[Federal Register Volume 75, Number 39 (Monday, March 1, 2010)]
[Rules and Regulations]
[Pages 9101-9102]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-4126]
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DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Part 1
[TD 9480]
RIN 1545-BI89
Reduced 2009 Estimated Income Tax Payments for Individuals With
Small Business Income
AGENCY: Internal Revenue Service (IRS), Treasury.
ACTION: Final and temporary regulations.
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SUMMARY: This document contains final and temporary regulations under
section 6654 of the Internal Revenue Code (Code) relating to reduced
estimated income tax payments for qualified individuals with small
business income for any taxable year beginning in 2009. The temporary
regulations implement changes to section 6654 made by the American
Recovery and Reinvestment Act of 2009. The temporary regulations
provide guidance for qualified individuals with small business income
to certify that they satisfy the statutory gross income requirement for
purposes of the reduction in their required 2009 estimated income tax
payments. The text of the temporary regulations serves as the text of
the proposed regulations set forth in the notice of proposed rulemaking
on this subject in the Proposed Rules section in this issue of the
Federal Register.
DATES: Effective Date: These regulations are effective on March 1,
2010.
Applicability Date: These regulations apply for any taxable year
beginning in 2009.
FOR FURTHER INFORMATION CONTACT: Adrienne Mikolashek, (202) 622-4940
(not a toll-free number).
SUPPLEMENTARY INFORMATION:
Background
These temporary regulations contain amendments to the Income Tax
Regulations (26 CFR part 1) under section 6654(d) of the Code relating
to the addition to tax for failure by an individual to pay estimated
income tax. Section 6654(d)(1)(D) was added by section 1212 of Division
B of the American Recovery and Reinvestment Act of 2009, Public Law
111-5 (123 Stat. 336 (2009)), effective for taxable years beginning in
2009.
Section 6654 imposes an addition to tax in the case of an
individual taxpayer's underpayment of estimated tax. Estimated tax is
payable in four installments throughout the taxable year, and the
amount of each required installment is generally 25 percent of the
required annual payment of estimated tax. Under section 6654(d)(1)(B),
the required annual payment is the lesser of (i) 90 percent of the tax
shown on the income tax return for the taxable year (or, if no return
is filed, 90 percent of the tax for the year) or (ii) 100 percent of
the tax shown on the taxpayer's return for the preceding taxable year
(or 110 percent if the taxpayer's adjusted gross income for the
preceding taxable year exceeded $150,000). The provision allowing for
the payment of 100 (or 110) percent of the tax shown on the taxpayer's
return for the preceding taxable year does not apply if the preceding
taxable year was less than 12 months or if the taxpayer did not file a
return for that year.
Under section 6654(d)(1)(D), the applicable percentage of tax shown
on the return for the preceding taxable year (either 100 or 110
percent) is reduced to 90 percent for qualified individuals for taxable
years beginning in 2009. In other words, for taxable years beginning in
2009, a qualified individual's annual required payment of estimated tax
is the lesser of (i) 90 percent of the tax shown on the return for the
2009 taxable year (or, if no return is filed, 90 percent of the tax for
the year) or (ii) 90 percent of the tax shown on the individual's
return for taxable year 2008.
Explanation of Provisions
The temporary regulations explain who is a qualified individual
under section 6654(d)(1)(D) and how a taxpayer establishes that the
taxpayer is a qualified individual. A qualified individual is any
individual (1) whose adjusted gross income shown on the individual's
return for the preceding taxable year is less than $500,000 and (2) who
certifies that more than 50 percent of the gross income shown on that
return was income from a small business. See section 6654(d)(1)(D)(ii).
If an individual is married, within the meaning of section 7703, and
files a separate return for a taxable year
[[Page 9102]]
beginning in 2009, then to qualify, the individual's adjusted gross
income shown on the preceding year's return must be less than $250,000,
rather than $500,000. See section 6654(d)(1)(D)(iv). Pursuant to
section 6654(d)(1)(D)(ii)(II), the Secretary shall prescribe by
regulation the form, manner, and time for filing a certification.
Additionally, section 6654(m) authorizes the Secretary to prescribe
regulations as necessary to carry out the purposes of section 6654.
Income from a small business is defined in general terms in section
6654(d)(1)(D)(iii) as income from a trade or business the average
number of employees of which was less than 500 for calendar year 2008.
The temporary regulations specify that the trade or business must be a
bona fide trade or business of which the individual was an owner. The
temporary regulations provide that a trade or business may be organized
as, or take the legal form of, a corporation, partnership, limited
liability company, or sole proprietorship.
