Electronic Funds Transfer of Depository Taxes, 51707-51713 [2010-20737]

Agencies

• Internal Revenue Service
• DEPARTMENT OF THE TREASURY

[Federal Register Volume 75, Number 162 (Monday, August 23, 2010)]
[Proposed Rules]
[Pages 51707-51713]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2010-20737]


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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Parts 1, 31, 40, and 301

[REG-153340-09]
RIN 1545-BJ13


Electronic Funds Transfer of Depository Taxes

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Notice of proposed rulemaking and notice of public hearing.

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SUMMARY: This document contains proposed regulations relating to 
Federal tax deposits (FTDs) by Electronic Funds Transfer (EFT). The 
proposed regulations affect all taxpayers that currently use FTD 
coupons. In response to the decision of the Financial Management 
Service to discontinue the system that processes FTD coupons, the 
proposed regulations provide rules under which depositors must use EFT 
for all FTDs and eliminate the rules regarding FTD coupons. This 
document also provides notice of a public hearing on these proposed 
regulations.

DATES: Written or electronic comments must be received by September 22, 
2010. Outlines of topics to be discussed at the public hearing 
scheduled for September 21, 2010, must be received by September 20, 
2010.

ADDRESSES: Send submissions to: CC:PA:LPD:PR (REG-153340-09), Room 
5203, Internal Revenue Service, P.O. Box 7604, Ben Franklin Station, 
Washington, DC 20044. Submissions may be hand delivered Monday through 
Friday between the hours of 8 a.m. and 4 p.m. to: CC:PA:LPD:PR (REG-
153340-09), Courier's Desk, Internal Revenue Service, 1111 Constitution 
Avenue, NW., Washington, DC, or sent electronically via the Federal 
eRulemaking Portal at https://www.regulations.gov (IRS REG-153340-09). 
The public hearing will be held in the IRS Auditorium, Internal Revenue 
Building, 1111 Constitution Avenue, NW., Washington, DC.

FOR FURTHER INFORMATION CONTACT: Concerning the proposed regulations, 
Michael E. Hara, (202) 622-4910; concerning submissions of comments, 
the hearing, and/or to be placed on the building access list to attend 
the hearing, Regina Johnson, (202) 622-7180 (not toll-free numbers).

SUPPLEMENTARY INFORMATION:

Background

    This document contains proposed amendments to the Income Tax 
Regulations (26 CFR part 1), the Employment Tax and Collection of 
Income Tax at the Source Regulations (26 CFR part 31), the Excise Tax 
Procedural Regulations (26 CFR part 40), and the Procedure and 
Administration Regulations (26 CFR part 301), to require that all FTDs 
be made by EFT.
    These proposed regulations are expected to be finalized by the end 
of 2010. The final regulations are expected to apply to remittances 
made after the date that final regulations are published in the Federal 
Register, but in no event earlier than January 1, 2011.

Explanation of Provisions

1. Requirement To Make Deposits by Electronic Funds Transfer

    Section 6302(h) of the Internal Revenue Code (Code) authorizes the 
Secretary to prescribe regulations as may be necessary for the 
development and implementation of an EFT system that is required to be 
used for the collection of depository taxes. On July 14, 1997, final 
regulations under section 6302(h) relating to the collection of Federal 
tax deposits (FTDs) by EFT (TD 8723, 62 FR 37490) were issued. These 
final regulations phased in depositors to the EFT system through 1999. 
In the final stages of the phase-in under those regulations, depositors 
with more than $50,000 in employment tax deposits during calendar year 
1995, 1996, or 1997, and depositors that, in any of those years, had no 
employment tax deposits but made deposits of other FTDs exceeding 
$50,000, were required to begin to deposit by EFT.
    On July 13, 1999, final regulations amending TD 8723 (TD 8828, 64 
FR 37675) were issued. Under those regulations, which are currently in 
effect, depositors whose aggregate annual FTDs exceed $200,000 
generally must use EFT. Depositors that exceed the $200,000 threshold 
have an initial one-year grace period after which they must use EFT in 
all later years even if their FTDs fall below the threshold.
    The Electronic Federal Tax Payment System (EFTPS) is the EFT system 
currently used by the Treasury Department to collect FTDs. More than 
97.5 percent of all FTDs are currently deposited electronically through 
EFTPS. Depositors not currently required to use EFTPS for deposits may 
instead use the paper-based FTD coupon system to make a deposit by 
presenting a check and an FTD coupon to a bank teller at one of 
approximately 8,000 financial institutions authorized as a government 
depositary or to a financial agent, a process that dates back to World 
War I.
    These proposed regulations are being issued to effectuate system 
changes made by the Financial Management Service (FMS), a Bureau of the 
Treasury Department. Beginning in 2011, FMS is eliminating the system 
that enables the processing of FTD coupons. Accordingly, these proposed 
regulations require the use of EFT for all FTDs, effective January 1, 
2011. The proposed regulations remove references to ``banking'' days 
and provide that, if the day an FTD would otherwise be due is a 
Saturday, Sunday, or legal holiday under section 7503, the taxes will 
be treated as timely deposited if deposited on the next succeeding day 
which is not a Saturday, Sunday, or legal holiday. The proposed 
regulations do not change existing rules for determining a depositor's 
status as either a monthly or semi-weekly depositor for employment 
taxes. The proposed regulations also do not change existing rules on 
whether a taxpayer can remit taxes with a return in lieu of making an 
FTD.
    For example, under the proposed regulations, employers must deposit 
income taxes withheld from wages and taxes under the Federal Insurance 
Contributions Act (FICA) (collectively, ``employment taxes'') by EFT 
unless the

