[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
