Federal Employment Tax Deposits--
De Minimis Rule

DEPARTMENT OF THE TREASURY
Internal Revenue Service 26 CFR Part 31 [TD 8909] RIN 1545-AY46

TITLE: Federal Employment Tax Deposits--De Minimis Rule

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Temporary and final regulations.

SUMMARY: This document contains temporary and final regulations
relating to the deposit of Federal employment taxes. The regulations
change the de minimis deposit rule for quarterly and annual return
periods. The regulations affect taxpayers required to make deposits
of Federal employment taxes. The text of the 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.

DATES: Effective date: These regulations are effective Wednesday,
December 6, 2000. Applicability date: For dates of applicability,
see §31.6302-1T(f)(4).

FOR FURTHER INFORMATION CONTACT: Brinton T. Warren, (202) 622- 4940
(not a toll-free call).

SUPPLEMENTARY INFORMATION:.2

Background and Explanation of Provisions

This document contains amendments to 26 CFR part 31, Employment
Taxes and Collection of Income Tax at the Source. Section
31.6302-1(f)(4) provides that if the total amount of accumulated
employment taxes for a return period is less than $1,000 and the
amount is fully deposited or remitted with a timely filed return for
the quarter, the amount deposited or remitted will be deemed to be
timely deposited.

The temporary regulations change the $1,000 threshold to $2,500.
Thus, a taxpayer that has accumulated employment taxes of less than
$2,500 for a return period (quarterly or annual, as the case may be)
does not have to make deposits but may remit its full liability with
a timely filed return for the return period. The de minimis
threshold is being raised as part of the IRS and Treasury's
continued efforts to reduce burden on the small business community.
On June 16, 1998, temporary regulations (TD 8771) that raised the de
minimis threshold from $500 to $1,000 were published in the Federal
Register (63 FR 32735). This increase of the threshold to $1,000 was
made final on June 17, 1999, (TD 8822) in regulations published in
the Federal Register (64 FR 32408).

Having conducted further study, the IRS now seeks additional changes
in deposit requirements to reduce taxpayer burden. The IRS and
Treasury have determined that another increase in the de minimis
threshold is a simple and straightforward step that will reduce
burden on small businesses.

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 also has 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 these regulations do not impose a collection of information
on small entities, the Regulatory Flexibility Act (5 U.S.C. chapter
6) does not apply. Pursuant to section 7805(f) of the Internal
Revenue Code, these regulations will be submitted to the Chief
Counsel for Advocacy of the Small Business Administration for
comment on their impact on small businesses.

Drafting Information

The principal author of the regulations is Brinton T. Warren of the
Office of Associate Chief Counsel, Procedure and Administration
(Administrative Provisions and Judicial Practice Division). 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.

Adoption of Amendments to the Regulations Accordingly, 26 CFR part
31 is amended as follows:

PART 31--EMPLOYMENT TAXES AND COLLECTION OF INCOME TAX AT.4 SOURCE

Paragraph 1. The authority citation for part 31 is amended by adding
an entry in numerical order to read in part as follows: Authority:
26 U.S.C. 7805 * * *

Section 31.6302-1T also issued under 26 U.S.C. 6302(a) and (c). * *
*

Par. 2. In §31.6302-1, a new sentence is added at the end of
paragraph (f)(4) to read as follows: §31.6302-1 Federal tax deposit
rules for withheld income taxes and taxes under the Federal
Insurance Contributions Act (FICA) attributable to payments made
after December 31, 1992.

* * * * *

(f) * * *

(4) * * * For guidance regarding de minimis amounts for quarterly or
annual return periods beginning on or after January 1, 2001, see
§31.6302-1T(f)(4).

* * * * *

Par. 3. Section 31.6302-1T is added to read as follows: §31.6302-1T
Federal tax deposit rules for withheld income taxes and taxes under
the Federal Insurance Contributions Act (FICA) attributable to
payments made after December 31, 1992 (temporary). (a) through (f)
(3). [Reserved] For further guidance, see §31.6302-1(a) through (f)
(3).

(f)(4) De Minimis rule. For quarterly and annual return periods
beginning on or after January 1, 2001, if the total amount of
accumulated employment taxes for the return period is less than
$2,500 and the amount is fully deposited or remitted. with a timely
filed return for the return period, the amount deposited or remitted
will be deemed to have been timely deposited..(f)(5) through (n).
[Reserved] For further guidance, see §31.6302-1(f)(5) through (n).

Commissioner of Internal Revenue
Approved:
Assistant Secretary for Tax Policy

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