Under the de minimis deposit safe harbor rule, employers that accumulate less than $2,500 in payroll taxes during the current calendar quarter can pay those taxes with their Form 941, rather than deposit them. Final regulations, which reiterate temporary regs, allow quarterly filers to use the safe harbor rule if their accumulated taxes for the current or preceding quarter are less than $2,500.
The regs also confirm that participation in the Form 944 program is voluntary. The regs apply to deposit periods beginning on or after Jan. 1, 2010. (76 F.R. 77672, 12-14-11)
Pick consecutive quarters
Expanding the de minimis safe harbor deposit rule should benefit employers with unexpected increases in their payroll deposits for a quarterly return period. However, to take full advantage of it, you’ll have to keep a closer eye on your quarterly taxes.
Example: AnyCompanyUSA’s payroll taxes for the first and second quarters of 2012 are $2,450 and $2,400. For those quarters, AnyCompanyUSA pays the taxes when it files its 941 forms. For the third quarter, it accumulates $2,550 in taxes. Without the alternative de minimis safe harbor, AnyCompanyUSA would have had to deposit its taxes according to its deposit schedule. However, AnyCompanyUSA can use its second-quarter taxes to determine whether the de minimis rule applies to the third quarter. Since it does, AnyCompanyUSA can pay the taxes when it files its third-quarter 941. Red flag: Unless AnyCompanyUSA knows that its taxes for the fourth quarter will be less than $2,500, it will have to make regular deposits throughout that quarter.
Opting into or out of annual filing
The regs retain the $1,000 threshold for employers wanting to participate in the annual Form 944 filing program. Existing employers that want to opt into or out of the program for a year must write to the IRS by March 15 of that year or call the IRS by April 1 of that year. New employers must call by the first day of the month that their first Form 941 is due: April 1, July 1, Oct. 1, or Jan. 1. Written requests must be postmarked by the 15th day of the month preceding the month the first 941 is due (i.e., March 15, June 15, etc.).
The IRS’ phone number is (800) 829-4933 (or the phone number listed in Form 944). Depending on where you’re located, the address is:
- Department of the Treasury Internal Revenue Service, Ogden, Utah 84201-0038
- Department of the Treasury Internal Revenue Service, Cincinnati, Ohio 45999-0038
You may also use the address listed in Form 944.
Clarifications to annual filing
The regs clarify that the look-back period for annual filers that filed Form 944 for either of the two previous years is the second preceding calendar year. In another clarification, the amount of taxes reported during a look-back period is determined without regard to your filing requirement. So, if you must file Form 941 for 2012, but filed Form 944 for the look-back period (i.e., 2010), the amount of taxes reported for the look-back period is the amount reported on the 2010 Form 944, even though you’ll file Form 941 for 2012.
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