[Federal Register Volume 60, Number 245 (Thursday, December 21, 1995)]
[Rules and Regulations]
[Pages 66139-66142]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-30685]



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DEPARTMENT OF THE TREASURY
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.

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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

[[Page 66140]]

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-by-case 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 

[[Page 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:


Sec. 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 Sec. 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 
Sec. 31.6071(a)-1(a)(1). However, if the final return under 
Sec. 31.6011(a)-6(a)(1) is a monthly return, as described in 
Sec. 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 Sec. 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 
Sec. 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 
Sec. 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:


Sec. 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 Secs. 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:


Sec. 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 Sec. 31.6011(a)-1 or 
Sec. 31.6011(a)-4 is required to make a final return on Form 941, or a 
variation thereof, under Sec. 31.6011(a)-6(a)(1) (relating to the final 
return for Federal Insurance Contributions Act taxes and 

[[Page 66142]]
income tax withholding from wages), the return which is required to be 
made under Sec. 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 
Sec. 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:


Sec. 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 Sec. 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:


Sec. 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 Sec. 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