Internal Revenue Bulletin 2008-4 (PDF rendition): IRS Announcements

Preserve advance releases and the authoritative Internal Revenue Bulletin rendition; directory timestamps are file-publication metadata, not legal effective dates. HTML bulletins begin June 2003; earlier available issues require full PDF parsing. Whole bulletin rendition: numbered items are identified below; other legal material and publisher context remain included. This is not a new standalone advance release.

Bulletin No. 200
8-4
January 28, 2008
HIGHLIGHTS
OF THIS ISSUE
These synopses are intended only as aids to the reader in
identifying the subject matter covered. They may not be
relied upon as authoritative interpretations.
INCOME TAX
Notice 2008–14, page 310.
This notice lists positions identified as frivolous for purposes
of section 6702(c) of the Code. Notice 2007–30, 2007–14
I.R.B. 883, modified and superseded.
Notice 2008–15, page 313.
Allocation of prepaid qualified mortgage insurance pre-
miums for 2007.This notice explains how individual taxpay-
ers may allocate prepaid qualified mortgage insurance premi-
ums to determine the amount that may be deducted in 2007.
This notice also provides guidance to reporting entities on the
information reporting of prepaid qualified mortgage insurance
premiums for 2007. Comments are requested on the rules
that should apply to the allocation and reporting of premiums
in future years.
EMPLOYEE PLANS
Notice 2008–17, page 316.
Weighted average interest rate update; corporate bond
indices; 30-year Treasury Securities; segment rates.
This notice contains updates for the corporate bond weighted
average interest rate for plan years beginning in January 2008;
the 24-month average segment rates; the funding transitional
segment rates applicable for January 2008; and the minimum
present value transitional rates for December 2007.
EXEMPT ORGANIZATIONS
Notice 2008–14, page 310.
This notice lists positions identified as frivolous for purposes
of section 6702(c) of the Code. Notice 2007–30, 2007–14
I.R.B. 883, modified and superseded.
ESTATE TAX
Notice 2008–14, page 310.
This notice lists positions identified as frivolous for purposes
of section 6702(c) of the Code. Notice 2007–30, 2007–14
I.R.B. 883, modified and superseded.
GIFT TAX
Notice 2008–14, page 310.
This notice lists positions identified as frivolous for purposes
of section 6702(c) of the Code. Notice 2007–30, 2007–14
I.R.B. 883, modified and superseded.
(Continued on the next page)
Announcements of Disbarments and Suspensions begin on page 333.
Fi
nding Lists begin on page ii.
Index for January begins on page iv.

EMPLOYMENT TAX
REG–111583–07, page 319.
Proposed regulations under section 6205 of the Code amend
the process for making interest-free adjustments of underpay-
ments and overpayments of employment taxes pursuant to
sections 6205 and 6413, respectively. The regulations also
clarify the process for filing claims for refund of overpayments
of employment taxes under sections 6402 and 6414. The reg-
ulations will continue to permit taxpayers to file a claim for re-
fund in lieu of making an interest-free adjustment for an over-
payment of employment taxes. A public hearing is scheduled
for April 17, 2008.
Notice 2008–14, page 310.
This notice lists positions identified as frivolous for purposes
of section 6702(c) of the Code. Notice 2007–30, 2007–14
I.R.B. 883, modified and superseded.
SELF-EMPLOYMENT TAX
Notice 2008–14, page 310.
This notice lists positions identified as frivolous for purposes
of section 6702(c) of the Code. Notice 2007–30, 2007–14
I.R.B. 883, modified and superseded.
EXCISE TAX
Notice 2008–14, page 310.
This notice lists positions identified as frivolous for purposes
of section 6702(c) of the Code. Notice 2007–30, 2007–14
I.R.B. 883, modified and superseded.
ADMINISTRATIVE
Notice 2008–14, page 310.
This notice lists positions identified as frivolous for purposes
of section 6702(c) of the Code. Notice 2007–30, 2007–14
I.R.B. 883, modified and superseded.
Notice 2008–15, page 313.
Allocation of prepaid qualified mortgage insurance pre-
miums for 2007.This notice explains how individual taxpay-
ers may allocate prepaid qualified mortgage insurance premi-
ums to determine the amount that may be deducted in 2007.
This notice also provides guidance to reporting entities on the
information reporting of prepaid qualified mortgage insurance
premiums for 2007. Comments are requested on the rules
that should apply to the allocation and reporting of premiums
in future years.
Notice 2008–16, page 315.
This notice provides rules under section 170(f)(17) of the Code
for substantiating lump-sum charitable contributions made
through the Combined Federal Campaign or a similar program.
January 28, 20082008–4 I.R.B.

The IRS Mission
Provide Americ
a’s taxpayers top quality service by helping them
understand an
d meet their tax responsibilities and by applying
the tax law with
integrity and fairness to all.
Introduction
The Internal Revenue Bulletin is the authoritative instrument of
the Commissioner of Internal Revenue for announcing official
rulings and procedures of the Internal Revenue Service and for
publishing Treasury Decisions, Executive Orders, Tax Conven-
tions, legislation, court decisions, and other items of general
interest. It is published weekly and may be obtained from the
Superintendent of Documents on a subscription basis. Bulletin
contents are compiled semiannually into Cumulative Bulletins,
which are sold on a single-copy basis.
It is the policy of the Service to publish in the Bulletin all sub-
stantive rulings necessary to promote a uniform application of
the tax laws, including all rulings that supersede, revoke, mod-
ify, or amend any of those previously published in the Bulletin.
All published rulings apply retroactively unless otherwise indi-
cated. Procedures relating solely to matters of internal man-
agement are not published; however, statements of internal
practices and procedures that affect the rights and duties of
taxpayers are published.
