Extension of Due Date for Electronically Filed Information Returns;
Limitation of Failure to Pay Penalty for Individuals During
Period of Installment Agreement

DEPARTMENT OF THE TREASURY  
Internal Revenue Service 26 CFR Parts 1, 31, and 301 [TD 8895] RIN
1545-AX31

TITLE: Extension of Due Date for Electronically Filed Information
Returns; Limitation of Failure to Pay Penalty for Individuals During
Period of Installment Agreement

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Final regulation.

SUMMARY: This document contains final regulations implementing
section 6071(b) relating to the extension of the due date for
certain electronically filed information returns. The final
regulations also provide rules under section 6651(h) relating to a
penalty reduction for certain individuals who have agreed with the
IRS to make installment payments in satisfaction of their tax
liability. The regulations relating to extension of filing dates
affect payors required to file information returns after December
31, 1999. The regulations relating to penalty reduction affect
individual taxpayers with installment agreements in effect during
months beginning after December 31, 1999.

DATES: Effective Date: These regulations are effective August 18,
2000.

     Applicability Date: The provisions of these regulations under
section 6071(b) apply for returns required to be filed after
December 31, 1999. The provisions of these regulations under section
6651(h) apply for determining the addition to tax for months
beginning after December 31, 1999.

FOR FURTHER INFORMATION CONTACT: Marilyn E. Brookens, (202) 622-
4920 (for information relating to the extension of due dates under
section 6071(b)); or Robert B. Taylor, (202) 622-4920 (for
information relating to the reduction in the penalty under section
6651(h)) (not toll-free numbers).

SUPPLEMENTARY INFORMATION:

Background and Explanation of Provisions

     This document contains amendments to the Income Tax
Regulations, Employment Tax Regulations, and Procedure and
Administration Regulations (26 CFR Parts 1, 31, and 301), and
implements sections 6071(b) and 6651(h), which were added to the
Internal Revenue Code (Code) by the Internal Revenue Service
Restructuring and Reform Act of 1998, Public Law 105-206 (112 Stat.
685, 724 (1998 Act)). Section 6071(b) was added to the Code by
section 2002 of the 1998 Act and extends the due date for
information returns required by chapter 61, subchapter A, part III,
subparts B and C (sections 6041 through 6053) that are filed
electronically. The information returns affected include the Form
W-2 series, Form W-2G, the Form 1098 series, the Form 1099 series,
and Form 8027. Under section 6071(b) such information returns are
due on or before March 31 of the year following the calendar year to
which the returns relate. Section 6071(b) applies to information
returns required to be filed with the IRS or the Social Security
Administration after December 31, 1999.

     Section 6651(h) was added to the Code by section 3303 of the
1998 Act and provides that, for individuals, the failure to pay
penalty is reduced from 0.5 percent per month to 0.25 percent per
month during the period an installment agreement under section 6159
is in effect with regard to a timely filed return. Section 6651(h)
applies to any Federal tax liability of an individual (including a
liability under subtitle C) and is effective for determining the
addition to tax for months beginning after December 31, 1999.

     On January 27, 2000, a notice of proposed rulemaking (REG-
105279-99, 2000-8 I.R.B. 707) under sections 6071(b) and 6651(h) was
published in the Federal Register (65 FR 4396). Although written or
electronic comments and requests for a public hearing were
solicited, no comments were received and no public hearing was
requested or held. The proposed regulations under sections 6071(b)
and 6651(h) are adopted by this Treasury decision.

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 has also 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 the regulations do not impose a collection of information on
small entities, a Regulatory Flexibility Analysis under the
Regulatory Flexibility Act (5 U.S.C. chapter 6) is not required.
Pursuant to section 7805(f) of the Code, the notice of proposed
rulemaking that preceded 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 the regulations relating to the
extension of due dates under section 6071(b) is Marilyn E. Brookens,
Office of Assistant Chief Counsel (Income Tax & Accounting). The
principal author of the regulations relating to the reduction in the
penalty under section 6651(h) is Robert B. Taylor, Office of
Assistant Chief Counsel (Income Tax & Accounting). 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, Reporting and
recordkeeping requirements.

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 parts 1, 31, and 301 are amended as
follows:

PART 1-INCOME TAXES

     Paragraph 1. The authority citation for part 1 continues to
read in part as follows:

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

     Par. 2. In §1.6041-2, paragraph (a)(3)(ii) is revised to read
as follows:

§1.6041-2 Return of information as to payments to employees.

     (a) * * *

     (3) * * *

     (ii) Exception. In a case where an employer is not required to
file Forms W-3 and W-2 under §31.6011(a)-4 or §31.6011(a)-5 of this
chapter, returns on Forms W-3 and W-2 required under this paragraph
(a) for any calendar year shall be filed on or before February 28
(March 31 if filed electronically) of the following year.