[[Page 51708]]

existing de minimis rule under Sec.  31.6302-1T(f)(4) applies. 
Generally, the de minimis rule for employment taxes allows employers 
with a deposit liability of less than $2,500 for a return period to 
remit employment taxes with their quarterly or annual return. Employers 
below the $2,500 threshold may remit the employment taxes with their 
tax return, may voluntarily make deposits by EFT, or may use other 
methods of payment as provided by the instructions relating to the 
return.

2. Taxes Required To Be Deposited by EFT

    Because the FTD coupon system will be eliminated by FMS, the 
proposed regulations require all FTDs of the following taxes to be made 
by EFT:
    1. Corporate income and corporate estimated taxes pursuant to Sec.  
1.6302-1;
    2. Unrelated business income taxes of tax-exempt organizations 
under section 511 pursuant to Sec.  1.6302-1;
    3. Private foundation excise taxes under section 4940 pursuant to 
Sec.  1.6302-1;
    4. Taxes withheld on nonresident aliens and foreign corporations 
pursuant to Sec.  1.6302-2;
    5. Estimated taxes on certain trusts pursuant to Sec.  1.6302-3;
    6. FICA taxes and withheld income taxes pursuant to Sec.  31.6302-
1;
    7. Railroad retirement taxes pursuant to Sec.  31.6302-2;
    8. Nonpayroll taxes, including backup withholding pursuant to Sec.  
31.6302-4;
    9. Federal Unemployment Tax Act (FUTA) taxes pursuant to Sec.  
31.6302(c)-3; and
    10. Excise taxes reported on Form 720, Quarterly Federal Excise Tax 
Return, pursuant to Sec.  40.6302(c)-1.

3. Benefits of EFTPS

    The benefits to taxpayers using EFTPS are substantial. According to 
IRS data, depositors using EFTPS are 31 times less likely to make an 
error resulting in a penalty than depositors using an FTD coupon. 
Depositors can schedule an EFTPS transaction 120 days in advance of the 
desired payment date at their convenience, 24 hours a day, 365 days a 
year. EFTPS also provides a confirmation number, called an ``EFT 
Number,'' which guarantees depositors that the tax deposit has been 
scheduled and allows the transaction to be traced if necessary. EFTPS 
processes over 100 million transactions per year, totaling nearly $2 
trillion dollars, with an error rate of 0.18 percent. In addition, many 
financial institutions are no longer accepting FTD coupons through 
their branch infrastructure. Eliminating FTD coupons will also result 
in projected cost savings for the Federal Government of at least $65 
million over the first five years, with an estimated savings of $13 
million each year thereafter.
    These proposed regulations also align with the Treasury 
Department's broad initiative to significantly increase the number of 
electronic transactions between taxpayers and the Federal Government. 
In addition to greatly reducing costs, enhancing customer service, and 
minimizing Treasury's environmental impact, the move from paper to 
electronic transactions will increase reliability, safety, and security 
for taxpayers.

Special Analyses

    It has been determined that this notice of proposed rulemaking 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 this regulation does 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 Code, these regulations have been submitted to the Chief Counsel 
for Advocacy of the Small Business Administration for comment on their 
impact on small business.

Comments and Public Hearing

    Before these proposed regulations are adopted as final regulations, 
consideration will be given to any written (a signed original and eight 
(8) copies) or electronic comments that are submitted timely to the 
IRS. Comments are requested on the clarity of the proposed regulations 
and how they can be made more understandable. Comments are also 
requested on the accuracy of the certification that the regulations in 
this document will not have a significant economic impact on a 
substantial number of small entities. All comments will be available 
for public inspection and copying.
    A public hearing has been scheduled for September 21, 2010, at 10 
a.m. in the IRS Auditorium, Internal Revenue Building, 1111 
Constitution Avenue, NW., Washington, DC. Due to building security 
procedures, visitors must enter at the Constitution Avenue entrance. In 
addition, all visitors must present photo identification to enter the 
building. Because of access restrictions, visitors will not be admitted 
beyond the immediate entrance area more than 30 minutes before the 
hearing starts. For information about having your name placed on the 
building access list to attend the hearing, see the FOR FURTHER 
INFORMATION CONTACT section of this preamble.
    The rules of 26 CFR 601.601(a)(3) apply to the hearing. Persons who 
wish to present oral comments at the hearing must submit written or 
electronic comments by September 22, 2010 and an outline of the topics 
to be discussed and the time to be devoted to each topic (a signed 
original and eight (8) copies) by September 20, 2010. A period of 10 
minutes will be allotted to each person for making comments. An agenda 
showing the scheduling of the speakers will be prepared after the 
deadline for receiving outlines has passed. Copies of the agenda will 
be available free of charge at the hearing.