Revenue rulings represent the conclusions of the Service on the
application of the law to the pivotal facts stated in the revenue
ruling. In those based on positions taken in rulings to taxpayers
or technical advice to Service field offices, identifying details
and information of a confidential nature are deleted to prevent
unwarranted invasions of privacy and to comply with statutory
requirements.
Rulings and procedures reported in the Bulletin do not have the
force and effect of Treasury Department Regulations, but they
may be used as precedents. Unpublished rulings will not be
relied on, used, or cited as precedents by Service personnel in
the disposition of other cases. In applying published rulings and
procedures, the effect of subsequent legislation, regulations,
court decisions, rulings, and procedures must be considered,
and Service personnel and others concerned are cautioned
against reaching the same conclusions in other cases unless
the facts and circumstances are substantially the same.
The Bulletin is divided into four parts as follows:
Part I.—19
86 Code.
This part i
ncludes rulings and decisions based on provisions of
the Intern
al Revenue Code of 1986.
Part II.—Treaties and Tax Legislation.
This part is divided into two subparts as follows: Subpart A,
Tax Conventions and Other Related Items, and Subpart B, Leg-
islation and Related Committee Reports.
Part III.—Administrative, Procedural, and Miscellaneous.
To the extent practicable, pertinent cross references to these
subjects are contained in the other Parts and Subparts. Also
included in this part are Bank Secrecy Act Administrative Rul-
ings. Bank Secrecy Act Administrative Rulings are issued by
the Department of the Treasury’s Office of the Assistant Secre-
tary (Enforcement).
Part IV
.—Items of General Interest.
This par
t includes notices of proposed rulemakings, disbar-
ment an
d suspension lists, and announcements.
The last Bulletin for each month includes a cumulative index
for the matters published during the preceding months. These
monthly indexes are cumulated on a semiannual basis, and are
published in the last Bulletin of each semiannual period.
The c
ontents of this publication are not copyrighted and may be reprinted freely. A citation of the Internal Revenue Bulletin as the source would be appropriate.
For sale by the Superintendent of Documents, U.S.Government Printing Office, Washington, DC 20402.
2008–4 I.R.B.January 28, 2008

January 28, 20082008–4 I.R.B.

Part I. Rulings
and Decisions Under the Internal Revenue Code
of 1986
Section 6050H
.—Returns
Relating to Mo
rtgage
Interest Received in Trade
or Business From Individuals
This notice explains how individual taxpayers may
allocate prepaid qualified mortgage insurance premi-
ums to determi
ne the amount that may be deducted in
2007. This not
ice also provides guidance to reporting
entities on th
e information reporting of prepaid qual-
ified mortgag
e insurance premiums for 2007. Com-
ments are req
uested on the rules that should apply
to the alloca
tion and reporting of premiums in future
years. See No
tice 2008-15, page 313.
2008–4 I.R.B.309January 28, 2008

Part III. Administrative, Procedural, and Miscellaneous
Frivolous Positions
Notice 2008–14
PURPOSE
Positions that are the same as or sim-
ilar to the positions listed in this notice
are identified as frivolous for purposes
of the penalty for a “frivolous tax re-
turn” under section 6702(a) of the Inter-
nal Revenue Code and the penalty for
a “specified frivolous submission” un-
der section 6702(b). Persons who file a
purported return of tax, including an orig-
inal or amended return, based on one or
more of these positions are subject to a
penalty of $5,000 if the purported return
of tax does not contain information on
which the substantial correctness of the
self-assessed determination of tax may
be judged or contains information that on
its face indicates the self-assessed deter-
mination of tax is substantially incorrect.
Likewise, persons who submit a “speci-
fied submission” (namely, a request for
a collection due process hearing or an
application for an installment agreement,
offer-in-compromise, or taxpayer assis-
tance order) based on one or more of the
positions listed in this notice are subject
to a penalty of $5,000. The penalty may
also be applied if the purported return or
any portion of the specified submission
is not based on a position set forth in this
notice, yet reflects a desire to delay or
impede the administration of Federal tax
laws for purposes of section 6702(a)(2)(B)
or 6702(b)(2)(A)(ii).
BACKGROUND
Section 407 of Tax Relief and Health
Care Act of 2006, Pub. L. No. 109–432,
120 Stat. 2922, 2960–62 (2006), amended
section 6702 to increase the amount of
the penalty for frivolous tax returns from
$500 to $5,000 and to impose a penalty
of $5,000 on any person who submits a
“specified frivolous submission.” A sub-
mission is a “specified frivolous submis-
sion” if it is a “specified submission” (de-
fined in section 6702(b)(2)(B) as a request
for a hearing under section 6320 or 6330
or an application under section 6159, 7122
or 7811) and any portion of the submis-
sion (i) is based on a position identified
by the Secretary as frivolous or (ii) re-
flects a desire to delay or impede admin-
istration of the Federal tax laws. Section
6702 was further amended to add a new
subsection (c) requiring the Secretary to
prescribe, and periodically revise, a list
of positions identified as frivolous. No-
tice 2007–30, 2007–14 I.R.B. 883, con-
tained the prescribed list. This notice re-
vises the list to add more positions identi-
fied as frivolous. The positions that have
been added are found in paragraphs 9(g),
11, 14 and 25.
DISCUSSION
Frivolous Positions. Positions that are
the same as or similar to the following are
frivolous.
(1) Compliance with the internal rev-
enue laws is voluntary or optional and not
required by law, including arguments that:
a. Filing a Federal tax or information re-
turn or paying tax is purely voluntary
under the law, or similar arguments
described as frivolous in Rev. Rul.
