Source: https://www.federalregister.gov/documents/2010/12/07/2010-30526/electronic-funds-transfer-of-depository-taxes
Timestamp: 2017-08-21 14:43:01
Document Index: 440150594

Matched Legal Cases: ['§\u20091', '§\u200931', '§\u200940', '§\u20091', '§\u200931', '§\u200931', '§\u200931', '§\u200931', '§\u200940', '§\u200940', '§\u200931', '§\u20091', '§\u20091', '§\u20091', '§\u20091', '§\u200931', '§\u20091', '§\u200931', '§\u200931', '§\u200931', '§\u200931', '§\u200931', '§\u200931', '§\u200931', '§\u200931', '§\u200931', '§\u200931', '§\u200931', '§\u200931', '§\u200931', '§\u200931', '§\u200931', '§\u200931', '§\u200931', '§\u200931', '§\u200931', '§\u200931', '§\u200940', '§\u2009301', '§\u20091', '§\u20091', '§\u2009301', '§\u2009301']

Federal Register :: Electronic Funds Transfer of Depository Taxes
A Rule by the Internal Revenue Service on 12/07/2010
75897-75904 (8 pages)
https://www.federalregister.gov/d/2010-30526 https://www.federalregister.gov/d/2010-30526
Applicability Date: For dates of applicability, see §§ 1.6302-1(d), 1.6302-2(g), 1.6302-3(d), 1.6302-4(b), 31.6071(a)-1(g), 31.6302-1(o), 31.6302-1T(n), 31.6302-2(d), 31.6302-4(e), 31.6302(c)-3(c), 40.6302(c)-1(f), 40.6302(c)-2(c), 40.6302(c)-3(g), 301.6302-1(c), and 301.6656-1(c).
On August 23, 2010, the Treasury Department and IRS published in the Federal Register (75 FR 51707) proposed amendments to the regulations (REG-153340-09) to require EFT for all FTDs and to eliminate the rules regarding FTD coupons. Written public comments responding to the proposed regulations were received. No public hearing was held because the IRS did not receive any requests to speak at the public hearing.
Several commentators asserted that many small businesses will have difficulty using EFT because they lack computers or internet access. Businesses without a computer may use the ACH debit option, which requires only a telephone call, to schedule a payment through the Electronic Federal Tax Payment System (EFTPS), an authorized method of EFT pursuant to § 31.6302-1(h)(4). To assist taxpayers new to EFTPS, United States-based live operator customer support is available toll-free 24 hours a day, year-round.
A commentator stated that requiring EFTPS will likely result in an increase in user errors based on taxpayers' computer illiteracy. Another commentator stated that requiring EFTPS will produce excessive costs in payment delays and requests for penalty abatement. According to IRS research, however, employers who pay electronically are 31 times less likely to make an error that results in interest or penalties than employers who use FTD coupons.
Several commentators expressed a reluctance to move away from the FTD coupon system based on taxpayers' familiarity with the current system and the relationships they have developed with their local banks. In deciding to discontinue the FTD coupon system, the Financial Management Service (FMS) considered current market conditions. In the last 18 months, more than 100 financial institutions, large and small, have stopped accepting FTD coupons. In many states, few financial institutions still process FTD coupons. Additionally, many states now require employers to file or pay their state business taxes electronically.
One commentator requested that the IRS continue to allow taxpayers to make payments by sending a check or money order to an IRS address when a new entity has applied for, but has not received, an employer identification number (EIN). The time it takes to receive an EIN, however, should no longer be an impediment to using EFTPS. Businesses within the United States or U.S. territories can apply for an EIN online using the IRS Web site. Once the application is completed, the information is validated during the online session, and an EIN is issued immediately. United States and international applicants may also obtain an EIN instantly using the telephone.
Several commentators requested raising the de minimis amounts above $2,500 for payments that may be made with a return. The de minimis deposit rules, however vary according to the type of tax involved. For example, the de minimis threshold is less than $2,500 per quarter for Form 720, Quarterly Federal Excise Tax Return, under § 40.6302(c)-1(e)(3), but less than $200 per calendar year for Form 1042, Annual Withholding Tax Return for U.S. Source Income of Foreign Persons, under § 1.6302-2(a)(1)(iv). Changing the existing de minimis deposit rules would create additional complexity and confusion for taxpayers, would upset the current established regulatory scheme, and unduly complicate enforcement of EFTPS.Start Printed Page 75898
Moreover, IRS will only receive confirmation that the payment was made. The IRS will not have access to any taxpayer's financial account. Businesses that do not wish to use EFTPS can arrange for their tax professional, financial institution, payroll service, or other trusted third party to make an FTD on their behalf using a master account. Businesses also may arrange for their financial institution to initiate a same-day tax wire payment for them.
