Under existing regulations Forms W–

2 and W–3 are due to SSA one month

after they are due to the employees. This

provides employers an opportunity to

correct any errors found by employees

before filing the Forms W–2 with SSA.

Some commentators noted that

providing the Forms W–2 to SSA at the

same time the forms are provided to the

employees eliminates the opportunity

for corrections currently provided by

the regulations. To minimize the need

for employers to file corrected Forms

W–2 (Form W–2c, Statement of

Corrected Income and Tax Amounts),

the final regulations include a suggested

one month additional period for

providing the Forms W–2 to SSA. Thus,

Forms W–2 would be due to employees

at the same time as the final Form 941

(generally one month after the end of

the quarter). Forms W–2 and W–3

would be due to SSA two months after

the final Form 941 is due.

Modification of Revenue Procedure 84–

77

In Revenue Procedure 84–77, 1984–2

C.B. 753, the IRS provided procedures

for preparing and filing certain forms,

including Form 941, Form W–2 and

Form W–3, when a successor employer

acquires substantially all of the property

(1) used in a trade or business of a

predecessor employer, or (2) used in a

separate unit of a trade or business of a

predecessor, and in connection with, or

immediately after the acquisition (but

during the same calendar year) the

successor employs individuals who

were employed in the trade or business

of the predecessor immediately prior to

the acquisition. Under the standard

procedure described in Rev. Proc. 84–

77, both the predecessor and successor

employer report the wages they paid

employees on Form W–2. Under the

alternate procedure, the predecessor is

relieved from furnishing Form W–2 to

any employee who is employed by the

successor employer and from filing such

Forms W–2 with SSA. Instead, the

successor employer assumes the

predecessor’s reporting obligation for

those employees. The preamble to the

proposed regulation stated that, other

than modifying the time frame for the

standard procedure, the proposed

regulation would not affect the validity

of Rev. Proc. 84–77.

One commentator questioned whether

the proposed regulation expedited the

filing requirements for the predecessor

employer with regard to individuals

who are not employed by the successor

employer. If the predecessor employer

ceases to pay wages, (i.e., is required to

file a final Form 941), the predecessor

employer is required under these

regulations to furnish Forms W–2 on an

expedited basis to those individuals

who are not employed by the successor

employer. The predecessor employer

must also file Forms W–2 and W–3 with

SSA on an expedited basis for those

individuals who are not employed by

the successor employer. Revenue

Procedure 84–77 is being modified to

reflect this change.

Some commentators asked how the

proposed regulations apply in the

context of mergers. If a final Form 941

is not filed because a merger does not

involve the cessation of business

operations but only a change in

corporate or business form, the

expedited filing requirements are

inapplicable.

Use of an agent

One commentator suggested the final

regulations provide an exception from

expedited filing for an employer that

appoints an agent to assume the

employer’s reporting obligation. A

similar exception was suggested in the

case of a controlled group of

corporations in which one member of

the group acts as the payroll agent for

the group. Because there is no

practically effective enforceable manner

for shifting liability for reporting from

an employer to an agent and for assuring

that the agent will satisfy the reporting

obligations, these suggestions were not

adopted.

Application to Returns filed by

Employers for Employees in Guam, U.S.

Virgin Islands, American Samoa,

Commonwealth of the Northern

Mariana Islands and Puerto Rico.

One commentator questioned whether

the proposed regulations applied to

wage statements furnished to employees

and filed with SSA by employers for

employees in Guam, U.S. Virgin Islands,

American Samoa, Commonwealth of the

Northern Mariana Islands and Puerto

Rico. While these employers file

variations of the Forms 941, W–2 and

W–3, they are subject to the filing
Federal Register / Vol. 60, No. 245 / Thursday, December 21, 1995 / Rules and Regulations 66141

requirements for Forms 941, W–2 and

W–3. In addition, employees of these

employers receive social security credit

on the same basis as employers who file

the Forms 941, W–2 and W–3. Thus,

these employers are subject to the

regulations.