2007–20, 2007–14 I.R.B. 863.
b. Nothing in the Internal Revenue Code
imposes a requirement to file a return
or pay tax, or that a person is not re-
quired to file a tax return or pay a
tax unless the Internal Revenue Ser-
vice responds to the person’s ques-
tions, correspondence, or a request to
identify a provision in the Code re-
quiring the filing of a return or the
payment of tax.
c. There is no legal requirement to file a
Federal income tax return because the
instructions to Forms 1040, 1040A,
or 1040EZ or the Treasury regulations
associated with the filing of the forms
do not display an OMB control num-
ber as required by the Paperwork Re-
duction Act of 1980, 44 U.S.C. § 3501
et seq., or similar arguments described
as frivolous in Rev. Rul. 2006–21,
2006–1 C.B. 745.
d. Because filing a tax return is not re-
quired by law, the Service must pre-
pare a return for a taxpayer who does
not file one in order to assess and col-
lect tax.
e. A taxpayer has an option under the
law to file a document or set of docu-
ments in lieu of a return or elect to file
a tax return reporting zero taxable in-
come and zero tax liability even if the
taxpayer received taxable income dur-
ing the taxable period for which the
return is filed, or similar arguments
described as frivolous in Rev. Rul.
2004–34, 2004–1 C.B. 619.
f. An employer is not legally obligated
to withhold income or employment
taxes on employees’ wages.
g. Only persons who have contracted
with the government by applying for
a governmental privilege or bene-
fit, such as holding a Social Security
number, are subject to tax, and those
who have contracted with the gov-
ernment may choose to revoke the
contract at will.
h. A taxpayer may lawfully decline to
pay taxes if the taxpayer disagrees
with the government’s use of tax rev-
enues, or similar arguments described
as frivolous in Rev. Rul. 2005–20,
2005–1 C.B. 821.
i. An administrative summons issued by
the Service isper seinvalid and com-
pliance with a summons is not legally
required.
(2) The Internal Revenue Code is not
law (or “positive law”) or its provisions
are ineffective or inoperative, including
the sections imposing an income tax or re-
quiring the filing of tax returns, because
the provisions have not been implemented
by regulations even though the provisions
in question either (a) do not expressly re-
quire the Secretary to issue implementing
regulations to become effective or (b) ex-
pressly require implementing regulations
which have been issued.
(3) A taxpayer’s income is excluded
from taxation when the taxpayer rejects
or renounces United States citizenship be-
cause the taxpayer is a citizen exclusively
of a State (sometimes characterized as
a “natural-born citizen” of a “sovereign
state”), that is claimed to be a separate
country or otherwise not subject to the
laws of the United States. This position
January 28, 20083102008–4 I.R.B.

includes the argument that the United
States does not include all or a part of
the physical territory of the 50 States and
instead consists of only places such as the
District of Columbia, Commonwealths
and Territories (e.g., Puerto Rico), and
Federal enclaves (e.g., Native American
reservations and military installations), or
similar arguments described as frivolous
in Rev. Rul. 2004–28, 2004–1 C.B. 624,
or Rev. Rul. 2007–22, 2007–14 I.R.B.
866.
(4) Wages, tips, and other compensa-
tion received for the performance of per-
sonal services are not taxable income or
are offset by an equivalent deduction for
the personal services rendered, including
an argument that a taxpayer has a “claim
of right” to exclude the cost or value of
the taxpayer’s labor from income or that
taxpayers have a basis in their labor equal
to the fair market value of the wages they
receive, or similar arguments described as
frivolous in Rev. Rul. 2004–29, 2004–1
C.B. 627, or Rev. Rul. 2007–19, 2007–14
I.R.B. 843.
(5) United States citizens and residents
are not subject to tax on their wages or
other income derived from sources within
the United States, as only foreign-based
income or income received by nonresi-
dent aliens and foreign corporations from
sources within the United States is tax-
able, and similar arguments described as
frivolous in Rev. Rul. 2004–30, 2004–1
C.B. 622.
(6) A taxpayer has been untaxed, de-
taxed, or removed or redeemed from the
Federal tax system though the taxpayer re-
mains a United States citizen or resident, or
similar arguments described as frivolous in
Rev. Rul. 2004–31, 2004–1 C.B. 617.
(7) Only certain types of taxpayers are
subject to income and employment taxes,
such as employees of the Federal gov-
ernment, corporations, nonresident aliens,
or residents of the District of Columbia
or the Federal territories, or similar argu-
ments described as frivolous in Rev. Rul.
2006–18, 2006–1 C.B. 743.
(8) Only certain types of income are
taxable, for example, income that re-
sults from the sale of alcohol, tobacco, or
firearms or from transactions or activities
that take place in interstate commerce.
(9) Federal income taxes are unconsti-
tutional or a taxpayer has a constitutional
right not to comply with the Federal tax
laws for one of the following reasons:
a. The First Amendment permits a tax-
payer to refuse to pay taxes based on
religious or moral beliefs.
b. A taxpayer may withhold payment of
taxes or the filing of a tax return until
the Service or other government entity
responds to a First Amendment peti-
tion for redress of grievances.
c. Mandatory compliance with, or en-
forcement of, the tax laws invades a
taxpayer’s right to privacy under the
Fourth Amendment.
d. The requirement to file a tax return
is an unreasonable search and seizure
contrary to the Fourth Amendment.
e. Income taxation, tax withholding, or
the assessment or collection of tax is
a “taking” of property without due
process of law or just compensation in
violation of the Fifth Amendment.
f. The Fifth Amendment privilege
against self-incrimination grants tax-
payers the right not to file returns or
the right to withhold all financial in-
formation from the Service.
g. The Ninth Amendment exempts those
with religious or other objections to
military spending from paying taxes
to the extent the taxes will be used for
military spending.
h. Mandatory or compelled compliance
with the internal revenue laws is a
form of involuntary servitude prohib-
ited by the Thirteenth Amendment.
i. Individuals may not be taxed unless
they are “citizens” within the meaning
of the Fourteenth Amendment.
j. The Sixteenth Amendment was not
ratified, has no effect, contradicts the
Constitution as originally ratified,
lacks an enabling clause, or does not
authorize a non-apportioned, direct
income tax.
k. Taxation of income attributed to a
trust, which is a form of contract, vi-
olates the constitutional prohibition
against impairment of contracts.
l. Similar constitutional arguments de-
scribed as frivolous in Rev. Rul.
