Penalties for Underpayments of Deposits &
Overstated Deposit Claims
DEPARTMENT OF THE TREASURY
Internal Revenue Service 26 CFR Parts 1, 31, 30, and 602 [TD 8947]
RIN 1545-AY79
TITLE: Penalties for Underpayments of Deposits and Overstated
Deposit Claims
AGENCY: Internal Revenue Service (IRS), Treasury.
ACTION: Final regulations and removal of final regulations.
SUMMARY: This document makes conforming amendments to certain final
regulations to reflect the removal of final regulations, relating to
the penalty for underpayment of deposits of taxes and the penalty
for overstated deposit claims. These regulations are obsolete due to
amendments to section 6656 of the Internal Revenue Code. The removal
of these regulations will not affect taxpayers.
DATES: The amendments and removal of these regulations is effective
June 15, 2001.
FOR FURTHER INFORMATION CONTACT: Robin M. Tuczak, (202) 622-4940
(not a toll-free number).
SUPPLEMENTARY INFORMATION:
Background and Explanation of Provisions
This document removes two sections from the Procedure and
Administration Regulations (26 CFR part 301) relating to penalties
for underpayment of Federal tax deposits and overstated deposit
claims under section 6656 of the Internal Revenue Code..2 The
Omnibus Budget Reconciliation Act of 1989, Public Law 101-239 (103
Stat. 2106, 1989) amended section 6656, modifying the penalty rates
relating to a failure to make a Federal tax deposit and removing the
penalty relating to overstatement of Federal tax deposits. These
changes have rendered §§301.6656-1 and 301.6656-2
obsolete.
Section 301.6656-1 was revised and §301.6656-2 was added by TD
7925, published in the Federal Register for December 13, 1983
(LR-311-81, 48 FR 5453). Section 301.6656-2 was added to implement
changes made by the Economic Recovery Tax Act of 1981, Public Law
97-34 (95 Stat. 172, 1981). Section 301.6656-1 was revised to remove
outdated provisions relating to deposits made before January 1,
1970, based on the law in effect for those deposits.
Section 301.6656-1 reflects that, at the time it was revised, the
penalty for underpayment of deposits was five percent of the amount
of the underpayment without regard to the period during which the
underpayment continued, absent reasonable cause. The Omnibus Budget
Reconciliation Act of 1986, Public Law 99-509 (100 Stat. 1874, 1986)
amended section 6656 to impose a ten percent penalty for
underpayment. The Omnibus Budget Reconciliation Act of 1989 further
amended this section to provide for a penalty that is equal to an
applicable percentage of the amount of the underpayment based on the
duration of the underpayment. This regulation does not reflect the
most recent amendments to section 6656. Furthermore, all relevant.3
information regarding underpayment penalties is put forth in the
code section or in other published guidance. This regulation does
not provide any additional guidance regarding the current
underpayment penalties as set forth in section 6656 and therefore
may be removed.
Section 301.6656-2 explains and expands upon former section 6656(b),
Overstated Deposit Claims. The Omnibus Budget Reconciliation Act of
1989 removed former section 6656(b), making this regulation
obsolete.
In addition, §301.6656-3 is redesignated as §301.6656-1.
Further, §§1.6302-1(d) and 1.6302-2(d) of the Income Tax
Regulations and §§31.6302-1(m)(1) and 31.6302(c)-4(a) of
the Employment Tax Regulations are revised to remove references to
the removed regulations under section 6656.
Effect on other Documents
The final regulations §§301.6656-1 and 301.6656-2
published in the Federal Register for December 13, 1983 (LR-311-81,
48 FR 5453) are removed as of June 15, 2001.
Special Analyses
It has been determined that the removal of these regulations is not
a significant regulatory action as defined in Executive Order 12866.
Therefore, a regulatory assessment is not required. Because this
rule merely removes regulatory provisions made obsolete by statute,
prior notice and comment and a delayed effective date are
unnecessary and contrary to the public interest. 5 U.S.C. 553(b)(B)
and (d). Because no notice of.4 proposed rulemaking is required, the
Regulatory Flexibility Act (5 U.S.C. chapter 6) does not apply.
Drafting Information
The principal author of the removal of the regulations is Robin M.
Tuczak of the Office of Associate Chief Counsel, Procedure and
Administration (Administrative Provisions and Judicial Practice
Division).
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.
26 CFR Part 301
Employment taxes, Estate taxes, Gift taxes, Income taxes, Penalties,
Reporting and recordkeeping requirements.
26 CFR Part 602
Reporting and recordkeeping requirements. Adoption of Amendments to
the Regulations Accordingly, 26 CFR parts 1, 31, 301, and 602 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 §1.6302-1, paragraph (d) is revised to read as
follows:
§1.6302-1 Use of Government depositaries in connection with
corporation income and estimated income taxes and certain taxes of
tax-exempt organizations.
* * * * *
(d) Failure to deposit. For provisions relating to the penalty for
failure to make a deposit within the prescribed time, see section
6656.
Par. 3. In §1.6302-2, paragraph (d) is revised to read as
follows:
§1.6302-2 Use of Government depositaries for payment of tax
withheld on nonresident aliens and foreign corporations.
* * * * *
(d) Penalties for failure to make deposits. For provisions relating
to the penalty for failure to make a deposit within the prescribed
time, see section 6656.
* * * * *
PART 31--EMPLOYMENT TAXES AND COLLECTION OF INCOME TAX AT SOURCE
Par. 4. The authority citation for part 31 continues to read in part
as follows:
Authority: 26 U.S.C. 7805 * * * Par. 5. In §31.6302-1,
paragraph (m)(1) is revised to read as follows:
§31.6302-1 Federal tax deposit rules for withheld income taxes
and taxes under the Federal Insurance Contributions Act (FICA).6
attributable to payments made after December 31, 1992.
* * * * *
(m) * * *
(1) Failure to deposit penalty. For provisions relating to the
penalty for failure to make a deposit within the prescribed time,
see section 6656.
* * * * *
Par. 6. In §31.6302(c)-4, paragraph (a) is revised to read as
follows:
§31.6302(c)-4 Cross references.
(a) Failure to deposit. For provisions relating to the penalty for
failure to make a deposit within the prescribed time, see section
6656.
* * * * *
PART 301--PROCEDURE AND ADMINISTRATION
Par. 7. The authority citation for part 301 continues to read in
part as follows: Authority: 26 U.S.C. 7805 * * *
§§301.6656-1 and 301.6656-2 [Removed]
Par. 8. Sections 301.6656-1 and 301.6656-2 are removed.
§301.6656-3 [Redesignated as §301.6656-1]
Par. 9. Section 301.6656-3 is redesignated as new §301.6656-1.
PART 602--OMB CONTROL NUMBERS UNDER THE PAPERWORK REDUCTION ACT
Par. 10. The authority citation for part 602 continues to read as
follows:
Authority: 26 U.S.C. 7805.
Par. 11. In §602.101, paragraph (b) is amended by removing
the entries for 301.6656-1 and 301.6656-2 from the table.
Robert E. Wenzel
Deputy Commissioner of Internal Revenue
Approved: June 1, 2001
Mark A. Weinberger
Assistant Secretary of the Treasury
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