* * * * *

     Par. 3. In §1.6041-6, the first sentence is revised to read as
follows:

§1.6041-6 Returns made on Forms 1096 and 1099 under section 6041;
contents and time and place for filing.

     Returns made under section 6041 on Forms 1096 and 1099 for any
calendar year shall be filed on or before February 28 (March 31 if
filed electronically) of the following year with any of the Internal
Revenue Service Centers, the addresses of which are listed in the
instructions for such forms. * * *

     Par. 4. In §1.6042-2, the first sentence of paragraph (c) is
revised to read as follows: §1.6042-2 Returns of information as to
dividends paid in calendar years after 1962.

* * * * *

     (c) Time and place for filing. The returns required under this
section for any calendar year shall be filed after September 30 of
such year, but not before the payer’s final payment for the year,
and on or before February 28 (March 31 if filed electronically) of
the following year with any of the Internal Revenue Service Centers,
the addresses of which are listed in the instructions for Form 1096.
* * *

* * * * *

     Par. 5. In §1.6043-2, paragraph (a) is revised to read as
follows:

§1.6043-2 Return of information respecting distributions in
liquidation.

     (a) Unless the distribution is one in respect of which
information is required to be filed pursuant to §1.332-6(b),
1.368-3(a), or 1.1081-11, every corporation making any distribution
of $600 or more during a calendar year to any shareholder in
liquidation of the whole or any part of its capital stock shall file
a return of information on Forms 1096 and 1099, giving all the
information required by such form and by the regulations in this
part. A separate Form 1099 must be prepared for each shareholder to
whom such distribution was made, showing the name and address of
such shareholder, the number and class of shares owned by him in
liquidation of which such distribution was made, and the total
amount distributed to him on each class of stock. If the amount
distributed to such shareholder on any class of stock consisted in
whole or in part of property other than money, the return on such
form shall in addition show the amount of money distributed, if any,
and shall list separately each class of property other than money
distributed, giving a description of the property in each such class
and a statement of its fair market value at the time of the
distribution. Such forms, accompanied by transmittal Form 1096
showing the number of Forms 1099 filed therewith, shall be filed on
or before February 28 (March 31 if filed electronically) of the year
following the calendar year in which such distribution was made with
any of the Internal Revenue Service Centers, the addresses of which
are listed in the instructions for Form 1096.

* * * * *

     Par. 6. In §1.6044-2, the first sentence of paragraph (d) is
revised to read as follows:

§1.6044-2 Returns of information as to payments of patronage
dividends with respect to patronage occurring in taxable years
beginning after 1962.

* * * * *

     (d) Time and place for filing. The return required under this
section on Forms 1096 and 1099 for any calendar year shall be filed
after September 30 of such year, but not before the payer’s final
payment for the year, and on or before February 28 (March 31 if
filed electronically) of the following year, with any of the
Internal Revenue Service Centers, the addresses of which are listed
in the instructions for such forms. * * *

* * * * *

     Par. 7. Section §1.6045-1 is amended by adding paragraph (r) to
read as follows:

§1.6045-1 Returns of information of brokers and barter exchanges.

* * * * *

     (r) Electronic filing. Notwithstanding the time prescribed for
filing in paragraph (j) of this section, Forms 1096 and 1099
required under this section for reporting periods ending during a
calendar year shall, if filed electronically, be filed after the
last calendar day of the reporting period elected by the broker or
barter exchange and on or before March 31 of the following calendar
year.

     Par. 8. In §1.6045-2, paragraph (g)(3) is revised to read as
follows:

§1.6045-2 Furnishing statement required with respect to certain
substitute payments.

* * * * *

     (g) * * *

     (3) Time and place of filing. The returns required under this
paragraph (g) for any calendar year shall be filed after September
30 of such year, but not before the final substitute payment for the
year is received by the broker, and on or before February 28 (March
31 if filed electronically) of the following year with any of the
Internal Revenue Service Centers, the addresses of which are listed
in the instructions for Form 1096.

* * * * *

     Par. 9. In §1.6045-4, the first sentence of paragraph (j) is
revised to read as follows:

§1.6045-4 Information reporting on real estate transactions with
dates of closing on or after January 1, 1991.

* * * * *

     (j) Time and place for filing. A reporting person shall file
the information returns required by this section with respect to a
real estate transaction after December 31 of the calendar year that
includes the date of closing (as determined under paragraph (h)(2)
(ii) of this section) and on or before February 28 (March 31 if
filed electronically) of the following calendar year. * * *

* * * * *

     Par. 10. In §1.6047-1, the first sentence of paragraph (a)(6)
is revised to read as follows:

§1.6047-1 Information to be furnished with regard to employee
retirement plan covering an owner-employee.