Special Analyses

It has been determined that this

Treasury decision is not a significant

regulatory action as defined in EO

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) and the Regulatory

Flexibility Act (5 U.S.C. chapter 6) do

not apply to these regulations, and,

therefore, a Regulatory Flexibility

Analysis is not required. Pursuant to

section 7805(f) of the Internal Revenue

Code, the notice of proposed rulemaking

preceding these regulations was

submitted to the Small Business

Administration for comment on its

impact on small business.

Drafting Information

The principal author of these

regulations is Jean M. Casey, Office of

the Associate Chief Counsel (Employee

Benefits and Exempt Organizations),

IRS. However, other personnel from the

IRS and Treasury Department

participated in their development.

List of Subjects

26 CFR Part 31

Employment taxes, Income taxes,

Penalties, Pensions, Railroad retirement,

Reporting and recordkeeping

requirements, Social security,

Unemployment compensation.

26 CFR Part 301

Employment taxes, Estate taxes,

Excise taxes, Gift taxes, Income taxes,

Penalties, Reporting and recordkeeping

requirements.

Adoption of Amendments to the

Regulations

Accordingly, 26 CFR part 31 and part

301 are amended as follows:

PART 31—EMPLOYMENT TAXES AND

COLLECTION OF INCOME TAX AT

SOURCE

Paragraph 1. The authority citation

for part 31 is amended by adding the

following entries in numerical order to

read as follows:

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

Section 31.6051–1(d) also issued under 26

U.S.C. 6051.

Section 31.6051–2 also issued under 26

U.S.C. 6051 * * *

Section 31.6071–1 also issued under 26

U.S.C. 6071 * * *

Section 31.6081–1 also issued under 26

U.S.C. 6081 * * *

Par. 2. Section 31.6051–1, paragraph

(d) is amended as follows:

1. Paragraph (d)(1) is redesignated as

(d)(1)(i).

2. Paragraph (d)(1)(ii) is added.

3. Paragraph (d)(2) is revised.

The addition and revision read as

follows:

§ 31.6051–1 Statements for employees.

* * * * *

(d) * * * (1)(i) * * *

(ii) Expedited furnishing—(A) General

rule. If an employer is required to make

a final return under § 31.6011(a)–6(a)(1)

(relating to the final return for Federal

Insurance Contributions Act taxes and

income tax withholding from wages) on

Form 941, or a variation thereof, the

employer must furnish the statement

required by this section on or before the

date required for filing the final return.

See § 31.6071(a)–1(a)(1). However, if the

final return under § 31.6011(a)–6(a)(1) is

a monthly return, as described in

§ 31.6011(a)–5, the employer must

furnish the statement required by this

section on or before the last day of the

month in which the final return is

required to be filed. See § 31.6071(a)–

1(a)(2). Except as provided in paragraph

(d)(2)(i) of this section, in no event may

an employer furnish the statement

required by this section later than

January 31 of the year succeeding the

calendar year to which it relates. The

requirements set forth in this paragraph

(d)(1)(ii) do not apply to employers with

respect to employees whose wages are

for domestic service in the private home

of the employer. See § 31.6011(a)–

1(a)(3).

(B) Requests by employees. An

employer is not permitted to furnish a

statement pursuant to the provisions of

the third sentence of paragraph (d)(1)(i)

of this section (relating to written

requests by terminated employees for

Form W–2) at a time later than that

required by the provisions of paragraph

(d)(1)(ii)(A) of this section.

(C) Effective date. This paragraph

(d)(1)(ii) is effective January 1, 1997.

(2) Extensions of time—(i) In general

(a) The Director, Martinsburg

Computing Center, may grant an

extension of time in which to furnish to

employees the statements required by

this section. A request may be made by

a letter to the Director, Martinsburg

Computing Center. The request must

contain:

(1) The employer’s name and address;

(2) The employer’s taxpayer

identification number;

(3) The type of return (i.e., Form W–

2) and

(4) A concise statement of the reasons

for requesting the extension.

(b) The application must be mailed or

delivered on or before the applicable

due date prescribed in paragraph (d)(1)

of this section for furnishing the

statements required by this section.