2005–19, 2005–1 C.B. 819.
(10) A taxpayer is not a “person” within
the meaning of section 7701(a)(14) or
other provisions of the Internal Revenue
Code, or similar arguments described as
frivolous in Rev. Rul. 2007–22, 2007–14
I.R.B. 866.
(11) Only fiduciaries are taxpayers, or
only persons with a fiduciary relationship
to the United States are obligated to pay
taxes, and the United States or the Service
must prove the fiduciary status or relation-
ship.
(12) Federal Reserve Notes are not tax-
able income when paid to a taxpayer be-
cause they are not gold or silver and may
not be redeemed for gold or silver.
(13) In a transaction using gold and sil-
ver coins, the value of the coins is excluded
from income or the amount realized in the
transaction is the face value of the coins
and not their fair market value for purposes
of determining taxable income.
(14) A taxpayer who is employed on
board a ship that provides meals at no cost
to the taxpayer as part of the employment
may claim a so-called “Mariner’s Tax De-
duction” (or the like) allowing the taxpayer
to deduct from gross income the cost of the
meals as an employee business expense.
(15) A taxpayer may purport to operate
a home-based business as a basis to deduct
as business expenses the taxpayer’s per-
sonal expenses or the costs of maintaining
the taxpayer’s household when the mainte-
nance items or amounts as reported do not
correspond to abona fidehome business,
such as when they are grossly excessive in
relation to the conceivable costs for some
portion of the home being used exclusively
and regularly as a business, or similar argu-
ments described as frivolous by Rev. Rul.
2004–32, 2004–1 C.B. 621.
(16) A “reparations” tax credit exists,
including argumentsthat African-Ameri-
can taxpayers may claim a tax credit on
their Federal income tax returns as repa-
rations for slavery or other historical mis-
treatment, that Native Americans are enti-
tled to an analogous credit (or are exempt
from Federal income tax on the basis of a
treaty), or similar arguments described as
frivolous in Rev. Rul. 2004–33, 2004–1
C.B. 628, or Rev. Rul. 2006–20, 2006–1
C.B. 746.
(17) A Native American or other tax-
payer who is not an employer engaged in
a trade or business may nevertheless claim
(for example, in an amount exceeding all
reported income) the Indian Employment
Credit under section45A, which explicitly
requires, among other criteria, that the tax-
2008–4 I.R.B.311January 28, 2008

payer be an employer engaged in a trade or
business to claim the credit.
(18) A taxpayer’s wages are excluded
from Social Security taxes if the taxpayer
waives the right to receive Social Security
benefits, or a taxpayer is entitled to a re-
fund of, or may claim acharitable-contri-
bution deduction for, the Social Security
taxes that the taxpayer has paid, or similar
arguments described as frivolous in Rev.
Rul. 2005–17, 2005–1 C.B. 823.
(19) Taxpayers may reduce or eliminate
their Federal tax liability by altering a tax
return, including striking out the penalty-
of-perjury declaration, or attaching docu-
ments to the return, such as a disclaimer of
liability, or similar arguments described as
frivolous in Rev. Rul. 2005–18, 2005–1
C.B. 817.
(20) A taxpayer is not obligated to pay
income tax because the government has
created an entity separate and distinct from
the taxpayer—a “straw man”—that is dis-
tinguishable from the taxpayer by some
variation of the taxpayer’s name, and any
tax obligations are exclusively those of
the “straw man,” or similar arguments de-
scribed as frivolous in Rev. Rul. 2005–21,
2005–1 C.B. 822.
(21) Inserting the phrase “nunc pro
tunc” on a return or other document filed
with or submitted to the Service has a legal
effect, such as reducing a taxpayer’s tax
liability, or similar arguments described as
frivolous in Rev. Rul. 2006–17, 2006–1
C.B. 748.
(22) A taxpayer may avoid tax on in-
come by attributing the income to a trust,
including the argument that a taxpayer can
put all of the taxpayer’s assets into a trust
to avoid income tax while still retaining
substantial powers of ownership and con-
trol over those assets or that a taxpayer
may claim an expense deduction for the in-
come attributed to a trust, or similar argu-
ments described as frivolous in Rev. Rul.
2006–19, 2006–1 C.B. 749.
(23) A taxpayer may lawfully avoid in-
come tax by sending income offshore, in-
cluding depositing income into a foreign
bank account.
(24) A taxpayer can claim the section
44 Disabled Access Credit to reduce tax
or generate a refund, for example, by pur-
portedly having purchased equipment or
services for an inflated price (which may
or may not have been actually paid), even
though it is apparent that the taxpayer did
not operate a small business that purchased
the equipment or services to comply with
the requirements of the Americans with
Disabilities Act.
(25) A taxpayer may claim the section
6421 fuels tax credit, which is limited to
gasoline used in an off-highway business
use, even though the taxpayer did not pur-
chase and use gasoline during the taxable
period for which the credit is claimed for
an off-highway business use. Also, if the
taxpayer claims an amount of credit that
is so disproportionately excessive to any
(including zero) business income reported
on the taxpayer’s income tax return as
to be patently unallowable (e.g., a credit
that is 150 percent of business income
reported on Form 1040) or facially reflects
an impossible quantity of gasoline given
the business use, if any, as reported by the
taxpayer.
(26) A taxpayer is allowed to buy or sell
the right to claim a child as a qualifying
child for purposes of the Earned Income
Tax Credit.
(27) An IRS Form 23C,Assessment
Certificate — Summary Record of Assess-
ments, is an invalid record of assessment
for purposes of section 6203 and Treas.
