Final payroll tax deposit regulations.

• Position: Includes IRS response by Thomas H. Dega

On October 2, 1992, Tax Executives Institute filed the following comments with the Internal Revenue Service and the Treasury Department, commending the agencies for substantially improving the final payroll tax deposit regulations. (TEI's earlier comments on the proposed regulations were reprinted in the September-October 1992 issue of The Tax Executive.) The Institute's comments -- which took the form of a letter from TEI President Bob Perlman to Assistant Treasury Secretary Goldberg and IRS Commissioner Peterson -- were prepared under the aegis of its Payroll and Other Federal Taxes Subcommittee, whose chair is Clifford H. Omo of Mobil Administrative Services Company, Inc.

On behalf of Tax Executives Institute, I am writing to commend the Department of the Treasury and the Internal Revenue Service for the substantial improvements made in the final payroll tax deposit regulations, which were issued on September 22. As TEI stated in its July 31 comments on the proposed regulations, there is no doubt that the old regulations were unduly complex and in serious need of reform. There is also no doubt that, whatever their shortcomings, the proposed regulations that were issued in May represented a monumental improvement in the payroll deposit rules. We are delighted that the final regulations mark even a larger step forward: they should operate to relieve employer burden, to reduce the number of penalties, and thereby to advance the goals of Compliance 2000.

Obviously, the Institute is disappointed that not all of the recommendations set forth in our July 31 comments were adopted. We believe that the reduction of the safe harbor percentage from five percent to two percent is unfortunate, especially for employers who remain subject to the statutory next-day rule. Nevertheless, we believe the final regulations represent a reasonable compromise. The revised look-back rule (including the procedure for IRS notification of depositor status), the Wednesday-Friday deposit regime (with a three banking-day minimum), and the year-long transition period all demonstrate the IRS's and Treasury's willingness to listen to its stakeholders and the public -- and to act upon what they hear. The process worked, and you and all the personnel who worked on the project are to be commended.

However -- and there is almost always a "however" isn't there? -- we believe that additional steps are necessary to truly mesh the administration of the new deposit rules with the...