IRS Excuses Small Businesses From Paying Taxes Electronically - threshold raised to $200,000 - Brief Article

Nation's Business, May, 1999 by James Worsham

Most small businesses can continue to pay their taxes on paper as a result of a recent decision by the Internal Revenue Service to raise the threshold for required electronic payment.

The IRS announced in March that it was raising to $200,000 from $50,000 the aggregate amount of taxes a business must owe before being required to pay them electronically. The requirement went into effect in 1997, but penalties for noncompliance have been waived because many companies were unable to comply.

The new rule takes effect in 2000, but the IRS will waive penalties for eligible firms for 1999.

As a result of the new ruling, about two-thirds of the businesses previously required to file electronically will be exempt, leaving only about 9 percent of U.S. companies facing the order.

Small-Business Y2K Loans Approved

President Clinton on April 2 signed legislation that allows the U.S. Small Business Administration to set up loans for small companies to fix year 2000 computer problems.

The legislation, which had passed the Senate and House by overwhelming margins in March, allows the SBA to guarantee loans from participating lenders to pay for fixing computer hardware or software or to make up for losses attributed to Y2K problems.

Cheaper Rulings From The IRS

The Internal Revenue Service has announced that more small businesses will be able to qualify for the reduced rate of $500 for private-letter tax rulings. The threshold has been raised to $1 in gross income from $150,000.

Private-letter rulings are issued to taxpayers who seek to have tax laws interpreted and applied to their own personal or business situations. For more information, see Revenue Procedure 99-1 in the Jan. 4 Internal Revenue Bulletin 1999-1. The bulletin is available in some libraries and on the IRS's World Wide Web site, at www.irs.ustreas.gov.