TAP F04-059

Annualized Form 941

Statement of Issue:

Quarterly filings of Form 941 are an unnecessary burden to the small business owner in the time it takes to complete and file quarterly returns. The IRS processing of quarterly Form 941’s are also an unnecessary use of IRS resources.

Proposal:

To decrease the burden for small business owners, the Committee recommended that the IRS initiate the pilot study proposed by the IRS Annualized Form 941 Task Force, to be expanded if successful for small business owners who owe less than $2500 per quarter to file Form 941 annually. The panel recommends the following conditions:

1. Businesses must show a record of compliancefor the previous 8 quarters in both filing timely and current on payments.
2. The IRS should structure the final implementation of an annualized Form 941 to include indexing for inflation.
3. The IRS should look at other options such as biannual filing for those taxpayers who owe more than $2500 per quarter.
4. To encourage electronic filing and payment, require both for participation in the annual Form 941 program.

The committee’s support for the concept and the recommendations it made have been a helpful part of the ongoing discussions. It is important to note that the committee’s surveys and discussions with small business employers provide a recognized additional foundation and credibility to its recommendations.

The Office of Burden Reduction and the task force are continuing to pursue an agreement among all of the stakeholders. In order to be successful, the task force must balance tax simplification with the concerns of the Social Security Administration regarding its need to accurately estimate the amount of funds available quarterly to the social security trust fund and the Department of Treasury’s concern regarding the impact of the initiative on the flow of tax revenues that fund the Federal government.