Drafting Information

    The principal author of these proposed regulations is Michael E. 
Hara, Office of the Associate Chief Counsel (Procedure and 
Administration).

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 40

    Excise taxes, Reporting and recordkeeping requirements.

26 CFR Part 301

    Employment taxes, Estate taxes, Excise taxes, Gift taxes, Income 
taxes, Penalties, Reporting and recordkeeping requirements.

Proposed Amendments to the Regulations

    Accordingly, 26 CFR parts 1, 31, 40, and 301 are proposed to be 
amended as follows:

PART 1--INCOME TAXES

    Paragraph 1. The authority citation for part 1 is amended by 
revising the entry for Section 1.1461-1 and 1.6302-1 through 1.6302-4 
to read in part as follows:

    Authority:  26 U.S.C. 7805 * * *
    Section 1.1461-1, 1.6302-1, 1.6302-2, 1.6302-3 and 1.6302-4 also 
issued under 26 U.S.C. 6302(h). * * *

    Par. 2. Section 1.1461-1 is amended by revising paragraph (a)(1), 
first sentence, to read as follows:

[[Page 51709]]

Sec.  1.1461-1  Payment and returns of tax withheld.

    (a) Payment of withheld tax--(1) Deposits of tax. Every withholding 
agent who withholds tax pursuant to chapter 3 of the Internal Revenue 
Code (Code) and the regulations under such chapter shall deposit such 
amount of tax as provided in Sec.  1.6302-2(a). * * *
* * * * *
    Par. 3. Section 1.6302-1 is amended by:
    1. Revising the heading.
    2. Revising paragraph (a).
    3. Removing paragraph (b)(1) and redesignating paragraph (b)(2) as 
paragraph (b).
    4. Removing paragraph (c).
    5. Redesignating paragraph (d) as paragraph (c).
    6. Adding paragraph (d).
    The revisions and additions read as follows:


Sec.  1.6302-1  Deposit rules for corporation income and estimated 
income taxes and certain taxes of tax-exempt organizations.

    (a) Requirement. A corporation, any organization subject to the tax 
imposed by section 511, and any private foundation subject to the tax 
imposed by section 4940 shall deposit all payments of tax imposed by 
chapter 1 of the Internal Revenue Code (or treated as so imposed by 
section 6154(h)), including any payments of estimated tax, on or before 
the date otherwise prescribed for paying such tax. This paragraph (a) 
does not apply to a foreign corporation or entity that has no office or 
place of business in the United States.
    (b) Deposits by electronic funds transfer. * * *
* * * * *
    (d) Effective/applicability date. This section applies to deposits 
and payments made after the date that final regulations are published 
in the Federal Register, but no earlier than January 1, 2011.
    Par. 4. Section 1.6302-2 is amended by:
    1. Revising the heading.
    2. Revising paragraphs (a)(1)(i), (ii), and (iv).
    3. Revising the heading for paragraph (b).
    4. Revising paragraph (b)(1).
    5. Removing paragraph (b)(6).
    6. Adding a sentence to the end of paragraph (g).
    The revisions and additions read as follows:


Sec.  1.6302-2  Deposit rules for tax withheld on nonresident aliens 
and foreign corporations.

    (a) Time for making deposits--(1) Deposits--(i) Monthly deposits. 
Except as provided in paragraphs (a)(1)(ii) and (iv) of this section, 
every withholding agent that, pursuant to chapter 3 of the Internal 
Revenue Code, has accumulated at the close of any calendar month an 
aggregate amount of undeposited taxes of $200 or more shall deposit 
such aggregate amount within 15 days after the close of such calendar 
month. However, the preceding sentence shall not apply if the 
withholding agent has made a deposit of taxes pursuant to paragraph 
(a)(1)(ii) of this section to a quarter monthly period that occurred 
during such month. With respect to section 1446, this section applies 
only to a publicly traded partnership described in Sec.  1.1446-4.
    (ii) Quarter-monthly deposits. If at the close of any quarter-
monthly period within a calendar month, the aggregate amount of 
undeposited taxes required to be withheld pursuant to chapter 3 of the 
Internal Revenue Code is $2,000 or more, the withholding agent shall 
deposit such aggregate amount within 3 business days after the close of 
such quarter-monthly period. Business days include every calendar day 
other than Saturdays, Sundays, or legal holidays under section 7503. If 
any of the three weekdays following the close of a quarter-monthly 
period is a legal holiday under section 7503, the withholding agent has 
an additional day for each day that is a legal holiday by which to make 
the required deposit. For example, if the Monday following the close of 
a quarter-monthly period is New Year's Day, a legal holiday, the 
required deposit for the quarter-monthly period is not due until the 
following Thursday rather than the following Wednesday.
* * * * *
    (iv) Annual deposits. If at the close of December of each calendar 
year, the aggregate amount of undeposited taxes required to be withheld 
pursuant to chapter 3 of the Internal Revenue Code is less than $200, 
the withholding agent may deposit such aggregate amount by March 15 of 
the following calendar year. If such aggregate amount is not so 
deposited, it shall be remitted in accordance with paragraph (a)(1) of 
Sec.  1.1461-1.
* * * * *
    (b) Manner of payment--(1) Payments not required by electronic 
funds transfer. A payment that is not required to be deposited by this 
section shall be made separately from a payment required by any other 
section. The payment may be submitted with the filed return. The 
timeliness of the payment will be determined by the date payment is 
received by the Internal Revenue Service at the place prescribed for 
filing by regulations or forms and instructions, or if section 7502(a) 
applies, by the date the payment is treated as received under section 
7502(a). Each withholding agent making payments under this section 
shall report on the return, for the period to which such payments are 
made, information regarding such payments according to the instructions 
that apply to such return.
* * * * *
    (g) * * * Paragraph (b)(1) of this section applies to payments made 
after the date that final regulations are published in the Federal 
Register, but no earlier than January 1, 2011.
    Par. 5. Section 1.6302-3 is amended by:
    1. Revising the heading.
    2. Revising paragraph (a).
    3. Revising paragraph (c).
    4. Adding paragraph (d).
    The revisions and additions read as follows:


Sec.  1.6302-3  Deposit rules for estimated taxes of certain trusts.

    (a) Requirement. A bank or other financial institution described in 
paragraph (b) of this section shall deposit all payments of estimated 
tax under section 6654(l) with respect to trusts for which such 
institution acts as a fiduciary by the date otherwise prescribed for 
paying such tax in the manner set forth in published guidance, forms 
and instructions.
* * * * *
    (c) Cross-references. For the requirement to deposit estimated tax 
payments of taxable trusts by electronic funds transfer, see Sec.  
31.6302-1(h) of this chapter.
    (d) Effective/applicability date. This section applies to payments 
made after the date that final regulations are published in the Federal 
Register, but no earlier than January 1, 2011.
    Par. 6. Section 1.6302-4 is revised to read as follows:


Sec.  1.6302-4  Voluntary payments by electronic funds transfer.

    (a) Electronic funds transfer. Any person may voluntarily remit by 
electronic funds transfer any payment of tax imposed by subtitle A of 
the Internal Revenue Code, including any payment of estimated tax. Such 
payment must be made in accordance with procedures prescribed by the 
Commissioner.
    (b) Effective/applicability date. This section applies to payments 
made after the date that final regulations are published in the Federal 
Register, but no earlier than January 1, 2011.

[[Page 51710]]

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

    Par. 7. The authority citation for part 31 is amended by removing 
the entries for Sec. Sec.  31.6302-1 through 31.6302-3, 31.6302-4, and 
31.6302(c)-2A and adding entries in numerical order to read in part as 
follows:

    Authority: 26 U.S.C. 7805 * * *
    Section 31.6302-1 also issued under 26 U.S.C. 6302(a) and (h).
    Section 31.6302-1T also issued under 26 U.S.C. 6302(a).
    Section 31.6302-2, 31.6302-3, and 31.6302-4 also issued under 26 
U.S.C. 6302(a) and (h).
    Section 31.6302(c)-2A also issued under 26 U.S.C. 6157(d) and 
6302(a) and (h).
    Section 31.6302(c)-3 also issued under 26 U.S.C. 6302(a) and 
(h). * * *


Sec.  31.6302-0  [Amended]

    Par. 8. Section 31.6302-0 is amended by removing the entries for 
Sec.  31.6302-1T.
    Par. 9. Section 31.6302-1 is amended by:
    1. Revising the heading.
    2. Revising paragraphs (c)(1), (c)(2), (c)(3), and (c)(4).
    3. Revising paragraph (d) Example 1, Example 2, Example 3, Example 
4, and Example 5.
    4. Revising paragraph (h)(2)(ii).
    5. Redesignating paragraph (h)(2)(iii) as paragraph (h)(2)(iv) and 
revising newly-designated paragraph (h)(2)(iv).
    6. Adding new paragraph (h)(2)(iii).
    7. Revising paragraph (i)(1) and (i)(3).
    8. Removing paragraphs (i)(4), (i)(5) and (i)(6).
    9. Adding paragraph (o).
    The revisions and additions read as follows:


Sec.  31.6302-1  Deposit rules for taxes under the Federal Insurance 
Contributions Act (FICA) and withheld income taxes.