Reg. § 301.6203–1, the Form 23C must
be personally signed by the Secretary of
the Treasury for an assessment to be valid,
the Service must provide a copy of the
Form 23C to a taxpayer if requested be-
fore taking collection action, or similar
arguments described as frivolous in Rev.
Rul. 2007–21, 2007–14 I.R.B. 865.
(28) A tax assessment is invalid because
the assessment was made from a section
6020(b) substitute for return, which is not
avalidreturn.
(29) A statutory notice of deficiency is
invalid because the taxpayer to whom the
notice was sent did not file an income tax
return reporting the deficiency or because
the statutory notice of deficiency was un-
signed or not signed by the Secretary of the
Treasury or by someone with delegated au-
thority.
(30) A Notice of Federal Tax Lien is in-
valid because it is not signed by a particu-
lar official (such as by the Secretary of the
Treasury), or because it was filed by some-
one without delegated authority.
(31) The form or content of a Notice of
Federal Tax Lien is controlled by or subject
to a state or local law, and a Notice of
Federal Tax Lien that does not comply in
form or content with a state or local law is
invalid.
(32) A collection due process notice un-
der section 6320 or 6330 is invalid if it is
not signed by the Secretary of the Treasury
or other particular official, or if no certifi-
cate of assessment is attached.
(33) Verification under section 6330
that the requirements of any applicable
law or administrative procedure have been
met may only be based on one or more par-
ticular forms or documents (which must
be in a certain format), such as a summary
record of assessment, or that the particular
forms or documents or the ones on which
verification was actually determined must
be provided to a taxpayer at a collection
due process hearing.
(34) A Notice and Demand is invalid
because it was not signed, was not on the
correct form (e.g., a Form 17), or was not
accompanied by a certificate of assessment
when mailed.
(35) The United States Tax Court is an
illegitimate court or does not, for any pur-
ported constitutional or other reason, have
the authority to hear and decide matters
within its jurisdiction.
(36) Federal courts may not enforce the
internal revenue laws because their juris-
diction is limited to admiralty or maritime
cases or issues.
(37) Revenue Officers are not autho-
rized to issue levies or Notices of Federal
Tax Lien or to seize property in satisfac-
tion of unpaid taxes.
(38) A Service employee lacks the au-
thority to carry out the employee’s duties
because the employee does not possess a
certain type of identification or credential,
for example, a pocket commission or a
badge, or it is not in the correct form or on
the right medium.
(39) A person may represent a taxpayer
before the Service or in court proceedings
even if the person does not have a power
of attorney from the taxpayer, has not been
enrolled to practice before the Service, or
has not been admitted to practice before
the court.
(40) A civil action to collect unpaid
taxes or penalties must be personally au-
thorized by the Secretary of the Treasury
and the Attorney General.
(41) A taxpayer’s income is not taxable
if the taxpayer assigns or attributes the in-
come to a religious organization (a “corpo-
ration sole” or ministerial trust) claimed to
January 28, 20083122008–4 I.R.B.

be tax-exempt under section 501(c)(3), or
similar arguments described as frivolous in
Rev. Rul. 2004–27, 2004–1 C.B. 625.
(42) The Service is not an agency of
the United States government but rather
a private-sector corporation or an agency
of a State or Territory without authority to
administer the internal revenue laws.
(43) Any position described as
frivolous in any revenue ruling or other
published guidance in existence when the
return adopting the position is filed with
or the specified submission adopting the
position is submitted to the Service.
Returns or submissions that contain po-
sitions not listed above, which on their face
have no basis for validity in existing law,
or which have been deemed frivolous in a
published opinion of the United States Tax
Court or other court of competent jurisdic-
tion, may be determined to reflect a desire
to delay or impede the administration of
Federal tax laws and thereby subject to the
$5,000 penalty.
The list of frivolous positions above
will be periodically revised as required by
section 6702(c).
EFFECTIVE DATE
This notice is effective for submissions
made and issues raised after January 14,
2008. For submissions made and issues
raised between March 16, 2007, and Jan-
uary 14, 2008, Notice 2007–30 applies.
EFFECT ON OTHER DOCUMENTS
Notice 2007–30 is modified and super-
seded.
DRAFTING INFORMATION
The principal author of this notice is
theOfficeoftheAssociateChiefCoun-
sel (Procedure and Administration). For
further information regarding this notice,
contact the Office of the Associate Chief
Counsel (Procedure and Administration),
Branch 2, at (202) 622–4940 (not a toll-
free call).
Allocation of Prepaid
Qualified Mortgage Insurance
Premiums for 2007
Notice 2008–15
PURPOSE
This notice provides guidance to indi-
vidual taxpayers on how to allocate pre-
paid qualified mortgage insurance premi-
ums to determine the amount of the pre-
paid premium a taxpayer may deduct in
2007 under § 163(h)(4)(F) of the Internal
Revenue Code (the “Code”).
This notice also provides guidance to
reporting entities receiving prepaid qual-
ified mortgage insurance premiums in
2007.
BACKGROUND
Section 163(a) of the Code generally al-
lows a deduction for all interest paid or ac-
crued within the taxable year on indebt-
edness. However, § 163(h)(1) provides
that in the case of a taxpayer other than a
corporation, no deduction shall be allowed
for personal interest paid or accrued dur-
ing the taxable year. Section 163(h)(2)(D)
excludes qualified residence interest from
the definition of personal interest.
Section 163(h)(3)(A) defines qualified
residence interest, in part, as interest paid
or accrued during the taxable year on ac-
quisition indebtedness with respect to any
qualified residence of the taxpayer. The
determination of whether any property is a
qualified residence of the taxpayer is made
as of the time the interest is accrued.