     (a) * * *

     (6) Time and place for filing. The return required under this
section for any calendar year shall be filed after the close of that
year and on or before February 28 (March 31 if filed electronically)
of the following year with any of the Internal Revenue Service
Centers, the addresses of which are listed in the instructions for
Form 1096. * * *

* * * * *

     Par. 11. Section 1.6049-4 is amended by:

     1. Revising the first sentence of paragraph (g)(1).

     2. Revising the first sentence of paragraph (g)(2).

     The revisions read as follows:

§1.6049-4 Return of information as to interest paid and original
issue discount includible in gross income after December 31, 1982.

* * * * *

     (g) * * * (1) Annual return. Except as provided in paragraph
(g)(2) of this section, the returns required under this section for
any calendar year for the payment of interest shall be filed after
September 30 of such year, but not before the payor’s final payment
to the payee for the year, and on or before February 28 (March 31 if
filed electronically) of the following year. * * *

     (2) Transactional return. In the case of a return under
paragraph (e) of this section, relating to returns on a
transactional basis, such return shall be filed at any time but in
no event later than February 28 (March 31 if filed electronically)
of the year following the calendar year in which the interest was
paid. * * *

* * * * *

      Par. 12. In §1.6049-7, the first sentence of paragraph (b)(2)
(iv) is revised to read as follows: §1.6049-7 Returns of information
with respect to REMIC regular interests and collateralized debt
obligations.

* * * * *

     (b) * * *

     (2) * * *

     (iv) Time and place for filing a return with respect to amounts
includible as interest. The returns required under this paragraph
(b)(2) for any calendar year must be filed after September 30 of
that year, but not before the payor’s final payment to the payee for
the year, and on or before February 28 (March 31 if filed
electronically) of the following year. * * *

* * * * *

     Par. 13. In §1.6050A-1, paragraph (b) is revised to read as
follows:

§1.6050A-1 Reporting requirements of certain fishing boat operators.

* * * * *

     (b) Time and place for filing. Returns required to be made
under this section on Form 1099-MISC shall be filed with the
Internal Revenue Service Center, designated in the instructions for
Form 1099-MISC, on or before February 28 (March 31 if filed
electronically) of the year following the calendar year in which the
relevant services were performed.

* * * * *

     Par. 14. In §1.6050D-1, paragraph (b) is revised to read as
follows:

§1.6050D-1 Information returns relating to energy grants and
financing.

* * * * *

     (b) Time and place for filing. Returns required to be made
under this section shall be filed with the Internal Revenue Service
Center designated in the instructions for Form 6497 or 1099-G on or
before the last day of February (March 31 if filed electronically)
of the year following the calendar year for which the return is
made.

     Par. 15. In §1.6050E-1, the first sentence of paragraph (h) is
revised to read as follows:

§1.6050E-1 Reporting of State and local income tax refunds.

* * * * *

     (h) Time and place for filing. The returns required under this
section for any calendar year shall be filed after September 30 of
that calendar year, but not before the refund officer’s final
payment (or allowance of credit or offset) for the year, and on or
before February 28 (March 31 if filed electronically) of the
following year. * * *

* * * * *

     Par. 16. In §1.6050H-2, the first and second sentences of
paragraph (a)(4) are revised to read as follows: §1.6050H-2 Time,
form, and manner of reporting interest received on qualified
mortgage.

     (a) * * *

     (4) Time and place for filing return. An interest recipient
must file a return required by this paragraph (a) on or before
February 28 (March 31 if filed electronically) of the year following
the calendar year for which it receives the mortgage interest. If no
interest is required to be reported for the calendar year, but a
reimbursement of interest on a qualified mortgage is required to be
reported for the calendar year, then a return required by this
paragraph (a) must be filed on or before February 28 (March 31 if
filed electronically) of the year following the calendar year in
which the reimbursement was made.

* * *

* * * * *

     Par. 17. In §1.6050J-1T, A-33 is revised to read as follows:

§1.6050J-1T Questions and answers concerning information returns
relating to foreclosures and abandonments of security (temporary).

* * * * *

     A-33: The return or returns must be filed on or before February
28 (March 31 if filed electronically) of the year following the
calendar year in which the acquisition of an interest in the
property occurs or in which the lender knows or has reason to know
of the abandonment of the property.

* * * * *

     Par. 18. In §1.6050P-1, paragraph (a)(4)(i) is revised to read
as follows:

§1.6050P-1 Information reporting for discharges of indebtedness by
certain financial entities.

     (a) * * *

     (4) * * * (i) In general. Except as provided in paragraph (a)
(4)(ii) of this section, returns required by this section must be
filed with the Internal Revenue Service office designated in the
instructions for Form 1099-C on or before February 28 (March 31 if
filed electronically) of the year following the calendar year in
which the identifiable event occurs.

