IRS Won't Impose Penalties
in Good Faith Efforts

WASHINGTON - The Internal Revenue Service released regulations today concerning the need to withhold tax on certain travel advances or reimbursements and make reports to employees on Forms W-2. To comply with the regulations, some employers have had to make significant modifications in their accounting and withholding procedures.

The IRS said that where substantial and good faith efforts have been made to comply with requirements of temporary regulations that became effective July 1, 1990, the IRS will not impose penalties for failures to withhold and pay employment taxes or failure to properly report advances or reimbursements. However, beginning July 1, 1991, penalties will be imposed where appropriate.

The final regulations reflect changes made by the Family Support Act of 1988 which called for travel advances or reimbursements to be taxable under certain circumstances. These regulations were published in the Federal Register in temporary and proposed form on Dec. 12, 1989.

The IRS said its decision recognizes all the difficulties employers from private industry and governments, including the IRS, encountered in putting in place all the required changes to meet the deadline.

The final regulations are scheduled to be published in the Federal Register on Dec. 17, 1990.

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