Section 163(h)(4)(A) defines a quali-
fied residence as the taxpayer’s principal
residence and one other property that the
taxpayer designates as a residence for pur-
poses of § 163(h)(4) for the taxable year
and that the taxpayer uses as a residence
(within the meaning of § 280A(d)(1)).
This general rule is subject to several spe-
cial rules contained in § 163(h)(4).
Section 163(h)(3)(B) defines acquisi-
tion indebtedness as any indebtedness that
is incurred in acquiring, constructing, or
substantially improving any qualified res-
idence of the taxpayer and is secured by
such residence. Acquisition indebtedness
includes indebtedness secured by the res-
idence resulting fromthe refinancing of
indebtedness meeting the requirements of
the preceding sentence (or this sentence);
but only to the extent the amount of the
indebtedness resulting from the refinanc-
ing does not exceed the amount of the
refinanced indebtedness. The aggregate
amount treated as acquisition indebtedness
for any period may not exceed $1,000,000
($500,000 in the case of a married individ-
ual filing a separate return).
Section 419 of the Tax Relief and
Health Care Act of 2006, Pub. L. No.
109–432, 120 Stat. 2967 (the “Act”),
added provisions to §§ 163(h)(3) and
163(h)(4) to treat qualified mortgage in-
surance premiums paid or accrued in
2007 for qualified mortgage insurance
contracts issued in 2007 as deductible
qualified residence interest. In the case
of prepaid qualified mortgage insurance
premiums, the deduction is limited to the
amount allocable to2007. The allocable
amount may be reduced or eliminated
under § 163(h)(3)(E)(ii), which provides
that the amount allowed as a deduction
is phased out ratably by 10 percent for
each $1,000 ($500 in the case of a mar-
ried individual filing a separate return) the
taxpayer’s adjusted gross income exceeds
$100,000 ($50,000 in the case of a mar-
ried individual filing a separate return).
Prior to enactment of section 419 of the
Act, taxpayers could not deduct premiums
paid for mortgage insurance as qualified
residence interest.
Section 163(h)(3)(E) provides that pre-
miums paid or accrued for qualified mort-
gage insurance in connection with acquisi-
tion indebtedness for a qualified residence
are treated as qualified residence interest
for purposes of § 163.
Section 163(h)(4)(E) defines quali-
fied mortgage insurance as —
(i) mortgage insurance provided by
the Veterans Administration, the Fed-
eral Housing Administration, or the Ru-
ral Housing Administration,
1
and
(ii) private mortgage insurance (as
definedbysection2oftheHomeown-
ers Protection Act of 1998 (12 U.S.C.
§ 4901), as in effect on December 20,
2006, the date § 163(h)(4)(E) was en-
acted).
1
References in § 163(h)(4)(e)(i) to the Veterans Administration (“VA”) and Rural Housing Administration (“Rural Housing”), are interpreted to meantheir respective successors, the Depart-
ment of Veterans Affairs and Rural Housing Service.
2008–4 I.R.B.313January 28, 2008

Section 163(h)(4)(F) states that any
amount paid by the taxpayer for qualified
mortgage insurance that is properly alloca-
ble to any mortgage the payment of which
extends to periods that are after the close
of the taxable year in which such amount is
paid shall be chargeable to capital account
and shall be treated as paid in such periods
to which so allocated. No deduction shall
be allowed for the unamortized balance of
such account if such mortgage is satisfied
before the end of the term. The preceding
sentences shall not apply to amounts paid
for qualified mortgage insurance provided
by the VA or Rural Housing.
Section 419 of the Act also added
§ 6050H(h) to the Code, which gener-
ally provides that any person who, in the
course of a trade or business, receives
from any individual premiums for mort-
gage insurance aggregating $600 or more
for any calendar year, shall make an infor-
mation return in the form prescribed by the
Secretary. For 2007, qualified mortgage
insurance premiums should be reported in
box4onForm1098,Mortgage Interest
Statement. The Instructions for Form 1098
state that, except for amounts paid to the
VA or Rural Housing, payments allocable
to periods after 2007 are treated as paid in
the periods to which they are allocable.
Generally, under § 6724(a) a failure
to file a correct information return shall
not be subject to a penalty if it is shown
that such failure is due to reasonable
cause and not to willful neglect. Under
§ 301.6724–1(a)(2)(i) of the Procedure
and Administration Regulations, a penalty
is waived for reasonable cause if the filer
establishes that there are significant miti-
gating factors with respect to the failure.
Section 301.6724–1(b)(1) provides that a
significant mitigatingfactor includes the
fact that, prior to the failure to file, the filer
was never required to file the particular
type of return or to furnish the particular
type of statement with respect to which
the failure occurred.
ALLOCATION OF PREPAID
QUALIFIED MORTGAGE
INSURANCE PREMIUMS UNDER
§ 163(h)(4)(F) PAID IN 2007
The Department of the Treasury (the
“Treasury”) and the Internal Revenue Ser-
vice (the “IRS”) have received comments
on the implementation of section 419 of
the Act. Notwithstanding the general rules
for the treatment of qualified residence in-
terest (for example, the period over which
certain points paid to refinance a mort-
gage are allocable), the Treasury and IRS
have determined, as a matter of administra-
tive convenience, to provide the following
guidance on the treatment of prepaid qual-
ified mortgage insurance premiums.
In the case of an individual taxpayer
who, in 2007, obtained a mortgage qualify-
ing as acquisition indebtedness on a quali-
fied residence and, in connection with that
mortgage, paid (by cash or financing, with-
out regard to source) a qualified mortgage
insurance premium for private mortgage
insurance or mortgage insurance provided
by the Federal Housing Administration is-
sued in 2007 but extending beyond 2007,
the taxpayer may allocate the prepaid pre-
mium ratably over the shorter of —
(1) the stated term of the mortgage, or
(2) 84 months, beginning with the
month in which the insurance was ob-
tained,
to determine the amount treated as de-
ductible qualified residence interest for
2007 (the “allocation method”). The in-
dividual taxpayer may have to contact the
issuer of the Form 1098 to ascertain the
manner in which the premium amount was
reflected in box 4.