Several commentators asserted that EFTPS registration is time-consuming, should be easier to use, and should make EFTPS available immediately. All taxpayers now using FTD coupons will be pre-enrolled in Treasury's free EFTPS. When they receive notification of pre-enrollment, they can use the phone or Internet to activate their PIN, enter their financial account information, and begin scheduling payments on the same day.
A commentator requested clarification of the One-Day Rule in § 31.6302-1(c) and Example 4 in § 31.6302-1(d). The commentator argued that the One-Day Rule should be applied only when an employer has accumulated $100,000 or more in undeposited employment taxes within the deposit period applicable to its status as a monthly or semi-weekly depositor and that Example 4 should be modified consistent with this result. These suggestions were not adopted. The commentator misinterprets the existing rules, which use accumulated taxes rather than undeposited taxes to determine the application of the One-Day rule. The proposed rules merely updated the existing rules and examples to be consistent with the elimination of the FTD coupon system and did not modify this aspect of the existing rules.
Example 4 in the proposed regulations correctly illustrates how the One-Day Rule applies in combination with a subsequent deposit obligation. Example 4 involves Employer D, a depositor subject to the semi-weekly rule for calendar year 2011. On Monday, January 10, 2011, D accumulates $115,000 in employment taxes. Because D has accumulated $100,000 or more in employment taxes, the One-Day Rule applies, and D therefore must deposit the $115,000 in employment taxes by the next business day, which is Tuesday, January 11, 2011. On Tuesday, January 11, 2011, D accumulates an additional $30,000 in employment taxes. Because the $115,000 in employment taxes accumulated on Monday is already subject to the One-Day Rule, there are no other accumulated taxes to be taken into account in determining D's deposit obligation for the additional $30,000 in employment taxes accumulated on Tuesday. Therefore, D has an additional and separate deposit obligation of $30,000 on Tuesday that must be satisfied by the following Friday. This example is adopted in the final regulations without change.
Since a taxpayer will no longer be able to use a government depository bank to make an FTD using an FTD coupon, these regulations remove references to “banking days” and instead determine the timeliness of deposits by reference to “business days,” meaning every calendar day that is not a Saturday, Sunday, or legal holiday under section 7503. Additionally, because EFTPS is available 24 hours a day, seven days a week, the final regulations provide that, consistent with section 7503, the term “legal holiday” for FTD purposes includes only those legal holidays in the District of Columbia. Thus, a statewide legal holiday will no longer be considered a legal holiday unless the holiday coincides with a legal holiday in the District of Columbia. The following days Start Printed Page 75899are currently legal holidays in the District of Columbia: New Year's Day, Birthday of Martin Luther King, Jr., Washington's Birthday, District of Columbia Emancipation Day, Memorial Day, Independence Day, Labor Day, Columbus Day, Veteran's Day, Thanksgiving Day, Christmas Day, and the day of the inauguration of the President, in every fourth year. The final regulations include several minor changes from the proposed regulations to reflect this application of the legal holiday rule and provide an additional example to illustrate it. See § 31.6302-1(d) Example 5.
A separate notice is being issued with these final regulations to provide transitional relief. Notice 2010—states that the IRS will not assert penalties for FTDs made in 2011 that would be considered timely if statewide legal holidays were taken into account.
In addition to the changes described earlier in this preamble, the final regulations include four minor revisions that vary from the text of the proposed regulations. Sections 31.6071(a)-1(a) and (c) are revised, consistent with the intent of the proposed regulations, to eliminate the rules for FTD coupons. The table of contents in § 31.6302-0 was updated to reflect the changes to the regulation headings. The heading to § 40.6302(c)-1T has been revised to remove the reference to government depositaries. Additionally, § 40.6302(c)-3 is further revised to illustrate the computation of the three business day rule for excise taxes when an intervening day is a holiday consistent with the rules in § 31.6302-1(c)(2)(iii) for employment taxes.