* * * * *
    (c) Deposit rules--(1) Monthly rule. An employer that is a monthly 
depositor must deposit employment taxes accumulated with respect to 
payments made during a calendar month by electronic funds transfer by 
the 15th day of the following month. If the 15th day of the following 
month is a Saturday, Sunday, or legal holiday, taxes will be treated as 
timely deposited if deposited on the next succeeding day which is not a 
Saturday, Sunday, or legal holiday under section 7503.
    (2) Semi-Weekly rule--(i) In general. An employer that is a semi-
weekly depositor for a calendar year must deposit employment taxes by 
electronic funds transfer by the dates set forth below:

------------------------------------------------------------------------
     Payment dates/semi-weekly periods              Deposit date
------------------------------------------------------------------------
(A) Wednesday, Thursday and/or Friday.....  On or before the following
                                             Wednesday.
(B) Saturday, Sunday, Monday and/or         On or before the following
 Tuesday.                                    Friday.
------------------------------------------------------------------------

    (ii) Semi-weekly period spanning two return periods. If the return 
period ends during a semi-weekly period in which an employer has two or 
more payment dates, two deposit obligations may exist. For example, if 
one quarterly return period ends on Thursday and a new quarterly return 
period begins on Friday, employment taxes from payments on Wednesday 
and Thursday are subject to one deposit obligation, and taxes from 
payments on Friday are subject to a separate deposit obligation. Two 
separate federal tax deposits are required.
    (iii) Special rule for computing days. Semi-weekly depositors have 
at least three business days following the close of the semi-weekly 
period by which to deposit employment taxes accumulated during the 
semi-weekly period. Business days include every calendar day other than 
Saturdays, Sundays, or legal holidays under section 7503. If any of the 
three weekdays following the close of a semi-weekly period is a legal 
holiday under section 7503, the employer has an additional day for each 
day that is a legal holiday by which to make the required deposit. For 
example, if the Monday following the close of a Wednesday to Friday 
semi-weekly period is Memorial Day, a legal holiday, the required 
deposit for the semi-weekly period is not due until the following 
Thursday rather than the following Wednesday.
    (3) Exception--One-Day rule. Notwithstanding paragraphs (c)(1) and 
(c)(2) of this section, if on any day within a deposit period (monthly 
or semi-weekly) an employer has accumulated $100,000 or more of 
employment taxes, those taxes must be deposited by electronic funds 
transfer in time to satisfy the tax obligation by the close of the next 
day. If the next day is a Saturday, Sunday, or legal holiday under 
section 7503, the taxes will be treated as timely deposited if 
deposited on the next succeeding day which is not a Saturday, Sunday, 
or legal holiday. For purposes of determining whether the $100,000 
threshold is met--
    (i) A monthly depositor takes into account only those employment 
taxes accumulated in the calendar month in which the day occurs; and
    (ii) A semi-weekly depositor takes into account only those 
employment taxes accumulated in the Wednesday-Friday or Saturday-
Tuesday semi-weekly period in which the day occurs.
    (4) Deposits required only on business days. No taxes are required 
to be deposited under this section on any day that is a Saturday, 
Sunday, or legal holiday. Deposits are required only on business days. 
Business days include every calendar day other than Saturday, Sundays, 
or legal holidays. For purposes of this paragraph (c), legal holidays 
shall have the same meaning provided in section 7503.
* * * * *
    (d) * * *

    Example 1. Monthly depositor.  (i) Determination of status. For 
calendar year 2011, Employer A determines its depositor status using 
the lookback period July 1, 2009 to June 30, 2010. For the four 
calendar quarters within this period, A reported aggregate 
employment tax liabilities of $42,000 on its quarterly Forms 941. 
Because the aggregate amount did not exceed $50,000, A is a monthly 
depositor for the entire calendar year 2011.
    (ii) Monthly rule. During December 2011, A (a monthly depositor) 
accumulates $3,500 in employment taxes. A has a $3,500 deposit 
obligation that must be satisfied by the 15th day of the following 
month. Since January 15, 2012, is a Sunday, and January 16, 2012, 
Dr. Martin Luther King, Jr.'s Birthday, is a legal holiday, A's 
deposit obligation will be satisfied if the deposit is made by 
electronic funds transfer by the next business day, January 17, 
2012.
    Example 2. Semi-weekly depositor.  (i) Determination of status. 
For the calendar year 2011, Employer B determines its depositor 
status using the lookback period July 1, 2009 to June 30, 2010. For 
the four calendar quarters within this period, B reported aggregate 
employment tax liabilities of $88,000 on its quarterly Forms 941. 
Because that amount exceeds $50,000, B is a semi-weekly depositor 
for the entire calendar year 2011.
    (ii) Semi-weekly rule. On Friday, January 7, 2011, B (a semi-
weekly depositor) has a pay day on which it accumulates $4,000 in 
employment taxes. B has a $4,000 deposit obligation that must be 
satisfied on or before the following Wednesday, January 12, 2011.
    (iii) Deposit made within three business days. On Friday, 
January 14, 2011, B (a semi-weekly depositor) has a pay day on which 
it accumulates $4,200 in employment taxes. Generally, B would have a 
required deposit obligation of employment taxes that must be 
satisfied by the following Wednesday, January 19, 2011. Because 
Monday, January 17, 2011, is Dr. Martin Luther King, Jr.'s Birthday, 
a legal holiday, B has an additional day to make the required 
deposit. B has a $4,200 deposit obligation that must be satisfied on 
or before the following Thursday, January 20, 2011.
    Example 3. One-Day rule.  On Monday, January 10, 2011, Employer 
C accumulates $110,000 in employment taxes with respect