* * * * *

     Par. 19. In §1.6052-1, paragraph (b)(1)(ii) is revised to read
as follows:

§1.6052-1 Information returns regarding payment of wages in the form
of group-term life insurance.

* * * * *

     (b) * * * (1) * * *

     (ii) Exception. In a case where an employer is not required to
file Forms W-3 and W-2 under §31.6011(a)-4 or §31.6011(a)-5 of this
chapter, returns on Forms W-3 and W-2 required under paragraph (a)
of this section for any calendar year shall be filed on or before
February 28 (March 31 if filed electronically) of the following
year.

* * * * *

PART 31--EMPLOYMENT TAXES AND COLLECTION OF INCOME TAX AT THE

SOURCE

     Par. 20. The authority citation for part 31 continues to read
in part as follows:

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

     Par. 21. In §31.3402(q)-1, the first sentence of paragraph (f)
(1) introductory text is revised to read as follows: §31.3402(q)-1
Extension of withholding to certain gambling winnings.

* * * * *

     (f) * * * (1) In general. Every person making payment of
winnings for which a statement is required under paragraph (e) of
this section shall file a return on Form W-2G with the Internal
Revenue Service Center serving the district in which is located the
principal place of business of the person making the return on or
before February 28 (March 31 if filed electronically) of the
calendar year following the calendar year in which the payment of
winnings is made. * * *

* * * * *

     Par. 22. In §31.6053-3, the first sentence of paragraph (a)(4)
is revised to read as follows: §31.6053-3 Reporting by certain large
food or beverage establishments with respect to tips.

     (a) * * *

     (4) Time and place for filing. The information return required
by this paragraph (a) shall be filed on or before the last day of
February (March 31 if filed electronically) of the year following
the calendar year for which the return is made with the Internal
Revenue Service Center specified by the Form 8027 or its
instructions. * * *

* * * * *

     Par. 23. In §31.6071(a)-1, paragraph (a)(3)(i) is revised to
read as follows:

§31.6071(a)-1 Time for filing returns and other documents.

     (a) * * *

     (3) * * * (i) General rule. Each information return in respect
of wages as defined in the Federal Insurance Contributions Act or of
income tax withheld from wages which is required to be made under
§31.6051-2 shall be filed on or before the last day of February
(March 31 if filed electronically) of the year following the
calendar year for which it is made, except that, if a tax return
under §31.6011(a)-5(a) is filed as a final return for a period
ending prior to December 31, the information statement shall be
filed on or before the last day of the second calendar month
following the period for which the tax return is filed.

* * * * *

PART 301--PROCEDURE AND ADMINISTRATION

     Par. 24. The authority citation for part 301 continues to read
in part as follows:

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

     Par. 25. Section 301.6651-1 is amended by:

     1. Revising the last sentence in paragraph (a)(2).

     2. Revising the second sentence in paragraph (a)(3).

     3. Adding paragraph (a)(4).

     The revisions and additions read as follows: §301.6651-1
Failure to file tax return or to pay tax.

     (a) * * *

     (2) * * * Except as provided in paragraph (a)(4) of this
section, the amount to be added to the tax is 0.5 percent of the
amount of tax shown on the return if the failure is for not more
than 1 month, with an additional 0.5 percent for each additional
month or fraction thereof during which the failure continues, but
not to exceed 25 percent in the aggregate.

     (3) * * * Except as provided in paragraph (a)(4) of this
section, the amount to be added to the tax is 0.5 percent of the
amount stated in the notice and demand if the failure is for not
more than 1 month, with an additional 0.5 percent for each
additional month or fraction thereof during which the failure
continues, but not to exceed 25 percent in the aggregate. * * *

     (4) Reduction of failure to pay penalty during the period an
installment agreement is in effect--(i) In general. In the case of a
return filed by an individual on or before the due date for the
return (including extensions)--

     (A) The amount added to tax for a month or fraction thereof is
determined by using 0.25 percent instead of 0.5 percent under
paragraph (a)(2) of this section if at any time during the month an
installment agreement under section 6159 is in effect for the
payment of such tax; and

     (B) The amount added to tax for a month or fraction thereof is
determined by using 0.25 percent instead of 0.5 percent under
paragraph (a)(3) of this section if at any time during the month an
installment agreement under section 6159 is in effect for the
payment of such tax.

     (ii) Effective date. This paragraph (a)(4) applies for purposes
of determining additions to tax for months beginning after December
31, 1999.

* * * * *      

Robert E. Wenzel  
Deputy Commissioner of Internal Revenue   
Approved: August 1, 2000   
Jonathan Talisman  
Acting Assistant Secretary of the Treasury

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