The temporary regulations also provide that a qualified individual
shall file a certification with the IRS in the manner and at the time
prescribed in forms, publications, or other guidance, such as Form
2210, ``Underpayment of Estimated Tax by Individuals, Estates, and
Trusts'' (or any successor form and its instructions).
The temporary regulations will be applicable for taxable years
beginning in 2009. The reduced percentage in section 6654(d)(1)(D) is
limited to taxable years beginning in 2009 and does not apply to
taxable years beginning before or after 2009.
Special Analyses
It has been determined that this Treasury decision is not a
significant regulatory action as defined in Executive Order 12866.
Therefore, a regulatory assessment is not required. For the
applicability of the Regulatory Flexibility Act, see the cross-
referenced notice of proposed rulemaking published elsewhere in this
issue of the Federal Register. Pursuant to section 7805(f) of the Code,
this regulation has been submitted to the Chief Counsel for Advocacy of
the Small Business Administration for comment on its impact on small
business.
Drafting Information
The principal author of these regulations is Adrienne Mikolashek,
Office of the Associate Chief Counsel, Procedure and Administration.
List of Subjects in 26 CFR Part 1
Income taxes, Reporting and recordkeeping requirements.
Amendments to the Regulations
0
Accordingly, 26 CFR part 1 is amended as follows:
PART 1--INCOME TAXES
0
Paragraph 1. The authority citation for part 1 is amended by adding an
entry in numerical order to read in part as follows:
Authority: 26 U.S.C. 7805 * * *
0
Par. 2. Section 1.6654-2 is amended by:
0
1. Revising paragraph (a) introductory text.
0
2. Redesignating paragraph (a)(1) as paragraph (a)(1)(i).
0
3. Adding new paragraphs (a)(1)(ii) and (f).
The additions and revision read as follows:
Sec. 1.6654-2 Exceptions to imposition of the addition to the tax in
the case of individuals.
(a) [Reserved]. For further guidance, see Sec. 1.6654-2T(a).
(1)(i) * * *
(ii) [Reserved]. For further guidance, see Sec. 1.6654-
2T(a)(1)(ii).
* * * * *
(f) [Reserved]. For further guidance, see Sec. 1.6654-2T(f).
0
Par. 3. Section 1.6654-2T is added to read as follows:
Sec. 1.6654-2T Exceptions to imposition of the addition to the tax in
the case of individuals (temporary).
(a) In general. The addition to the tax under section 6654 will not
be imposed for any underpayment of any installment of estimated tax if,
on or before the date prescribed for payment of the installment, the
total amount of all payments of estimated tax made equals or exceeds
the lesser of the amount in Sec. 1.6654-2(a)(1) or the amount in Sec.
1.6654-2(a)(2).
(1)(i) [Reserved]. For further guidance, see Sec. 1.6654-
2(a)(1)(i).
(ii) Special rule for taxable years beginning in 2009. For any
taxable year beginning in 2009, for a qualified individual, the amount
described in Sec. 1.6654-2(a)(1)(i) is reduced to 90 percent of that
amount.
(A) Qualified individual means any individual whose adjusted gross
income shown on the individual's return for the preceding taxable year
is less than $500,000 and who certifies, as prescribed in paragraph
(a)(1)(ii)(D) of this section, that more than 50 percent of the gross
income shown on the return for the preceding taxable year was income
from a small business.
(B) Income from a small business means income from the operation of
a bona fide trade or business of which the individual was an owner
during calendar year 2009, and that on average had fewer than 500
employees in calendar year 2008.
(C) The trade or business may be organized as, or take the legal
form of, a corporation, partnership, limited liability company, or sole
proprietorship.
(D) A qualified individual shall file a certification of the
individual's qualification in the manner and at the time prescribed by
the Internal Revenue Service in forms, publications, or other guidance.
(a)(2) through (e) [Reserved]. For further guidance, see Sec.
1.6654-2(a)(2) through (e).
(f) Effective/applicability date. Paragraph (a) of this section
applies to any taxable year beginning in 2009.
(g) Expiration date. The applicability of paragraph (a) of this
section expires on or before February 26, 2013.
Steven T. Miller,
Deputy Commissioner for Services and Enforcement.
Approved: February 18, 2010.
Michael F. Mundaca,
Acting Assistant Secretary of the Treasury (Tax Policy).
[FR Doc. 2010-4126 Filed 2-26-10; 8:45 am]
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