[[Page 51711]]

to wages paid on that date. C has a deposit obligation of $110,000 
that must be satisfied by the next business day. If C was not 
subject to the semi-weekly rule on January 10, 2011, C becomes 
subject to that rule as of January 11, 2011. See paragraph 
(b)(2)(ii) of this section.
    Example 4. One-Day rule in combination with subsequent deposit 
obligation.  Employer D is subject to the semi-weekly rule for 
calendar year 2011. On Monday, January 10, 2011, D accumulates 
$115,000 in employment taxes. D has a deposit obligation that must 
be satisfied by the next business day. On Tuesday, January 11, D 
accumulates an additional $30,000 in employment taxes. Although D 
has a $115,000 deposit obligation incurred earlier in the semi-
weekly period, D has an additional and separate deposit obligation 
of $30,000 on Tuesday that must be satisfied by the following 
Friday.
    Example 5.  [Reserved].
* * * * *
    (h) * * *
    (2) * * *
    (ii) Deposits for return periods beginning after December 31, 1999, 
and made before January 1, 2011. Unless exempted under paragraph (h)(5) 
of this section, for deposits for return periods beginning after 
December 31, 1999, and made before January 1, 2011, a taxpayer that 
deposits more than $200,000 of taxes described in paragraph (h)(3) of 
this section during a calendar year beginning after December 31, 1997, 
must use electronic funds transfer (as defined in paragraph (h)(4) of 
this section) to make all deposits of those taxes that are required to 
be made for return periods beginning after December 31 of the following 
year and must continue to deposit by electronic funds transfer in all 
succeeding years. As an example, a taxpayer that exceeds the $200,000 
deposit threshold during calendar year 1998 is required to make 
deposits for return periods beginning in or after calendar year 2000 by 
electronic funds transfer.
    (iii) Deposits made after December 31, 2010. Unless exempted under 
paragraph (h)(5) of this section, a taxpayer that has a required tax 
deposit obligation described in paragraph (h)(3) of this section must 
use electronic funds transfer (as defined in paragraph (h)(4) of this 
section) to make all deposits of those taxes made after December 31, 
2010.
    (iv) Voluntary deposits. A taxpayer that is authorized to make 
payment of taxes with a return under regulations may voluntarily make a 
deposit by electronic funds transfer.
* * * * *
    (i) Time and manner of remittance with a return--(1) General rules. 
A remittance required to be made by this section that is authorized to 
be made with a return under regulations and is made with a return must 
be made separately from a remittance required by any other section. 
Further, a remittance for a deposit period in one return period must be 
made separately from a remittance for a deposit period in another 
return period.
* * * * *
    (3) Time deemed paid. In general, amounts remitted with a return 
under this section will be considered as paid on the date payment is 
received by the Internal Revenue Service at the place prescribed for 
filing by regulations or forms and instructions (or if section 7502(a) 
applies, by the date the payment is treated as received under section 
7502(a)), or on the last day prescribed for filing the return 
(determined without regard to any extension of time for filing the 
return), whichever is later. In the case of the taxes imposed by 
chapter 21 and 24 of the Internal Revenue Code, solely for purposes of 
section 6511 and the regulations thereunder (relating to the period of 
limitation on credit or refund), if an amount is remitted with a return 
under this section prior to April 15th of the calendar year immediately 
succeeding the calendar year that contains the period for which the 
amount was remitted, the amount will be considered paid on April 15th 
of the succeeding calendar year.
* * * * *
    (o) Effective/applicability date. Paragraphs (c), (d) Examples 1 
through 5, (h)(2)(ii), (h)(2)(iii), (h)(2)(iv),(i)(1) and (i)(3) of 
this section apply to payments made after the date that final 
regulations are published in the Federal Register, but no earlier than 
January 1, 2011.
    Par. 10. Section 31.6302-1T is amended by:
    1. Revising paragraph (g)(1).
    2. Revising paragraph (n)(1).
    The revisions read as follows.


Sec.  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).