The Treasury and IRS have determined
84 months to be an appropriate allocation
period after reviewing comments received
from representatives of the mortgage in-
surance industry.
REPORTING REQUIREMENTS
FOR 2007 FOR ENTITIES
RESPONSIBLE FOR REPORTING
PREPAID QUALIFIED MORTGAGE
INSURANCE PREMIUMS
A reporting entity that receives, from an
individual, qualified mortgage insurance
premiums of $600 or more in 2007 is re-
quired to file the 2007 Form 1098. For
prepaid qualified mortgage insurance pre-
miums, except for amounts paid to the VA
or Rural Housing, the entity should report
in box 4 of the Form 1098 the portion of
the amount received that is allocable to
2007, as provided in the instructions to the
form. However, an entity reporting either
the amount actually received or the amount
determined under the 84-month allocation
method described above will be deemed to
meet the requirements of § 6724(a).
REQUEST FOR COMMENTS
This notice provides transitional re-
lief for individual taxpayers and reporting
entities for 2007. Section 3 of the Mort-
gage Forgiveness Debt Relief Act of 2007,
Pub. L. No. 110–142, 121 Stat. 1803,
which was enacted on December 20, 2007,
contains a provision extending the de-
ductibility of qualified mortgage insurance
premiums under § 163(h)(3)(E) through
2010. The Treasury and IRS request com-
ments regarding the appropriate allocation
method and reporting requirements that
should apply to future years.
Written comments in response to this
notice should be submitted no later than
March 28, 2008, to the Internal Rev-
enue Service, CC:PA:LPD:RU (Notice
2008–15), room 5203, P.O. Box 7604,
Ben Franklin Station, Washington, DC
20044. Submissions may be hand carried
between the hours of 8 a.m. and 4 p.m.
to CC:PA:LPD:RU (Notice 2008–15),
Courier’s Desk, Internal Revenue Service,
1111 Constitution Avenue NW, Washing-
ton, DC 20224. Alternatively, comments
may be submitted via the Internet at
Notice.Comments@irscounsel.treas.gov
in which case “Notice 2008–15” should
be in the subject line. All submissions
will be available for public inspection
and copying in their entirety. Therefore,
submissions received by the IRS should
not include taxpayer-specific information
of a confidential nature. Submissions
should include the name and telephone
number of a person to contact.
DRAFTING INFORMATION
The principal author of this notice is
Charles H. Kim of the Office of Asso-
ciate Chief Counsel (Income Tax and Ac-
counting). For further information regard-
ing this notice, contact Charles H. Kim at
(202) 622–5020 (not a toll-free call).
January 28, 20083142008–4 I.R.B.

Organization Treated as a
Donee
Notice 2008–16
SECTION 1. PURPOSE
This notice provides rules under
§ 170(f)(17) of the Internal Revenue Code
(Code) for substantiating lump-sum char-
itable contributions made through the
Combined Federal Campaign (CFC) or a
similar program (e.g.,aUnitedWayCam-
paign).
Taxpayers claiming charitable con-
tribution deductions for cash, check, or
other monetary gifts made in taxable years
beginning after August 17, 2006, are sub-
ject to the recordkeeping requirements of
§170(f)(17),asaddedbysection1217
of the Pension Protection Act of 2006,
P. L. 109–280, 120 Stat. 780 (2006) (PPA).
To substantiate a deduction, § 170(f)(17)
requires a taxpayer to maintain a bank
record or a written communication from
the donee showing the name of the donee
organization, the date of the contribution,
and the amount of the contribution.
The Internal Revenue Service and
the Treasury Department expect to is-
sue regulations under § 170 incorporat-
ing the recordkeeping requirements of
§ 170(f)(17). Taxpayers making lump-sum
charitable contributions through the CFC
or a similar program may rely on this
notice to comply with § 170(f)(17) until
those regulations are effective.
SECTION 2. BACKGROUND
Section 170 generally allows a deduc-
tion, subject to certain limitations, for
any charitable contribution (as defined in
§ 170(c)) payment of which is made during
the taxable year. Forany contribution of
$250 or more, § 170(f)(8) provides that no
deduction is allowed unless the taxpayer
substantiates the contribution by a con-
temporaneous written acknowledgment
of the contribution by the donee organ-
ization. The contemporaneous written
acknowledgment must contain the follow-
ing information: the amount of cash and
a description of any property other than
cash contributed; a statement whether the
donee organization provided any goods
or services in consideration for the contri-
bution; and a description and good faith
estimate of the value of any goods or ser-
vices provided in consideration for the
contribution, or, if the goods or services
consist solely of intangible religious ben-
efits, a statement to that effect.
Section 1.170A–13(f)(12) of the In-
come Tax Regulations provides, in rele-
vant part, that an organization described
in § 170(c), or an organization described
in 5 CFR 950.105 (a Principal Combined
Fund Organization (PCFO) for purposes
of the CFC) and acting in that capacity,
that receives a payment made as a contri-
bution is treated as a donee organization
solely for purposes of § 170(f)(8), even if
the organization (pursuant to the donor’s
instructions or otherwise) distributes the
amount received to one or more organiza-
tions described in § 170(c).
Section 1217 of the PPA adds
§ 170(f)(17), effective for contributions
made in taxable years beginning after
August 17, 2006. Section 170(f)(17) pro-
vides that no deduction is allowed under
§ 170(a) for any contribution of a cash,
check, or other monetary gift, unless the
taxpayer maintains as a record of the
contribution a bank record or a written
communication from the donee showing
the name of the donee organization and
the date and the amount of the contribu-
tion. Unlike § 170(f)(8), which applies
only to contributions of $250 or more,
§ 170(f)(17) applies to all contributions
of a cash, check, or other monetary gift,
regardless of amount. Notice 2006–110,
2006–51 I.R.B. 1127, provides rules under
§ 170(f)(17) for substantiating charitable
contributions made by payroll deduction.
