FROM THE OFFICE OF PUBLIC AFFAIRS

The Treasury Department and the Internal Revenue Service today announced procedures that business taxpayers may use to redesignate their estimated income tax overpayments as employment tax deposits, so that their overpayments can be used to pay their current employment tax obligations. This will help businesses improve cash flow.

The Announcement addresses the situation where taxpayers have already paid estimated tax payments that equal or exceed their income tax liability for the year. This could occur due to unanticipated loses as a result of the September 11^th attacks. Businesses whose projected income was reduced as a result of the September 11^th terrorist attacks will be allowed to apply previous estimated tax payments to cover their current employment tax obligations.

"The Treasury and IRS have been working hard to help businesses affected by the September 11^th terrorist attacks. This redesignation of estimated taxes is a common sense move that will help some of the hardest hit businesses meet their cash flow needs," stated Mark Weinberger, Treasury Assistant Secretary for Tax Policy.

This is another in a series of administrative actions the Treasury Department and the IRS have taken in the past two weeks to alleviate the tax burdens on individuals and businesses as a result of changing circumstances surrounding the September 11 tragedy. Treasury and IRS have provided mid-quarter convention relief (10/18/01) and issued interim guidance that provides employees will not be taxed on donated leave (10/24/01).

These administrative actions are in addition to the filing relief provided to individuals and businesses immediately after the attacks (9/12/01 and 9/13/01).

The text of Announcement 2001-112 follows:

Part IV - Items of General Interest
Redesignation of Estimated Income Tax Payments

Announcement 2001-112

Many taxpayers have informed the Internal Revenue Service (IRS) that their income for the current year will be substantially less than previously expected because of economic disruptions resulting from the September 11, 2001 Terrorist Attack. Some taxpayers who made estimated income tax payments now believe their tax liability for their current taxable year will be lower than the sum of the estimated tax payments they have already made. Several of these taxpayers have asked whether the IRS will permit them to redesignate their estimated income tax payments, in whole or in part, as deposits to satisfy their obligations to deposit employment and withheld income taxes.

This announcement clarifies that the IRS will permit the redesignation of estimated income tax payments as tax deposits to satisfy obligations to deposit employment taxes imposed by chapters 21, 22, and 23 of the Internal Revenue Code, and income taxes withheld under chapter 24. To make this redesignation, a taxpayer should contact the IRS through its Disaster Relief toll-free telephone number 1-866-562-5227.

Taxpayers who wish to redesignate their estimated tax payments should keep in mind their estimated income tax obligations. If, as a result of the redesignation, the amount of estimated tax payments is reduced below the amount required to satisfy the taxpayer's estimated income tax obligation, the taxpayer may be liable for additions to tax under section 6654 or 6655.