* * * * *
    (g) Agricultural employers--Special rules--(1) In general. An 
agricultural employer reports wages paid to farm workers annually on 
Form 943 (Employer's Annual Tax Return for Agricultural Employees) and 
reports wages paid to nonfarm workers quarterly on Form 941 or annually 
on Form 944. Accordingly, an agricultural employer must treat 
employment taxes reportable on Form 943 (``Form 943 taxes'') separately 
from employment taxes reportable on Form 941 or Form 944 (``Form 941 or 
Form 944 taxes''). Form 943 taxes and Form 941 or Form 944 taxes are 
not combined for purposes of determining whether a deposit of either is 
due, whether the One-Day rule of Sec.  31.6302-1(c)(3) applies, or 
whether any safe harbor is applicable. In addition, Form 943 taxes and 
Form 941 or Form 944 taxes must be deposited separately. (See Sec.  
31.6302-1(b) for rules for determining an agricultural employer's 
deposit status for Form 941 taxes.) Whether an agricultural employer is 
a monthly or semi-weekly depositor of Form 943 taxes is determined 
according to the rules of this paragraph (g).
* * * * *
    (n) Effective/applicability dates--(1) In general. Sections 
31.6302-1 through 31.6302-3 apply with respect to the deposit of 
employment taxes attributable to payments made after December 31, 1992. 
To the extent that the provisions of Sec. Sec.  31.6302-1 through 
31.6302-3 are inconsistent with the provisions of Sec. Sec.  
31.6302(c)-1 and 31.6302(c)-2, a taxpayer will be considered to be in 
compliance with Sec. Sec.  31.6301-1 through 31.6302-3 if the taxpayer 
makes timely deposits during 1993 in accordance with Sec. Sec.  
31.6302(c)-1 and 31.6302(c)-2. Paragraphs (b)(4), (c)(5), (c)(6), (d) 
Example 6, (e)(2), (f)(4)(i), (f)(4)(iii), (f)(5) Example 3, and (g)(1) 
of this section apply to taxable years beginning on or after December 
30, 2008. Paragraph (f)(4)(ii) of this section applies to taxable years 
beginning on or after January 1, 2010. The rules of paragraphs (e)(2) 
and (g)(1) of this section that apply to taxable years beginning before 
December 30, 2008, are contained in Sec.  31.6302-1 in effect prior to 
December 30, 2008. The rules of paragraphs (b)(4), (c)(5), (c)(6), (d) 
Example 6, (f)(4)(i), (f)(4)(iii), and (f)(5) Example 3 of this section 
that apply to taxable years beginning on or after January 1, 2006, and 
before December 30, 2008, are contained in Sec.  31.6302-1T in effect 
prior to December 30, 2008. The rules of paragraphs (b)(4) and (f)(4) 
of this section that apply to taxable years beginning before January 1, 
2006, are contained in Sec.  31.6302-1 in effect prior to January 1, 
2006. The rules of paragraph (g) eliminating use of Federal tax deposit 
coupons apply to deposits and payments made after the date that final 
regulations are published in the Federal Register, but no earlier than 
January 1, 2011.
* * * * *
    Par. 11. Section 31.6302-2 is amended by:
    1. Revising the heading.
    2. Revising paragraph (d).

[[Page 51712]]

    The revisions read as follows.


Sec.  31.6302-2  Deposit rules for taxes under the Railroad Retirement 
Tax Act (RRTA).

* * * * *
    (d) Effective/applicability date. This section applies to payments 
made after the date that final regulations are published in the Federal 
Register, but no earlier than January 1, 2011.
    Par. 12. Section 31.6302-4 is amended by:
    1. Revising the heading.
    2. Revising paragraph (d).
    3. Adding paragraph (e).
    The revisions and additions read as follows:


Sec.  31.6302-4  Deposit rules for withheld income taxes attributable 
to nonpayroll payments.

* * * * *
    (d) Special rules. A taxpayer must treat nonpayroll withheld taxes, 
which are reported on Form 945, ``Annual Return of Withheld Federal 
Income Tax,'' separately from taxes reportable on Form 941, 
``Employer's QUARTERLY Federal Tax Return'' (or any other return, for 
example, Form 943, ``Employer's Annual Federal Tax Return for 
Agricultural Employees''). Taxes reported on Form 945 and taxes 
reported on Form 941 are not combined for purposes of determining 
whether a deposit of either is due, whether the One-Day rule of Sec.  
31.6302-1(c)(3) applies, or whether any safe harbor is applicable. In 
addition, taxes reported on Form 945 and taxes reported on Form 941 
must be deposited separately. (See paragraph (b) of Sec.  31.6302-1 for 
rules for determining an employer's deposit status for taxes reported 
on Form 941.) Taxes reported on Form 945 for one calendar year must be 
deposited separately from taxes reported on Form 945 for another 
calendar year.
    (e) Effective/applicability date. Section 31.6302-4(d) applies to 
payments made after the date that final regulations are published in 
the Federal Register, but no earlier than January 1, 2011.


Sec.  31.6302(c)-2A  [Removed]

    Par. 13. Section 31.6302(c)-2A is removed.
    Par. 14. Section 31.6302(c)-3 is amended by:
    1. Revising the heading.
    2. Revising paragraph (a)(1), introductory text.
    3. Revising paragraph (a)(1)(i).
    4. Revising paragraph (a)(1)(ii), introductory text.
    5. Removing paragraph (a)(3).
    6. Revising paragraph (b).
    7. Revising paragraph (c).
    8. Removing paragraph (d).
    The revisions read as follows:


Sec.  31.6302(c)-3  Deposit rules for taxes under the Federal 
Unemployment Tax Act.