(c) In any case in which an employer

is unable, by reason of illness, absence,

or other good cause, to sign a request for

an extension, any person standing in

close personal or business relationship

to the employer may sign the request on

his behalf, and shall be considered as a

duly authorized agent for this purpose,

provided the request sets forth a reason

for a signature other than the employer’s

and the relationship existing between

the employer and the signer. For

provisions relating to extensions of time

for filing the Social Security

Administration copies of the statement,

see § 31.6081(a)–1(a)(3).

(ii) Automatic Extension of Time. The

Commissioner may, in appropriate

cases, publish procedures for automatic

extensions of time to furnish Forms W–

2 where the employer is required to

furnish the Form W–2 on an expedited

basis.

* * * * *

Par. 3. Section 31.6051–2, paragraph

(c), first sentence is revised to read as

follows:

§ 31.6051–2 Information returns on Form

W–3 and Internal Revenue Service copies of

Form W–2.

* * * * *

(c) Cross references. For provisions

relating to the time for filing the

information returns required by this

section and to extensions of the time for

filing, see §§ 31.6071(a)–1(a)(3) and

31.6081(a)–1(a)(3), respectively. * * *

Par. 4. Section 31.6071(a)–1(a)(3) is

amended as follows:

1. Paragraph (a)(3)(i) is removed.

2. Paragraph (a)(3)(ii) is redesignated

as paragraph (a)(3)(i) and the heading is

revised.

3. A new paragraph (a)(3)(ii) is added.

The addition and revision read as

follows:

§ 31.6071(a)–1 Time for filing returns and

other documents.

(a) * * *

(3) * * * (i) General rule. * * *

(ii) Expedited filing—(A) General rule.

If an employer who is required to make

a return pursuant to § 31.6011(a)–1 or

§ 31.6011(a)–4 is required to make a

final return on Form 941, or a variation

thereof, under § 31.6011(a)–6(a)(1)

(relating to the final return for Federal

Insurance Contributions Act taxes and
66142 Federal Register / Vol. 60, No. 245 / Thursday, December 21, 1995 / Rules and Regulations

income tax withholding from wages),

the return which is required to be made

under § 31.6051–2 must be filed on or

before the last day of the second

calendar month following the period for

which the final return is filed. The

requirements set forth in this paragraph

(a)(3)(ii) do not apply to employers with

respect to employees whose wages are

for domestic service in the private home

of the employer. See § 31.6011(a)–

1(a)(3).

(B) Effective date. This paragraph

(a)(3)(ii) is effective January 1, 1997.

* * * * *

Par. 5. Section 31.6081(a)–1(a)(3) is

revised to read as follows:

§ 31.6081(a)–1 Extensions of time for filing

returns and other documents.

(a) * * *

(3) Information returns of employers

on Forms W–2 and W–3—(i) In general.

The Director, Martinsburg Computing

Center, may grant an extension of time

in which to file the Social Security

Administration copy of Forms W–2 and

the accompanying transmittal form

which constitutes an information return

under paragraph § 31.6051–2(a). The

request must contain a concise

statement of the reasons for requesting

the extension. The request must be

mailed or delivered on or before the

date on which the employer is required

to file the Form W–2 with the Social

Security Administration.

(ii) Automatic Extension of Time. The

Commissioner may, in appropriate

cases, publish procedures for automatic

extensions of time to file Forms W–2

where the employer is required to file

the Form W–2 on an expedited basis.

* * * * *

PART 301—PROCEDURE AND

ADMINISTRATION

Par. 6. The authority citation for part

301 continues to read in part as follows:

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

Par. 7. Section 301.6011–2(c)(4)(i) is

revised to read as follows:

§ 301.6011–2 Required use of magnetic

media.

* * * * *

(c) * * *

(4) Waiver. (i) The Commissioner may

waive the requirements of this section if

hardship is shown in a request for

waiver filed in accordance with this

paragraph (c)(4)(i). The principal factor

in determining hardship will be the

amount, if any, by which the cost of

filing the information returns in

accordance with this section exceeds

the cost of filing the returns on other

media. Notwithstanding the forgoing, if

an employer is required to make a final

return on Form 941, or a variation

thereof, and expedited filing of Forms

W–2 is required, the unavailability of

specifications for magnetic media filing

will be treated as creating a hardship.

