[Federal Register Volume 61, Number 56 (Thursday, March 21, 1996)]
[Rules and Regulations]
[Pages 11547-11550]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-6718]
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DEPARTMENT OF THE TREASURY
26 CFR Parts 1 and 31
[TD 8661]
RIN 1545-AU10
Federal Tax Deposits by Electronic Funds Transfer
AGENCY: Internal Revenue Service (IRS), Treasury.
ACTION: Temporary regulations.
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SUMMARY: This document contains temporary regulations relating to the
deposit of Federal taxes by electronic funds transfer (EFT) under
section 6302 of the Internal Revenue Code. The document also includes
temporary regulations providing authority for the voluntary payment of
certain Federal taxes by EFT. The regulations would provide the public
with additional guidance needed to make deposits by EFT and would
affect certain taxpayers not previously required to make deposits by
EFT. The text of these temporary regulations also serves as the text of
a cross-reference notice of proposed rulemaking on this subject in the
Proposed Rules section of this issue of the Federal Register.
EFFECTIVE DATE: March 21, 1996.
FOR FURTHER INFORMATION CONTACT: Vincent G. Surabian, 202-622- 6232
(not a toll-free number).
SUPPLEMENTARY INFORMATION:
Background
On July 11, 1994, the IRS issued Treasury Decision 8553 (59 FR
35414), setting forth temporary regulations relating to the deposit of
Federal taxes by EFT. Those temporary regulations explained which
taxpayers must make deposits by electronic funds transfer, which taxes
must be so deposited, and when the deposits must commence. The text of
those temporary regulations also served as the text of a cross-
reference notice of proposed rulemaking published in the same issue of
the Federal Register at 59 FR 35418.
The IRS received many comment letters in response to the
publication of those temporary regulations. In addition, a number of
oral comments were made at the public hearing held on October 3, 1994.
With limited exceptions, those comments will not be addressed in this
document, but instead will be addressed in final regulations that the
IRS expects to publish in the near future.
Under the temporary regulations currently in place, the requirement
to begin EFT deposits is based on the taxpayer's total deposits of the
taxes imposed by chapters 21 (FICA taxes), 22 (railroad retirement
taxes) and 24 (income tax withheld at source) of the Internal Revenue
Code during certain ``determination periods.'' If the taxpayer's
deposits of those taxes during a determination period exceed a
prescribed dollar threshold, the taxpayer must begin to deposit by EFT
on and after the applicable effective date prescribed in the temporary
regulations, unless otherwise exempted.
The amendments to the temporary regulations set forth in this
document provide a special rule for any taxpayer that does not make
deposits of the taxes imposed by chapters 21, 22, and 24, but that does
make deposits of other taxes required to be deposited pursuant to
regulations issued under section 6302 (for instance, corporate income
taxes). If the taxpayer's total deposits for all other depository taxes
during a prescribed determination period exceed a prescribed dollar
threshold, the taxpayer must begin depositing by EFT on and after the
applicable effective date prescribed in these amendments to the
temporary regulations, unless otherwise exempted. (A taxpayer will
become subject to the EFT requirement for the January 1, 1998,
applicable effective date by exceeding the threshold amount during
either calendar year 1995 or calendar year 1996.) The phase-in schedule
is as follows:
------------------------------------------------------------------------
Determination Applicable
Threshold amount period effective date
------------------------------------------------------------------------
$50 thousand.................... 1-1-95 to 12-31-95 January 1, 1998.
$50 thousand.................... 1-1-96 to 12-31-96 January 1, 1998.
$20 thousand.................... 1-1-97 to 12-31-97 January 1, 1999.
------------------------------------------------------------------------
The current temporary regulations provide that a taxpayer subject
to the EFT requirement must use EFT for all deposits required to be
made on and after the applicable effective date. This requirement may
subject a taxpayer to two different modes of deposit with respect to
the same return period. For example, assume an employer is required to
deposit by EFT beginning with the January 1, 1997, applicable effective
date. The employer pays its employees weekly and has a paydate on
December 31, 1996. The employment taxes incurred for that paydate would
be reportable on the fourth quarter 1996 Form 941, but the due date for
the deposit of those taxes would occur in early January 1997. Under the
current rule, all the deposits relating to the fourth quarter 1996 Form
941 would be made by paper coupon (FTD coupon) with the exception of
the deposit for the December 31 payroll, which would be made by EFT.
For purposes of consistency, this rule is being changed with respect to
the January 1, 1997, applicable effective date and thereafter to
provide that the first deposit required to be made by EFT is the first
deposit with respect to a deposit obligation incurred for a return
period beginning on or after the applicable effective date. Thus, under
the revised rule, the deposit with respect to the December 31 paydate
in the example would be made by FTD coupon rather than by EFT.
