Regs on Reporting of Nonpayroll Withheld Income Taxes

 [4830-01-u]

ACTION: Final and temporary regulations.

SUMMARY: This document contains final and temporary regulations relating to the reporting of nonpayroll withheld income taxes under section 6011 of the Internal Revenue Code. The temporary regulations remove the requirement that a person file Form 945, Annual Return of Withheld Federal Income Tax, for each calendar year, whether or not the person is required to withhold the taxes reported on Form 945 in a particular calendar year. The temporary regulations require that a person file Form 945 only for a calendar year in which the person is required to withhold taxes required to be reported on Form 945. The text of these temporary regulations also serves as the text of the proposed regulations set forth in the notice of proposed rulemaking on this subject in the Proposed Rules section of this issue of the Federal Register.

EFFECTIVE DATE: These regulations are effective October 16, 1995.

FOR FURTHER INFORMATION CONTACT: Vincent G. Surabian, 202-622-6232 (not a toll-free number).

SUPPLEMENTARY INFORMATION:

PAPERWORK REDUCTION ACT

These regulations are being issued without prior notice and public procedure pursuant to the Administrative Procedure Act (5 U.S.C. 553). For this reason, the collection of information contained in these regulations has been reviewed and, pending receipt and evaluation of public comments, approved by the Office of Management and Budget under control number 1545-1413. Responses to this collection of information are required to monitor compliance with the federal tax laws related to the reporting and deposit of nonpayroll withheld taxes.

An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless the collection of information displays a valid control number.

For further information concerning this collection of information, and where to submit comments on the collection of information and the accuracy of the estimated burden, and suggestions for reducing this burden, please refer to the preamble to the cross- referencing notice of proposed rulemaking published in the Proposed Rules section of this issue of the Federal Register.

Books or records relating to a collection of information must be retained as long as their contents may become material in the administration of any internal revenue law. Generally, tax returns and tax return information are confidential, as required by 26 U.S.C. 6103.

BACKGROUND

On December 23, 1993, the IRS published final regulations (TD 8504) in the Federal Register (58 FR 68033) relating to both the reporting and depositing of Federal employment taxes. Those regulations simplify reporting requirements by removing all "nonpayroll" withheld taxes from reporting on Form 941, Employer's Quarterly Federal Tax Return (or Form 941E, Quarterly Return of Withheld Federal Income Tax and Medicare Tax) and requiring those taxes to be reported on Form 945. Those final regulations were effective December 23, 1993.

Section 31.6011(a)-4(b) of those regulations provides that every person required to make a return of income tax withheld from nonpayroll payments for calendar year 1994 must make a return for calendar year 1994 and for each subsequent calendar year (whether or not any such tax is required to be withheld that year) until a final return is made in accordance with section 31.6011(a)-6. In addition, every person not required to make a return of income tax withheld from nonpayroll payments for calendar year 1994 must make a return for the first calendar year after 1994 in which the person is required to withhold the tax and for each subsequent calendar year until a final return is made in accordance with section 31.6011(a)-6.

In the preamble to TD 8504, the IRS stated that it welcomed and would consider comments from the public regarding the requirement to continue filing Form 945 annually, regardless of liability, until a final return is filed in accordance with section 31.6011(a)-6. Several commentators responded to that invitation, all opposing the requirement to file a return for a calendar year for which there is no liability. As a result, the IRS has reconsidered the specific requirement.

EXPLANATION OF PROVISIONS

These temporary regulations remove the requirement that, once a person files an annual Form 945, the person must file a Form 945 every subsequent year until the person files a final return. Under these temporary regulations, a person must file a Form 945 only for a calendar year in which the person is required to withhold Federal income tax from nonpayroll payments.

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 has also 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, 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 and Accounting). 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 602

Reporting and recordkeeping requirements.

ADOPTION OF AMENDMENTS TO THE REGULATIONS

Accordingly, 26 CFR parts 31 and 602 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 an entry in numerical order to read as follows:

Authority: 26 U.S.C. 7805 * * *

Section 31.6011(a)-4T also issued under 26 U.S.C. 6011. * * *

Par 2. Section 31.6011(a)-4 is amended by revising paragraph (b) to read as follows:

SECTION 31.6011(a)-4 RETURNS OF INCOME TAX WITHHELD.

* * * * *

(b) [Reserved] For further guidance see section 31.6011(a)- 4T(b).

* * * * *

Par. 3. Section 31.6011(a)-4T is added to read as follows:

SECTION 31.6011(a)-4T RETURNS OF INCOME TAX WITHHELD (TEMPORARY).

(a) [Reserved] For further guidance see section 31.6011(a)- 4(a).

(b) WITHHELD FROM NONPAYROLL PAYMENTS. Every person required to withhold tax from nonpayroll payments for calendar year 1994 must make a return for calendar year 1994 and for any subsequent calendar year in which any such tax is required to be withheld until the person makes a final return in accordance with section 31.6011(a)-6. Every person not required to withhold tax from nonpayroll payments for calendar year 1994 must make a return for the first calendar year after 1994 in which the person is required to withhold such tax and for any subsequent calendar year in which the person is required to withhold such tax until the person makes a final return in accordance with section 31.6011(a)-6. Form 945, Annual Return of Withheld Federal Income Tax, is the form prescribed for making the return required under this paragraph (b). Nonpayroll payments are --

(1) Certain gambling winnings subject to withholding under section 3402(q);

(2) Retirement pay for services in the Armed Forces of the United States subject to withholding under section 3402;

(3) Certain annuities as described in section 3402(o)(1)(B);

(4) Pensions, annuities, IRAs, and certain other deferred income subject to withholding under section 3405; and

(5) Reportable payments subject to backup withholding under section 3406.

PART 602 -- OMB CONTROL NUMBERS UNDER THE PAPERWORK REDUCTION ACT

Par. 4. The authority citation for part 602 continues to read as follows:

Authority: 26 U.S.C. 7805.

SECTION 602.101 [Amended]

Par. 5. Section 602.101, paragraph (c) is amended in the table by adding the entry "31.6011(a)-4T....1545-1413" in numerical order.