(a) Payment of withheld tax—(1) Deposits of tax. Every withholding agent who withholds tax pursuant to chapter 3 of the Internal Revenue Code (Code) and the regulations under such chapter shall deposit such amount of tax as provided in § 1.6302-2(a). * * *
Deposit rules for tax withheld on nonresident aliens and foreign corporations.
(a) Time for making deposits—(1) Deposits—(i) Monthly deposits. Except as provided in paragraphs (a)(1)(ii) and (iv) of this section, every withholding agent that, pursuant to chapter 3 of the Internal Revenue Code, has accumulated at the close of any calendar month an aggregate amount of undeposited taxes of $200 or more shall deposit such aggregate amount by the 15th day of the following month. However, the preceding sentence shall not apply if the withholding agent has made a deposit of taxes pursuant to paragraph (a)(1)(ii) of this section to a quarter-monthly period that occurred during such month. If the 15th day of the following month is a Saturday, Sunday, or legal holiday in the District of Columbia under section 7503, taxes will be treated as timely deposited if deposited on the next succeeding day which is not a Saturday, Sunday, or legal holiday. With respect to section Start Printed Page 759001446, this section applies only to a publicly traded partnership described in § 1.1446-4.
(iv) Annual deposits. If at the close of December of each calendar year, the aggregate amount of undeposited taxes required to be withheld pursuant to chapter 3 of the Internal Revenue Code is less than $200, the withholding agent may deposit such aggregate amount by March 15 of the following calendar year. If such aggregate amount is not so deposited, it shall be remitted in accordance with paragraph (a)(1) of § 1.1461-1.
§ 1.6302-3
Deposit rules for estimated taxes of certain trusts.
(c) Cross-references. For the requirement to deposit estimated tax payments of taxable trusts by electronic funds transfer, see § 31.6302-1(h) of this chapter.
§ 1.6302-4
Section 31.6302(c)-3 also issued under 26 U.S.C. 6302(a) and (h).* * *
(a) Federal Insurance Contributions Act and income tax withheld from wages and from nonpayroll payments—(1) Quarterly or annual returns. Except as provided in paragraph (a)(4) of this section, each return required to be made under §§ 31.6011(a)-1 and 31.6011(a)-1T, in respect of the taxes imposed by the Federal Insurance Contributions Act (26 U.S.C. 3101-3128), or required to be made under §§ 31.6011(a)-4 and 31.6011(a)-4T, in respect of income tax withheld, shall be filed on or before the last day of the first calendar month following the period for which it is made. However, a return may be filed on or before the 10th day of the second calendar month following such period if timely deposits under section 6302(c) of the Code and the regulations have been made in full payment of such taxes due for the period.
(c) Federal Unemployment Tax Act. Each return of the tax imposed by the Federal Unemployment Tax Act required to be made under § 31.6011(a)-3 shall be filed on or before the last day of the first calendar month following the period for which it is made. However, a return may be filed on or before the 10th day of the second calendar month following such period if timely deposits under section 6302(c) of the Code and the regulations thereunder have been made in full payment of such taxes due for the period.
Start Printed Page 75901
§ 31.6302-2
Deposit rules for taxes under the Railroad Retirement Tax Act (R.R.T.A.).
Deposit rules for withheld income taxes attributable to nonpayroll taxes.
3. Revising paragraph (d),
(4) Deposits required only on business days. No taxes are required to be deposited under this section on any day that is a Saturday, Sunday, or legal holiday. Deposits are required only on business days. Business days include every calendar day other than Saturdays, Sundays, or legal holidays. For purposes of this paragraph (c), legal holidays shall have the same meaning provided in section 7503. Pursuant to section 7503, the term legal holiday means a legal holiday in the District of Columbia. For purposes of this Start Printed Page 75902paragraph (c), the term “legal holiday” does not include other Statewide legal holidays.
(g) Agricultural employers—Special rules—(1) In general. An agricultural employer reports wages paid to farm workers annually on Form 943 (Employer's Annual Tax Return for Agricultural Employees) and reports wages paid to nonfarm workers quarterly on Form 941 or annually on Form 944. Accordingly, an agricultural employer must treat employment taxes reportable on Form 943 (“Form 943 taxes”) separately from employment taxes reportable on Form 941 or Form 944 (“Form 941 or Form 944 taxes”). Form 943 taxes and Form 941 or Form 944 taxes are not combined for purposes of determining whether a deposit of either is due, whether the One-Day rule of § 31.6302-1(c)(3) applies, or whether any safe harbor is applicable. In Start Printed Page 75903addition, Form 943 taxes and Form 941 or Form 944 taxes must be deposited separately. (See § 31.6302-1(b) for rules for determining an agricultural employer's deposit status for Form 941 taxes.) Whether an agricultural employer is a monthly or semi-weekly depositor of Form 943 taxes is determined according to the rules of this paragraph (g).