The current temporary regulations provide that a deposit by EFT is
deemed made (i) at the time a debit is made (the amount is withdrawn
from the taxpayer's account) if the Government's authorized financial
agent debits the taxpayer's account; or (ii) in all other cases, at the
time the funds are credited to the Treasury's general account. Comments
by the Federal Reserve Board, the Financial Management Service, and IRS
personnel recommended a clarification of that provision. Based on those
recommendations, the current temporary regulations are amended to
provide that a deposit by EFT is deemed made (i) at the time a debit is
made (the amount is withdrawn from the taxpayer's account and not
returned or reversed) if the Government's authorized agent originates a
debit entry which instructs the taxpayer's financial institution to
debit the taxpayer's account for a Federal tax payment; or (ii) in all
other cases (assuming the amount is not returned or reversed), either
at the time the funds are paid into the Treasury's general account at
the Federal Reserve Bank of New York or at the time the funds are
invested under Treasury's Tax and Loan program (see 31 CFR Part 203).
Investment occurs when the funds are credited by the Federal Reserve
Bank to the depositary institution's note balance.
These temporary regulations also define the term taxpayer. For
purposes of the EFT requirement, a taxpayer is any person required to
deposit federal taxes, including not only individuals, but also any
trust, estate, partnership, association, company or corporation. This
definition responds to numerous inquiries following the issuance of the
current temporary regulations.
Sections 31.6302-1T(h)(2) (describing the taxes required to be
deposited by EFT) and 31.6302-1T(h)(8) (describing when a deposit of
tax by EFT is deemed to be a payment of tax) have been revised solely
for purposes of clarity. No substantive change is being made to either
of the provisions.
These temporary regulations allow individual taxpayers to make
voluntary
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payments of income tax by EFT, even though individual income tax is not
required to be deposited with a government depositary. The voluntary
EFT payments are to be made in accordance with instructions provided in
procedures to be prescribed by the Commissioner at a future date.
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 rules and, therefore, a Regulatory Flexibility Analysis is not
required. Pursuant to section 7805(f) of the Internal Revenue Code, a
copy of these temporary regulations will be submitted to the Chief
Counsel for Advocacy of the Small Business Administration for comment
on their impact on small business.
Drafting Information
The principal author of these regulations is Vincent G. Surabian,
Office of the Assistant Chief Counsel (Income Tax & Accounting), IRS.
However, other personnel from the IRS and Treasury Department
participated in their development.
List of Subjects
26 CFR Part 1
Income taxes, Reporting and recordkeeping requirements.
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
Accordingly, 26 CFR parts 1 and 31 are amended as follows:
PART 1--INCOME TAXES
Paragraph 1. The authority citation for part 1 is amended by adding
an entry in numerical order to read as follows:
Authority: 26 U.S.C. 7805 * * *
Section 1.6302-4T also issued under 26 U.S.C. 6302(a) and (c). * *
*
Par. 2. Section 1.6302-4T is added to read as follows:
Sec. 1.6302-4T Use of financial institutions in connection with
individual income taxes (temporary).
Voluntary payments by electronic funds transfer. An individual may
voluntarily remit by electronic funds transfer all payments of tax
imposed by subtitle A of the Code, including any payments of estimated
tax. Such payments must be made in accordance with procedures to be
prescribed by the Commissioner.
PART 31--EMPLOYMENT TAXES AND COLLECTION OF INCOME TAX AT SOURCE
Par. 3. The authority citation for part 31 continues to read in
part as follows:
Authority: 26 U.S.C. 7805 * * *
Par. 4. Section 31.6302-1T is amended as follows:
1. Paragraph (h)(1)(ii)(A) is redesignated as paragraph
(h)(1)(ii)(A)(1); the first sentence in newly designated paragraph
(h)(1)(ii)(A)(1) is removed, and three new sentences are added in its
place; and, in the last sentence of the newly designated paragraph, the
text preceding the table is revised.
2. Paragraph (h)(1)(ii)(A)(2) is added.
3. Paragraphs (h)(2), (h)(3), (h)(7) and (h)(8) are revised.
The additions and revisions read as follows:
Sec. 31.6302-1T Federal tax deposit rules for withheld income taxes
and taxes under the Federal Insurance Contributions Act (FICA)--
deposits required to be made by electronic funds transfer after
December 31, 1994 (temporary).