    (a) Requirement--(1) In general. Except as provided in paragraph 
(a)(2) of this section, every person that, by reason of the provisions 
of section 6157, computes the tax imposed by section 3301 on a 
quarterly or other time period basis shall--
    (i) If the person is described in section (a)(1) of section 6157, 
deposit the amount of such tax by the last day of the first calendar 
month following the close of each of the first three calendar quarters 
in the calendar year; or
    (ii) If the person is other than a person described in section 
(a)(1) of section 6157, deposit the amount of such tax by the last day 
of the first calendar month following the close of--
* * * * *
    (b) Manner of deposit--(1) In general. A deposit required to be 
made by an employer under this section shall be made separately from a 
deposit required by any other section. An employer may make one, or 
more than one, remittance of the amount required to be deposited. An 
employer that is not required to deposit an amount of tax by this 
section may nevertheless voluntarily make that deposit. For the 
requirement to deposit tax under the Federal Unemployment Tax Act by 
electronic funds transfer, see Sec.  31.6302-1(h).
    (2) Time deemed paid. For the time an amount deposited by 
electronic funds transfer is deemed paid, see Sec.  31.6302-1(h)(9). 
For the time an amount remitted with a return is deemed paid, see Sec.  
31.6302-1(i)(3).
    (c) Effective/applicability date. This section applies to payments 
made after the date that final regulations are published in the Federal 
Register, but no earlier than January 1, 2011.

PART 40--EXCISE TAX PROCEDURAL REGULATIONS

    Par. 15. The authority citation for part 40 continues to read in 
part as follows:

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

    Par. 16. Section 40.6302(c)-1 is amended by:
    1. Revising the heading.
    2. In paragraph (b)(2)(v), removing the language ``that failure may 
be reported to the appropriate IRS office and''.
    3. Revising paragraphs (d) and (f).
    The revisions read as follows:


Sec.  40.6302(c)-1  Deposits.

* * * * *
    (d) Deposits required by electronic funds transfer. All deposits 
required by this part must be made by electronic funds transfer, as 
that term is defined in Sec.  31.6302-1(h)(4) of this chapter.
* * * * *
    (f) Effective/applicability date. This section applies to deposits 
made after the date that final regulations are published in the Federal 
Register, but no earlier than January 1, 2011.
* * * * *


Sec.  40.6302(c)-2  [Amended]

    Par. 17. Section 40.6302(c)-2, paragraph (c), is amended by 
removing the language ``2001'' and adding ``2001, except that paragraph 
(b) of this section does not apply on and after the date described in 
Sec.  40.6302(c)-1(f)'' in its place.
    Par. 18. Section 40.6302(c)-3 is amended as follows:
    1. The heading is revised to read as set forth below.
    2. In paragraph (c), the language ``banking'' is removed in both 
places it appears and ``business'' is added in its place.
    3. In paragraph (g), the language ``2004'' is removed and ``2004, 
except that paragraph (f)(5) of this section does not apply on and 
after the date described in Sec.  40.6302(c)-1(f)'' is added in its 
place.


Sec.  40.6302(c)-3  Special rules for deposits under chapter 33.

* * * * *

PART 301--PROCEDURE AND ADMINISTRATION

    Par. 19. The authority citation for part 301 is amended to read in 
part as follows:

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

    Par. 20. Section 301.6302-1 is revised to read as follows:


Sec.  301.6302-1  Manner or time of collection of taxes.

    (a) Employment and excise taxes. For provisions relating to the 
manner or time of collection of certain employment and excise taxes and 
deposits in connection with the payment thereof, see the regulations 
relating to the particular tax.
    (b) Income taxes. (1) For provisions relating to the deposits of 
income and estimated income taxes of certain corporations, see Sec.  
1.6302-1 of this chapter (Income Tax Regulations).
    (2) For provisions relating to the deposits of tax required to be 
withheld under chapter 3 of the Code on nonresident aliens and foreign 
corporations and tax-free covenant bonds, see Sec.  1.6302-2 of this 
chapter.
    (c) Effective/applicability date. This section applies to payments 
made after

[[Page 51713]]

the date that final regulations are published in the Federal Register, 
but no earlier than January 1, 2011.
    Par. 21. Section 301.6656-1 is amended by:
    1. Revising paragraph (b).
    2. Revising paragraph (c).
    The revisions read as follows:


Sec.  301.6656-1  Abatement of penalty.

* * * * *
    (b) Deposit sent to Secretary. The Secretary may abate the penalty 
imposed by section 6656(a) if the first time a depositor is required to 
make a deposit, the amount required to be deposited is inadvertently 
sent to the Secretary rather than deposited by electronic funds 
transfer.
    (c) Effective/applicability date. This section applies to deposits 
made after the date that final regulations are published in the Federal 
Register, but no earlier than January 1, 2011.


Sec.  301.7502-2  [Removed]

    Par. 22. Section 301.7502-2 is removed.

Steven T. Miller,
Deputy Commissioner for Services and Enforcement.
[FR Doc. 2010-20737 Filed 8-19-10; 4:15 pm]
BILLING CODE 4830-01-P