See § 31.6071(a)–1(a)(3)(ii). A request

for waiver should be filed at least 45

days before the due date of the

information return in order for the

Service to have adequate time to

respond to the request for waiver. The

waiver will specify the type of

information return and the period to

which it applies and will be subject to

such terms and conditions regarding the

method of reporting as may be

prescribed by the Commissioner.

* * * * *

Margaret Milner Richardson,

Commissioner of Internal Revenue.

Approved: December 12, 1995.

Leslie Samuels,

Assistant Secretary of the Treasury.

[FR Doc. 95–30685 Filed 12–20–95; 8:45 am]

BILLING CODE 4830–01–U

POSTAL SERVICE

39 CFR Part 111

Revisions to Standards for

Palletization

AGENCY: Postal Service.

ACTION: Final rule.

SUMMARY: On July 31, 1995, the Postal

Service published a proposed rule for

public comment in the Federal Register

(60 FR 39080–39088) to revise current

makeup standards in the Domestic Mail

Manual (DMM) for second-, third-, and

fourth-class mail prepared on pallets.

The final rule adopts proposed changes

that pertain only to the physical

characteristics of pallet loads (such as

minimum/maximum height and weight

limits and provisions for triplestacking). These changes will not be

affected by the Postal Service’s

classification reform proposal currently

under consideration before the Postal

Rate Commission (Docket No. MC95–1).

The Postal Service has decided not to

adopt, at this time, those elements of the

proposed rule that would be affected by

implementation of classification reform

to avoid burdening software developers

and mailers with the need to make

changes that will be supplanted shortly

after their implementation. Instead, the

standards for levels of pallet sortation

and preparation, along with other

related issues, will be addressed with

the standards that the Postal Service

proposes to implement with the

pending classification reform filing. The

Postal Service expects to publish a

proposed rule on classification reform

for public comment in December 1995.

EFFECTIVE DATE: January 1, 1996.

FOR FURTHER INFORMATION CONTACT:

Cheryl Beller, (202) 268–5166.

SUPPLEMENTARY INFORMATION: The July

31 proposed rule discussed in detail the

efforts by the Postal Service to establish

certain basic preparation standards that

mailers must meet to ensure that pallets,

and the mail placed on them, maintain

their integrity throughout transportation

and postal processing and allow safe

handling by postal employees. At the

same time, these standards allow

mailers flexibility to prepare pallets by

using recognized industry practices

based on their specific production and

service needs.

The 30-day comment period ended on

August 30, 1995, and 16 written

comments were received from

publishers, mailer associations, printers

and mailers, transportation companies,

and presort software developers. After

thorough consideration of these

comments, the Postal Service is

publishing its final rule. This final rule

removes sections in DMM MO42

through MO48 relating to pallet size and

revises and consolidates them into

MO41 under one section on general

pallet standards. The final rule also

revises standards related to stacking and

top-capping pallets and to identifying

and notifying nonconforming mailers

whose preparation methods result in

pallets that fail to meet basic pallet

integrity and safety standards. The final

rule also establishes standards for

palletizing trays of letter-size mail.

DMM E333 and E416 are also revised to

clarify the availability of third-class

carrier route rates and special fourthclass level A and B rates for mail on

pallets; these revisions also stipulate

that the Postal Service will not unload

containerized drop shipment loads that

have not maintained their integrity in

transit or that arrive in an unsafe

manner. DMM MO33 is revised to

require all trays on BMC, ASF, SDC, and

mixed BMC pallets to be both sleeved

and strapped to facilitate processing on

sack and parcel sorters.

The revised DMM standards are set

forth after the discussion of comments

to the proposed rule. Many commenters

commended the Postal Service for

listening to its customers in developing

standards that were fair and in accord

with industry practices. Such comments

are not summarized below.