The IRS on Wednesday lightened the paperwork load for about half a million small-business owners with a rule change that will allow them to send in their payroll taxes less often.
While it won't reduce their actual tax burden one dime, it will enable the nation's smallest firms to space out those payments over a longer period of time without fear of penalty from Uncle Sam.
In many cases, small-business owners who were sending employees' Social Security, Medicare and federal income withholding taxes to the IRS monthly will now be able to accumulate three months' worth of payroll taxes and send them in with their quarterly income tax returns.
Before the rule change, the IRS only allowed small-business owners whose employment tax liability was less than $500 in a "return period"--typically three months--to accumulate those receipts and send them quarterly instead of making a monthly deposit to the IRS.
The rule change doubles that threshold to $1,000, making about half a million additional small firms eligible to hold onto their payroll taxes a bit longer. Nearly one-third of the nation's 6.2 million employers won't have to make monthly employment tax deposits, according to the IRS.
The new rules kick in July 1 for small businesses that report their employment taxes quarterly on Form 941. The changes also apply to agricultural employers who file annually on Form 943, effective next Jan. 1.
Small-business advocates stifled a yawn when assessing the impact of the move, though they credited the IRS with making a small step toward reform.
"It's encouraging that they are listening to complaints," said David D'Onofrio, director of government affairs for National Small Business United. "This is something that small businesses have been complaining about for a long time."
For more information about the employment tax changes, call the IRS at (800) 829-1040.