(n) Effective/applicability dates—(1) In general. Sections 31.6302-1 through 31.6302-3 apply with respect to the deposit of employment taxes attributable to payments made after December 31, 1992. To the extent that the provisions of §§ 31.6302-1 through 31.6302-3 are inconsistent with the provisions of §§ 31.6302(c)-1 and 31.6302(c)-2, a taxpayer will be considered to be in compliance with §§ 31.6301-1 through 31.6302-3 if the taxpayer makes timely deposits during 1993 in accordance with §§ 31.6302(c)-1 and 31.6302(c)-2. Paragraphs (b)(4), (c)(5), (c)(6), (d) Example 6, (e)(2), (f)(4)(i), (f)(4)(iii), (f)(5) Example 3, and (g)(1) of this section apply to taxable years beginning on or after December 30, 2008. Paragraph (f)(4)(ii) of this section applies to taxable years beginning on or after January 1, 2010. The rules of paragraphs (e)(2) and (g)(1) of this section that apply to taxable years beginning before December 30, 2008, are contained in § 31.6302-1 in effect before December 30, 2008. The rules of paragraphs (b)(4), (c)(5), (c)(6), (d) Example 6, (f)(4)(i), (f)(4)(iii), and (f)(5) Example 3 of this section that apply to taxable years beginning on or after January 1, 2006, and before December 30, 2008, are contained in § 31.6302-1T in effect before December 30, 2008. The rules of paragraphs (b)(4) and (f)(4) of this section that apply to taxable years beginning before January 1, 2006, are contained in § 31.6302-1 in effect prior to January 1, 2006. The rules of paragraph (g) of this section eliminating use of Federal tax deposit coupons apply to deposits and payments made after December 31, 2010.
Deposit rules for withheld income taxes attributable to nonpayroll payments.
(d) Special rules. A taxpayer must treat nonpayroll withheld taxes, which are reported on Form 945, “Annual Return of Withheld Federal Income Tax,” separately from taxes reportable on Form 941, “Employer's QUARTERLY Federal Tax Return” (or any other return, for example, Form 943, “Employer's Annual Federal Tax Return for Agricultural Employees”). Taxes reported on Form 945 and taxes reported on Form 941 are not combined for purposes of determining whether a deposit of either is due, whether the One-Day rule of § 31.6302-1(c)(3) applies, or whether any safe harbor is applicable. In addition, taxes reported on Form 945 and taxes reported on Form 941 must be deposited separately. (See paragraph (b) of § 31.6302-1 for rules for determining an employer's deposit status for taxes reported on Form 941.) Taxes reported on Form 945 for one calendar year must be deposited separately from taxes reported on Form 945 for another calendar year.
§ 31.6302(c)-2A
(b) Manner of deposit—(1) In general. A deposit required to be made by an employer under this section shall be made separately from a deposit required by any other section. An employer may make one, or more than one, remittance of the amount required to be deposited. An employer that is not required to deposit an amount of tax by this section may nevertheless voluntarily make that deposit. For the requirement to deposit tax under the Federal Unemployment Tax Act by electronic funds transfer, see § 31.6302-1(h).
(2) Time deemed paid. For the time an amount deposited by electronic funds transfer is deemed paid, see § 31.6302-1(h)(9). For the time an amount remitted with a return is deemed paid, see § 31.6302-1(i)(3).
(d) Deposits required by electronic funds transfer. All deposits required by this part must be made by electronic funds transfer, as that term is defined in § 31.6302-1(h)(4) of this chapter.
Deposits (temporary).
§ 40.6302(c)-2
§ 301.6302-1
(b) Income taxes. (1) For provisions relating to the deposits of income and estimated income taxes of certain corporations, see § 1.6302-1 of this chapter (Income Tax Regulations).
(2) For provisions relating to the deposits of tax required to be withheld under chapter 3 of the Code on nonresident aliens and foreign corporations and tax-free covenant bonds, see § 1.6302-2 of this chapter.
§ 301.6656-1
§ 301.7502-2
[FR Doc. 2010-30526 Filed 12-2-10; 11:15 am]