[Federal Register Volume 59, Number 245 (Thursday, December 22, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-31290]
[[Page Unknown]]
[Federal Register: December 22, 1994]
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DEPARTMENT OF THE TREASURY
26 CFR Part 31
[EE-83-89]
RIN 1545-AN57
Time for Furnishing Wage Statements on Termination of Employer's
Operations
AGENCY: Internal Revenue Service (IRS), Treasury.
ACTION: Notice of proposed rulemaking.
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SUMMARY: This document contains proposed regulations under sections
6051 and 6071 of the Internal Revenue Code of 1986 concerning the time
for furnishing wage statements to both employees and the Social
Security Administration upon the termination of an employer's
operations. These proposed regulations will affect employers and their
employees in the year the employer ceases to pay wages. These
regulations will improve the wage reconciliation process between the
Social Security Administration and the IRS.
DATES: Written comments and requests for a public hearing must be
received by February 21, 1995.
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 Whalen Casey, (202) 622-6040 (not
a toll-free number).
SUPPLEMENTARY INFORMATION:
Background
This document contains amendments to the Employment Tax Regulations
(26 CFR part 31) under sections 6051 and 6071 of the Internal Revenue
Code (Code). The proposed regulations are to be issued under the
authority of sections 6051, 6071 and 7805.
Explanation of Provisions
The proposed regulations improve the wage reconciliation process
between the Social Security Administration (SSA) and the Internal
Revenue Service (IRS) by generally requiring an employer that is
required to file a final Form 941, Employer's Quarterly Federal Tax
Return, to file Forms W-2, Wage and Tax Statement, and W-3, Transmittal
of Wage and Tax Statements, with SSA and to furnish Form W-2 to the
employees at the same time the employer is required to file the final
Form 941.
Prior to 1978, employers had submitted quarterly tax returns to the
IRS listing both the aggregate wages and taxes for all employees (Form
941) and each employee's name and Social Security number, showing the
amount of wages paid to the employee for that quarter (Schedule A of
Form 941 or Form 941A). The IRS forwarded Form 941A to SSA, which used
it to post earnings to individual Social Security records.
In order to minimize the burden on employers, Congress changed the
requirement for submission of detailed wage statements from a quarterly
to an annual basis, effective in 1978. As a result, under the current
system, an employer submits quarterly tax returns (Forms 941) to the
IRS listing the aggregate wages and taxes of all of its employees.
Annual information returns are submitted to SSA listing the wages of
each individual employee (Forms W-2, accompanied by Forms W-3 listing
aggregate annual wages of all employees). A reconciliation problem
arises when the aggregate wages on the annual reports to the SSA do not
match the aggregate wages on the four quarterly reports submitted to
the IRS. Where the wages reported to the IRS exceed the wages reported
to SSA, this indicates a possible underreporting of social security
wages to SSA.
One source of these discrepancies is the termination by employers
of their business operations. In some instances, employers that have
gone out of business well before the due date for the annual filing of
Form W-2 have failed to file Forms W-2 with SSA as required. These
failures have occurred even though the employer might have filed one or
more quarterly Forms 941 with the IRS during the year. In these cases,
the failure to receive the Forms W-2 means SSA is unable to credit
wages to the social security accounts of affected employees. This
problem can be eliminated by requiring employers that terminate
business operations to file Forms W-2 and W-3 at the time they are
required to file the final Form 941.
Generally, under Sec. 31.6071(a)-1(a)(1) of the existing
regulations, the Form 941 is due on or before the last day of the first
calendar month following the period (generally a calendar quarter) for
which it is made. Thus, the Form 941 is generally due on or before
April 30, July 31, October 31, and January 31. There is a ten-day
extension if the employer timely deposited the taxes due for the
quarter. Section 31.6011(a)-6(a)(1) of the existing regulations
requires an employer that ceases to pay wages in a quarter to mark and
file the Form 941 for that quarter as a final return. The proposed
regulations require an employer that is required to file a final Form
941 to provide Forms W-2 to the employees and Forms W-2 and W-3 to SSA
at the same time that the employer is required to file the final Form
941.
Different time frames apply to monthly Form 941 filers. Under
Sec. 31.6071(a)-1(a)(2) of the existing regulations, if the district
director notifies an employer that it is required to make monthly
returns on Form 941 in lieu of quarterly returns, the Form 941 is due
on or before the fifteenth day of the calendar month following the
period (generally a calendar month) for which it is made. For employers
that are required to file Form 941 monthly, requiring the filing of the
Forms W-2 at the same time as the final Form 941 might be unduly
burdensome. Thus, the proposed regulations would not require a monthly
filer to provide Forms W-2 to the employees until the end of the
calendar month in which the final Form 941 is due, rather than by the
fifteenth day of that month. The proposed regulations leave in place
the provisions of Sec. 31.6071(a)-1(a)(3) of the existing regulations
requiring a monthly filer that files a final Form 941 to furnish Forms
W-2 and W-3 to SSA on or before the last day of the second calendar
month following the period for which the final Form 941 is due.
