[Federal Register: December 1, 2004 (Volume 69, Number 230)]
[Rules and Regulations]
[Page 69819-69820]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr01de04-6]
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DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 31
[TD 9162]
RIN 1545-BB66
Federal Unemployment Tax Deposits--De Minimis Threshold
AGENCY: Internal Revenue Service (IRS), Treasury.
ACTION: Final regulations.
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SUMMARY: This document contains final regulations relating to the
deposit of Federal Unemployment Tax Act (FUTA) taxes. The regulations
change the accumulated amount of tax liability above which taxpayers
must begin depositing Federal unemployment taxes. The regulations
affect employers that have an accumulated FUTA tax liability of $500 or
less.
DATES: Effective Date: These regulations are effective December 1,
2004.
Applicability Date: For dates of applicability, see Sec.
31.6302(c)-3(a)(2) and (3).
FOR FURTHER INFORMATION CONTACT: Heather L. Dostaler, (202) 622-4940
(not a toll-free number).
SUPPLEMENTARY INFORMATION:
Background
This document contains amendments to the Regulations on Employment
Taxes and Collection of Income Tax at Source (26 CFR part 31) under
section 6302 relating to mode or time of collection. The current rules
relating to the deposit of FUTA taxes generally require employers to
deposit taxes on a quarterly basis. An exception provides that an
employer is not required to make a deposit until accumulated FUTA tax
liability exceeds $100.
A notice of proposed rulemaking (REG-144908-02) providing an
additional exception to the FUTA tax deposit requirements was published
in the Federal Register (68 FR 42329) on July 17, 2003. Under the
proposed exception, an employer would not be required to deposit FUTA
taxes if the employer's liability for other employment taxes (FICA
taxes and withheld income taxes) was below the threshold at which
deposits were required for those other taxes.
Three written comments were received in response to the notice of
proposed rulemaking, but there was no request for a public hearing and
a public hearing was not held. All comments were considered and are
available for public inspection upon request. After consideration of
the written comments, the proposed regulations under section 6302 are
adopted as revised by this Treasury decision. The public comments and
the revisions are discussed below.
Summary of Comments
Two commentators expressed concern that the creation of an
additional exception linked to the deposit rules for other employment
taxes will create complexity and that a single exception based on FUTA
tax liability is sufficient. One commentator expressed concern
regarding the low threshold amounts under both exceptions, and also
expressed concern that the proposed exception could be misinterpreted
by those accustomed to referring only to the amount of accumulated FUTA
taxes.
One commentator suggested that the regulations should exempt
household employers who file Schedule H, ``Household Employment
Taxes,'' with Form 1040. This comment is outside the scope of these
regulations, which are limited to the deposit rules issued under
section 6302. Household employment taxes reported on Schedule H are
paid with the employer's income taxes.
Explanation of Provisions
After considering the public comments, the IRS and Treasury
Department agree that a single exception based on a higher FUTA tax
liability threshold is preferable to the exception in the proposed
regulations. Accordingly, the final regulations do not include an
exception linked to the deposit rules for other employment taxes.
Instead, they increase the FUTA tax liability threshold from $100 to
$500. Thus, an employer will not be required to make a deposit of FUTA
taxes until FUTA tax liability exceeds $500. This change is a simple
and straightforward step to reduce the burden on small businesses.
Special Analyses
It has been determined that this Treasury decision is not a
significant regulatory action as defined in Executive Order 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) does not apply to these regulations, and, because
these regulations do not impose a collection of information on small
entities, the Regulatory Flexibility Act (5 U.S.C. chapter 6) does not
apply. Pursuant to section 7805(f) of the Internal Revenue Code, the
notice of proposed rulemaking preceding these regulations was submitted
to the Chief Counsel for Advocacy of the Small Business Administration
for comment on its impact on small business.
Drafting Information
The principal author of these regulations is Heather L. Dostaler of
the Office of Associate Chief Counsel, Procedure and Administration
(Administrative Provisions and Judicial Practice Division).
List of Subjects in 26 CFR Part 31
Employment taxes, Income taxes, Penalties, Pensions, Railroad
retirement, Reporting and recordkeeping requirements, Social Security,
Unemployment compensation.
Adoption of Amendments to the Regulations
0
Accordingly, 26 CFR part 31 is amended as follows:
PART 31--EMPLOYMENT TAXES AND COLLECTION OF INCOME TAX AT SOURCE
0
Paragraph 1. The authority citation for part 31 continues to read, in
part, as follows:
Authority: 26 U.S.C. 7805 * * *
[[Page 69820]]
0
Par. 2. In Sec. 31.6302(c)-3, paragraphs (a)(2) and (a)(3) are revised
to read as follows:
Sec. 31.6302(c)-3 Use of Government depositaries in connection with
tax under the Federal Unemployment Tax Act.
(a) * * *
(2) Special rule where accumulated amount does not exceed $500. The
provisions of paragraph (a)(1) of this section shall not apply with
respect to any period described therein if the amount of the tax
imposed by section 3301 for such period (as computed under section
6157) plus amounts not deposited for prior periods does not exceed $500
($100 in the case of periods ending on or before December 31, 2004).
Thus, an employer shall not be required to make a deposit for a period
unless his tax for such period plus tax not deposited for prior periods
exceeds $500.
(3) Requirement for deposit in lieu of payment with return. If the
amount of tax reportable on a return on Form 940 exceeds by more than
$500 ($100 in the case of calendar years before 2005) the sum of the
amounts deposited by the employer pursuant to paragraph (a)(1) of this
section for such calendar year, the employer shall, on or before the
last day of the first calendar month following the calendar year for
which the return is required to be filed, deposit the balance of the
tax due with an authorized financial institution.
* * * * *
Mark E. Matthews,
Deputy Commissioner for Services and Enforcement.
Approved: November 23, 2004.
Gregory Jenner,
Acting Assistant Secretary of the Treasury.
[FR Doc. 04-26511 Filed 11-30-04; 8:45 am]
BILLING CODE 4830-01-P