[Federal Register Volume 65, Number 18 (Thursday, January 27, 2000)]
[Proposed Rules]
[Pages 4396-4400]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-1898]
-----------------------------------------------------------------------
DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Parts 1, 31, and 301
[REG-105279-99]
RIN 1545-AX31
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: Notice of proposed rulemaking.
-----------------------------------------------------------------------
SUMMARY: This document contains proposed regulations implementing
section 6071(b) relating to the extension of the due date for certain
electronically filed information returns. The 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: Written or electronic comments and requests for a public
hearing must be received by April 26, 2000.
ADDRESSES: Send submissions to: CC:DOM:CORP:R (REG-105279-99), room
5226, Internal Revenue Service, POB 7604, Ben Franklin Station,
Washington, DC 20044. Submissions may be hand delivered Monday through
Friday between the hours of 8 a.m. and 5 p.m. to: CC:DOM:CORP:R (REG-
105279-99), Courier's Desk, Internal Revenue Service, 1111 Constitution
Avenue NW., Washington, DC. Alternatively, taxpayers may submit
comments electronically via the Internet by selecting the ``Tax Regs''
option on the IRS Home Page, or by submitting comments directly to the
IRS Internet site at http://www.irs.ustreas.gov/tax__regs/reglist.html.
FOR FURTHER INFORMATION CONTACT: Concerning the regulations relating
to
[[Page 4397]]
the extension of due dates, Marilyn E. Brookens, (202) 622-4920;
concerning the regulations relating to penalty reductions, Robert B.
Taylor, (202) 622-4940; concerning submissions of comments, Guy
Traynor, (202) 622-7180 (not toll-free numbers).
SUPPLEMENTARY INFORMATION:
Background
This document contains proposed 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. 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.
1. Proposed Regulations Implementing Section 6071(b)
Sections 6041 through 6053 of the Code require the filing of
information returns that report income, payments, or gross proceeds
resulting from certain transactions. Under current law, these returns
are generally due to the IRS or the Social Security Administration by
(1) February 28 of the year following the calendar year to which the
returns relate or (2) the last day of February following the calendar
year to which the returns relate. Certain returns, however, such as
those required by section 6050I (relating to cash receipts of more than
$10,000) are due on a date other than February 28 or the last day of
February. The due date for filing information returns is the same
whether the returns are filed on paper, electronically, or by other
forms of magnetic media (such as magnetic tape, cartridges, and
diskettes).
As an incentive to filers of information returns to use electronic
filing, section 6071(b) extends by 1 month the due date for certain
information returns required by sections 6041 through 6053 if the
return is filed electronically. H.R. Conf. Rep. No. 599, 105th Cong.,
2nd Sess. 235. Accordingly, beginning on January 1, 2000, information
returns currently required by sections 6041 through 6053 to be filed by
February 28, or the last day of February, of the year following the
calendar year to which the returns relate may be filed electronically
as late as March 31 of the year following the calendar year to which
the returns relate. The information returns affected by the proposed
regulations include the Form W-2 series, Form W-2G, the Form 1098
series, the Form 1099 series, and Form 8027. Section 6071(b) does not
affect information returns required to be filed on or before a date
other than February 28 or the last day of February. Section 6071(b)
also does not affect information returns filed on paper or by means of
magnetic media (such as magnetic tape, cartridges or diskettes) other
than electronic filing.
The proposed regulations affect only information returns for which
a due date is currently prescribed by regulation. Section 6071(b) also
applies to other information returns required under sections 6041
through 6053 and extends the due date for electronic filing of those
returns in cases in which a due date of February 28 or the last day of
February is prescribed by form or other nonregulatory guidance.
The proposed regulations also remove references to two obsolete
forms (Form 1099F and Form 1099L) and make ministerial changes to the
phrasing and forms of citation used in various provisions.
2. Proposed Regulations Implementing Section 6651(h)
Section 6651(a)(2) imposes a penalty for failure to pay the amount
shown as tax on a return on or before the due date prescribed for
payment of such tax (with regard to extensions), unless it is shown
that such failure is due to reasonable cause and not due to willful
neglect. The amount of the penalty is 0.5 percent of the amount of such
tax 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 such
failure continues, not exceeding 25 percent in the aggregate.
Section 6651(a)(3) imposes a penalty for failure to pay any amount
in respect of any tax required to be shown on a return, which is not so
shown, within 21 calendar days from the date of notice and demand
therefor (10 business days if the amount for which such notice and
demand is made equals or exceeds $100,000), unless it is shown that
such failure is due to reasonable cause and not due to willful neglect.
The amount of the penalty is 0.5 percent of the amount of tax 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 such failure continues, not exceeding 25 percent in the
aggregate.