Under Sec. 31.6051-1(d)(1) of the existing regulations, applicable
to both quarterly and monthly Form 941 filers, if an individual's
employment is terminated before the end of a calendar year, the
employer may furnish Form W-2 to the employee at any time after
termination but no later than January 31 of the next year. If the
terminated employee requests a Form W-2, and if there is no reasonable
expectation on the part of either the employer or the employee of
further employment during the calendar year, the employer must furnish
Form W-2 to the employee by the later of 30 days after the employee
made the request or 30 days after the last payment of wages. The
proposed regulation has no effect on the rights of terminated employees
to require the employer to furnish Form W-2 within this time frame.
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. This proposed
regulation would have the effect of modifying the time frame for the
standard procedure in section 4.01 of the Revenue Procedure. Except for
this change, the proposed regulation would not affect the continuing
validity of the Revenue Procedure.
The proposed regulation applies to employers who file Form 941 on a
monthly or quarterly basis, including railroad employers. It does not
apply to employers with respect to their agricultural employees (in
those cases, employers file on an annual basis on Form 943). Nor does
it apply to employers with respect to their domestic employees (in
those cases, employers file on an annual basis beginning in 1995).
These regulations are effective upon the date of publication of
these regulations in final form in the Federal Register. However, these
regulations shall apply only to employers that cease the payment of
wages after the close of the calendar quarter in which the date of
publication occurs.
Special Analyses
It has been determined that this notice of proposed rulemaking 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, this notice of proposed rulemaking will be
submitted to the Chief Counsel for Advocacy of the Small Business
Administration for comment on its impact on small business.
Comments and Public Hearing
Before these proposed regulations are adopted as final regulations,
consideration will be given to any written comments (a signed original
and eight (8) copies) that are submitted timely to the IRS. All
comments will be available for public inspection and copying. A public
hearing may be scheduled if requested in writing by a person who timely
submits written comments. If a public hearing is scheduled, notice of
the date, time, and place for the hearing will be published in the
Federal Register.
Drafting Information
The principal author of these regulations is Jean Whalen 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 in 26 CFR Part 31
Employment taxes, Income taxes, Penalties, Pensions, Railroad
retirement, Reporting and recordkeeping requirements, Social security,
Unemployment compensation.
Proposed Amendments to the Regulations
Accordingly, 26 CFR part 31 is proposed to be 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 31.6071-1 also issued under 26
U.S.C. 6071. * * *
Par. 2. Section 31.6051-1(d)(1) is amended as follows:
1. Paragraph (d)(1) is redesignated as (d)(1)(i).
2. Paragraph (d)(1)(ii) is added to read as follows:
Sec. 31.6051-1 Statements for employees.
* * * * *
(d) * * * (1)(i) * * *
(ii) Expedited filing--(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, the employer must furnish the
statement required by this section on or before the time 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). 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. The provisions of the third sentence of
paragraph (d)(1)(i) of this section (relating to requests by terminated
employees of Form W-2) are unaffected by the provisions of paragraph
(d)(1)(ii)(A) of this section. However, an employer shall not be
permitted to furnish a statement pursuant to the provisions of the
third sentence of paragraph (d)(1)(i) of this section 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 upon the
date of publication of these regulations in final form in the Federal
Register. However, this paragraph (d)(1)(ii) shall apply only to
employers that cease the payment of wages after the close of the
calendar quarter in which the date of publication occurs.
* * * * *
Par. 3. The first sentence of Sec. 31.6051-2(c) 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 Sec. 31.6071(a)-1(a)(3) and
Sec. 31.6081(a)-1(a)(3), respectively. * * *
Par. 4. Section 31.6071(a)-1(a)(3) is amended as follows:
1. Paragraph (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.
4. 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 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), the return which is required to be made under Sec. 31.6051-2
shall be filed on or before the time required for filing the final
return on Form 941 under Sec. 31.6011(a)-6(a)(1). See Sec. 31.6071(a)-
1(a)(1). 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 upon the
date of publication of these regulations in final form in the Federal
Register. However, this paragraph (a)(3)(ii) shall apply only to
employers that cease the payment of wages after the close of the
calendar quarter in which the date of publication occurs.
* * * * *
Margaret Milner Richardson,
Commissioner of Internal Revenue.
[FR Doc. 94-31290 Filed 12-21-94; 8:45 am]
BILLING CODE 4830-01-P