* * * * *
(h) * * * (1) * * *
(ii) Periods after December 31, 1994. (A)(1) Taxpayers whose
aggregate deposits of the taxes imposed by Chapters 21 (Federal
Insurance Contributions Act), 22 (Railroad Retirement Tax Act), and 24
(Collection of Income Tax at Source on Wages) of the Internal Revenue
Code during a 12-month determination period exceed the applicable
threshold amount are required to deposit all depository taxes described
in paragraph (h)(2) of this section by electronic funds transfer (as
defined in paragraph (h)(3) of this section) unless exempted under
paragraph (h)(4) of this section. If the applicable effective date is
January 1, 1995, or January 1, 1996, the requirement to deposit by
electronic funds transfer applies to all deposits required to be made
on and after the applicable effective date. If the applicable effective
date is January 1, 1997, or thereafter, the requirement to deposit by
electronic funds transfer applies to all deposits required to be made
with respect to deposit obligations incurred for return periods
beginning on and after the applicable effective date. * * * The
threshold amounts, determination periods and applicable effective dates
for purposes of this paragraph (h)(1)(ii)(A)(1) are as follows: * * *
(2) Unless exempted under paragraph (h)(4) of this section, a
taxpayer that does not deposit any of the taxes imposed by chapters 21,
22, and 24 during the applicable determination periods set forth in
paragraph (h)(1)(ii)(A)(1) of this section, but that does make deposits
of other depository taxes (as described in paragraph (h)(2) of this
section), is nevertheless subject to the requirement to deposit by
electronic funds transfer if the taxpayer's aggregate deposits of all
depository taxes exceed the threshold amount set forth in this
paragraph (h)(1)(ii)(A)(2) during an applicable 12-month determination
period. This requirement to deposit by electronic funds transfer
applies to all depository taxes due with respect to deposit obligations
incurred on and after the applicable effective date. The threshold
amount, determination periods, and applicable effective dates for
purposes of this paragraph (h)(1)(ii)(A)(2) are as follows:
------------------------------------------------------------------------
Determination Applicable
Threshold amount period effective date
------------------------------------------------------------------------
$50 thousand.................... 1-1-95 to 12-31-95 January 1, 1998.
$50 thousand.................... 1-1-96 to 12-31-96 January 1, 1998.
$20 thousand.................... 1-1-97 to 12-31-97 January 1, 1999.
------------------------------------------------------------------------
* * * * *
(2) Taxes required to be deposited by electronic funds transfer.
The requirement to deposit by electronic funds transfer under paragraph
(h)(1)(ii) of this section applies to all the taxes required to be
deposited under Secs. 1.6302-1, 1.6302-2, and 1.6302-3 of this chapter;
Secs. 31.6302-1, 31.6302-2, 31.6302-3, 31.6302-4, and 31.6302(c)-3; and
Sec. 40.6302(c)-1 of this chapter.
(3) Definitions--(i) Electronic funds transfer. An electronic funds
transfer is any transfer of depository taxes made in accordance with
Revenue Procedure 94-48 (1994-2 C.B. 694), (see Sec. 601.601(d)(2) of
this chapter), or in accordance with procedures subsequently prescribed
by the Commissioner.
(ii) Taxpayer. For purposes of this section, a taxpayer is any
person required to deposit federal taxes, including not only
individuals, but also
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any trust, estate, partnership, association, company or corporation.
* * * * *
(7) Time deemed deposited. A deposit of taxes by electronic funds
transfer will be deemed made--
(i) At the time a debit is made (the amount is withdrawn from the
taxpayer's account and not returned or reversed) if the Government's
authorized agent originates a debit entry which instructs the
taxpayer's financial institution to debit the taxpayer's account for a
Federal tax payment; or
(ii) In all other cases (assuming the amount is not returned or
reversed), either at the time that the funds are paid into the
Treasury's general account at the Federal Reserve Bank of New York, or
at the time that the funds are invested under Treasury's Tax and Loan
program (see 31 CFR part 203). Investment occurs when the funds are
credited by the Federal Reserve Bank to the depository institution's
note balance.
(8) Time deemed paid. In general, an amount deposited under this
paragraph (h) will be considered to be a payment of tax on the last day
prescribed for filing the applicable return for the return period
(determined without regard to any extension of time for filing the
return) or, if later, at the time deemed deposited under paragraph
(h)(7) of this section. In the case of the taxes imposed by chapters 21
and 24 of the Internal Revenue Code, solely for purposes of section
6511 and the regulations thereunder (relating to the period of
limitation on credit or refund), if an amount is deposited prior to
April 15th of the calendar year immediately succeeding the calendar
year that includes the period for which the amount was deposited, the
amount will be considered paid on April 15th.
Margaret Milner Richardson,
Commissioner of Internal Revenue.
Approved: December 22, 1995.
Leslie Samuels,
Assistant Secretary of the Treasury.
[FR Doc. 96-6718 Filed 3-20-96; 8:45 am]
BILLING CODE 4830-01-P