Section 6651(h), added to the Code by section 3303 of the 1998 Act,
provides that for an individual who enters into an installment
agreement under section 6159 with regard to a timely filed return, the
failure to pay penalties will be reduced from 0.5 percent to 0.25
percent during the period of the installment agreement. This provision
was added to the Code because Congress believed that it was
``inappropriate to apply the full penalty for failure to pay taxes to
taxpayers who are in fact paying their taxes through an installment
agreement.'' H.R. Rep. No. 364, 105th Cong., 1st Sess. 81; S. Rep. No.
174, 105th Cong., 2nd Sess. 63. This provision is effective for
purposes of determining additions to tax for months beginning after
December 31, 1999.
Accordingly, for an individual who enters into an installment
agreement under section 6159 with regard to a timely filed return, the
proposed regulations provide that the failure to pay penalties under
section 6651(a)(2) and (3) will be reduced from 0.5 percent per month
to 0.25 percent per month during the period of the installment
agreement.
Proposed Effective Date
The provisions of these regulations under section 6071(b) are
proposed to be applicable for returns required to be filed after
December 31, 1999. The provisions of these regulations under section
6651(h) are proposed to be applicable for determining the addition to
tax for months beginning after December 31, 1999.
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
[[Page 4398]]
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, this notice of proposed
rulemaking will be submitted to the Chief Counsel for Advocacy of the
Small Business Administration for comment on its impact on small
business.
Comments and Requests for a 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. The IRS and Treasury Department request comments on the clarity of
the proposed rules and how they can be made easier to understand. All
comments will be available for public inspection and copying. A public
hearing may be scheduled if requested by any person that timely submits
comments. If a public hearing is scheduled, notice of the date, time,
and place for the hearing will be published in the Federal Register.
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.
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, and 301 are proposed to be amended
as follows:
PART 1--NCOME 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 Sec. 1.6041-2, paragraph (a)(3)(ii) is revised to read
as follows:
Sec. 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 Sec. 31.6011(a)-4 or 31.6011(a)-5 of this
chapter, returns on Forms W-3 and W-2 required under this paragraph for
any calendar year shall be filed on or before February 28 (March 31 if
filed electronically) of the following year.
* * * * *
Par. 3. In Sec. 1.6041-6, the first sentence is revised to read as
follows:
Sec. 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 Sec. 1.6042-2, the first sentence of paragraph (c) is
revised to read as follows:
Sec. 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 Sec. 1.6043-2, paragraph (a) is revised to read as
follows:
Sec. 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 Sec. 1.332-6(b), Sec. 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 Sec. 1.6044-2, the first sentence of paragraph (d) is
revised to read as follows:
Sec. 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 Sec. 1.6045-1 is amended by adding paragraph (r) to
read as follows:
Sec. 1.6045-1 Returns of information of brokers and barter exchanges.
* * * * *
[[Page 4399]]
(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 Sec. 1.6045-2, paragraph (g)(3) is revised to read as
follows:
Sec. 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 Sec. 1.6045-4, the first sentence of paragraph (j) is
revised to read as follows:
Sec. 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 Sec. 1.6047-1, the first sentence of paragraph (a)(6)
is revised to read as follows:
Sec. 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:
Sec. 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 Sec. 1.6049-7, the first sentence of paragraph
(b)(2)(iv) is revised to read as follows:
Sec. 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 paragraph (b)(2) of
this section 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 Sec. 1.6050A-1, paragraph (b) is revised to read as
follows:
Sec. 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 Sec. 1.6050D-1, paragraph (b) is revised to read as
follows:
Sec. 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 Sec. 1.6050E-1, the first sentence of paragraph (h) is
revised to read as follows:
Sec. 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 Sec. 1.6050H-2, the first and second sentences of
paragraph (a)(4) are revised to read as follows:
Sec. 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 paragraph (a) of this section 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 paragraph (a)
of this section 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 Sec. 1.6050J-1T, A-33 is revised to read as follows:
Sec. 1.6050J-1T Questions and answers concerning information returns
relating to foreclosures and abandonments of security (temporary).
* * * * *
[[Page 4400]]
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 Sec. 1.6050P-1, paragraph (a)(4)(i) is revised to read
as follows:
Sec. 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 Sec. 1.6052-1, paragraph (b)(1)(ii) is revised to read
as follows:
Sec. 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 Sec. 31.6011(a)-4 or Sec. 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
Par. 20. The authority citation for part 31 continues to read in
part as follows:
Authority: 26 U.S.C. 7805 * * *
Par. 21. In Sec. 31.3402(q)-1, the first sentence of paragraph
(f)(1) is revised to read as follows:
Sec. 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 Sec. 31.6053-3, the first sentence of paragraph (a)(4)
is revised to read as follows:
Sec. 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 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 Sec. 31.6071(a)-1, paragraph (a)(3)(i) is revised to
read as follows:
Sec. 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
Sec. 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
Sec. 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:
Sec. 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 substituting 0.25 percent for 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 substituting 0.25 percent for 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 Internal Revenue.
[FR Doc. 00-1898 Filed 1-26-00; 8:45 am]
BILLING CODE 4830-01-U