II 

109TH CONGRESS 

2D SESSION S. 3583 

To amend the Internal Revenue Code of 1986 to regulate payroll tax deposit 

agents. 

IN THE SENATE OF THE UNITED STATES 

JUNE 27, 2006 

Ms. SNOWE introduced the following bill; which was read twice and referred 

to the Committee on Finance 

A BILL 

To amend the Internal Revenue Code of 1986 to regulate 

payroll tax deposit agents. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. REGULATION OF PAYROLL TAX DEPOSIT 

4 AGENTS. 

5 (a) IN GENERAL.—Chapter 77 of the Internal Rev6 enue Code of 1986 (relating to miscellaneous provisions) 

7 is amended by adding at the end the following new section: 

8 ‘‘SEC. 7529. PAYROLL TAX DEPOSIT AGENTS. 

9 ‘‘(a) REGISTRATION.— 


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1 ‘‘(1) IN GENERAL.—The Secretary shall estab2 lish a system to require the initial registration and 

3 the annual renewal of the registration of persons 

4 seeking to act as payroll tax deposit agents author5 ized to make Federal employment tax deposits on 

6 behalf of employer taxpayers. Such system shall 

7 also— 

8 ‘‘(A) establish a registration and renewal 

9 fee for each payroll tax deposit agent in an 

10 amount not to exceed $100, 

11 ‘‘(B) provide the payroll tax deposit agent 

12 the option of either submitting a bond as speci13 fied in subsection (b) or submitting to an an14 nual audit as specified in subsection (c), 

15 ‘‘(C) require such disclosures as are speci16 fied in subsection (d), 

17 ‘‘(D) require that such agent ensure the 

18 direct notification of the employer by any Fed19 eral employment tax authority (and State em20 ployment tax authority if such agent contracts 

21 to make State employment tax deposits for the 

22 employer) regarding the nonpayment of such 

23 employment taxes, and 

24 ‘‘(E) provide penalties for unregistered 

25 persons acting as payroll tax deposit agents 


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1 with respect to Federal tax deposits in an 

2 amount not to exceed $10,000 for each 90 days 

3 of noncompliance. 

4 ‘‘(2) DEFINITION OF PAYROLL TAX DEPOSIT

5 AGENT.—For purposes of this section, the term 

6 ‘payroll tax deposit agent’ means any person which 

7 provides payroll processing or tax filing and deposit 

8 services to 1 or more employers (other than an em9 ployer acting on its own behalf) if such person has 

10 the contractual authority to access such employer’s 

11 funds for the purpose of making employment tax de12 posits. Such term shall not include any person which 

13 only transfers such funds (regardless if such person 

14 has the authority to determine the amount of such 

15 transfer) and does not have the authority to im16 pound such funds for such purpose. 

17 ‘‘(3) EMPLOYMENT TAX.—For purposes of this 

18 section, the term ‘employment tax’ includes unem19 ployment insurance contributions. 

20 ‘‘(b) BONDING.— 

21 ‘‘(1) IN GENERAL.—If a payroll tax deposit 

22 agent elects to submit a bond under subsection 

23 (a)(1)(B), the amount of such bond shall be not less 

24 than $50,000 nor more than $500,000, and shall be 


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1 determined with respect to each payroll tax deposit 

2 agent under regulations prescribed by the Secretary. 

3 ‘‘(2) SURETY.—Any bond or security furnished 

4 pursuant to this section shall be in such form and 

5 with such surety or sureties as may be prescribed by 

6 regulations issued pursuant to section 7101. 

7 ‘‘(c) ANNUAL AUDITS.—If a payroll tax deposit agent 

8 elects to submit to an annual audit under subsection 

9 (b)(1)(B), such audit shall be performed by an inde10 pendent third party and shall be based on such audit prin11 ciples as the Secretary determines necessary, including the 

12 following: 

13 ‘‘(1) The escrow account of the payroll tax de14 posit agent in which such agent holds its employers’ 

15 taxes is balanced each year to the total of the quar16 terly reconciliation statements. 

17 ‘‘(2) The escrow account funds of the payroll 

18 tax deposit agent are not commingled with such 

19 agent’s operating funds. 

20 ‘‘(3) No evidence that the payroll tax deposit 

21 agent used any of the funds in such agent’s escrow 

22 account to pay such agent’s own operating costs. 

23 ‘‘(4) Receipt evidence that such agent paid the 

24 required employment taxes on behalf of the employVerDate Aug 31 2005 04:40 Jun 29, 2006 Jkt 049200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\S3583.IS S3583

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1 ers to the proper government employment tax au2 thority. 

3 ‘‘(d) DISCLOSURE.—The Secretary shall require pay4 roll tax deposit agents to disclose to each potential and 

5 existing client prior to or at the time of contracting for 

6 payroll services— 

7 ‘‘(1) the client’s continuing liability for payment 

8 of all Federal and State employment taxes notwith9 standing any contractual relationship with a payroll 

10 tax deposit agent, 

11 ‘‘(2) the mechanisms available to the client to 

12 verify the amount and date of payment of all tax de13 posits made by the payroll tax deposit agent on be14 half of such client, including the Internet address, 

15 postal address, and telephone number of each Fed16 eral and State employment tax authority related to 

17 such deposits, and 

18 ‘‘(3) such other information that the Secretary 

19 determines is necessary or appropriate to assist em20 ployers in the selection and use of payroll tax de21 posit agents. 

22 ‘‘(e) TAX DEPOSITS AND RETURNS.—Only persons 

23 registered under this section may— 

24 ‘‘(1) make Federal tax deposits on behalf of an 

25 employer, 


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1 ‘‘(2) sign and file Federal employment tax re2 turns on behalf of a taxpayer, and 

3 ‘‘(3) have access to confidential tax information 

4 relating to such employer. 

5 ‘‘(f) REGULATIONS.—The Secretary shall prescribe 

6 such regulations as may be necessary to carry out the pro7 visions of this section.’’. 

8 (b) PAYROLL TAX DEPOSIT AGENTS SUBJECT TO

9 PENALTY FOR FAILURE TO COLLECT AND PAY OVER

10 TAX, OR ATTEMPT TO EVADE OR DEFEAT TAX.— 

11 (1) IN GENERAL.—Section 6672(a) of the In12 ternal Revenue Code of 1986 is amended by insert13 ing ‘‘, including any payroll tax deposit agent (as de14 fined in section 7529(a)(2)),’’ after ‘‘Any person’’. 

15 (2) CONSTRUCTION.—The amendment made by 

16 paragraph (1) shall not be construed to create any 

17 inference with respect to the interpretation of sec18 tion 6672 of the Internal Revenue Code of 1986 as 

19 such section was in effect on the day before the date 

20 of the enactment of this Act. 

21 (c) CLERICAL AMENDMENT.—The table of sections 

22 for such chapter 77 is amended by adding at the end the 

23 following new item: 

‘‘Sec. 7529. Payroll tax deposit agents.’’. 

24 (d) EFFECTIVE DATES.— 


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1 (1) IN GENERAL.—Except as provided in para2 graph (2), the amendments made by this section 

3 shall take effect on the date of the enactment of this 

4 Act. 

5 (2) PENALTY.—The amendments made by sub6 section (b) shall apply to failures occurring after the 

7 date of the enactment of this Act. 

Æ 


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