Any contribution of $250 or more made
by cash, check, or other monetary gift is
subject to §§ 170(f)(8) and (f)(17). No
deduction for a lump-sum contribution of
$250 or more is allowed unless the tax-
payer satisfies the substantiation require-
ments of each section. However, both
§§ 170(f)(8) and (f)(17) may be satisfied
by a single document if the document con-
tains all information required by both sec-
tions within the time period as may be re-
quired.
SECTION 3. APPLICATION
OF § 170(f)(17) TO LUMP-SUM
CONTRIBUTIONS MADE THROUGH
THE CFC OR A SIMILAR PROGRAM
A deduction for a lump-sum contri-
bution made in taxable years beginning
after August 17, 2006, will not be allowed
unless the recordkeeping requirements of
§ 170(f)(17) are met. In the case of a
lump-sum contribution made through the
CFC or a similar program, an organization
described in § 170(c), or an organization
described in 5 CFR 950.105 (a PCFO for
purposes of the CFC) and acting in that
capacity, that receives a payment made as
a contribution may be treated as a donee
described in § 170(c) for purposes of
§ 170(f)(17) (and not solely for purposes
of § 170(f)(8)) even ifthe organization
(pursuant to the donor’s instructions or
otherwise) distributes the amount received
to one or more organizations described in
§ 170(c). For purposes of § 170(f)(17),
a written communication from the PCFO
for purposes of the CFC (and acting in
that capacity) or a similar organization,
must include the name of the donee or-
ganization that is the ultimate recipient
of the charitable contribution (i.e., the
one or more organizations described in
§ 170(c) to which the PCFO for purposes
of the CFC (or the similar organization)
distributes the amount received).
The Internal Revenue Service and
the Treasury Department expect to issue
regulations under § 170 that will incor-
porate the recordkeeping requirements
of § 170(f)(17). In light of the purpose
of section 1217 of the PPA, the nexus
between the PCFOs (or similar organiza-
tions) and actual donees will be reviewed.
The anticipated regulations may require
disclosure to each donor of the actual
amount distributed to the ultimate recip-
ient organizations through the CFC or
the similar program and the date of that
distribution. Taxpayers may rely on this
notice to substantiate lump-sum contribu-
tions made through the CFC or a similar
program in taxable years beginning after
August 17, 2006, until those regulations
are effective.
2008–4 I.R.B.315January 28, 2008

SECTION 4. PAPERWORK
REDUCTION ACT
The collections of information refer-
enced in this notice have been previously
reviewed and approved by the Office of
Management and Budget (OMB) as part
of the promulgation of § 1.170A–13 in ac-
cordance with the Paperwork Reduction
Act (44 U.S.C. 3507) under control num-
ber 1545–0754. This notice merely clari-
fies the substantiation required for a contri-
bution of a cash, check, or other monetary
gift subject to § 170(f)(17).
An agency may not conduct or sponsor,
and a person is not required to respond
to, a collection of information unless the
collection of information displays a valid
OMB control number.
Books or records relating to a collection
of information must be retained as long
as their contents may become material in
the administration of any internal revenue
law. Generally, tax returns and return in-
formation are confidential, as required by
§ 6103.
SECTION 5. DRAFTING
INFORMATION
The principal author of this notice is
Nancy J. Lee of the Office of Associate
Chief Counsel (Income Tax & Account-
ing). For further information regarding
this notice, contact Nancy J. Lee at (202)
622–5020 (not a toll-free call).
Update for Weighted Average
Interest Rates, Yield Curves,
and Segment Rates
Notice 2008–17
This notice provides guidance as to the
corporate bond weighted average interest
rate and the permissible range of interest
rates specified under § 412(b)(5)(B)(ii)(II)
of the Internal Revenue Code. It also
provides guidance on the corporate bond
monthly yield curve (and the correspond-
ing spot segment rates), the 24-month av-
erage segment rates, and the funding tran-
sitional segment rates under § 430(h)(2).
In addition, this notice provides guidance
as to the interest rate on 30-year Treasury
securities under § 417(e)(3)(A)(ii)(II) as
in effect for plan years beginning before
2008, and the minimum present value seg-
ment rates under § 417(e)(3)(D) as in effect
for plan years beginning after 2007.
CORPORATE BOND WEIGHTED
AVERAGE INTEREST RATE
Sections412(b)(5)(B)(ii)and
412(l)(7)(C)(i), as amended by the Pen-
sion Funding Equity Act of 2004 and by
the Pension Protection Act of 2006 (PPA),
provide that the interest rates used to cal-
culate current liability and to determine
the required contribution under § 412(l)
for plan years beginning in 2004 through
2007 must be within a permissible range
based on the weighted average of the rates
of interest on amounts invested conser-
vatively in long term investment grade
corporate bonds during the 4-year period
ending on the last day before the beginning
of the plan year.
Notice 2004–34, 2004–1 C.B. 848, pro-
vides guidelines for determining the cor-
porate bond weighted average interest rate
and the resulting permissible range of in-
terest rates used to calculate current liabil-
ity. That notice establishes that the corpo-
rate bond weighted average is based on the
monthly composite corporate bond rate de-
rived from designated corporate bond in-
dices. The methodology for determining
the monthly composite corporate bond rate
as set forth in Notice 2004–34 continues to
apply in determining that rate. See Notice
2006–75, 2006–42 I.R.B. 366.
The composite corporate bond rate for
December 2007 is 6.28 percent. Pursuant
to Notice 2004–34, the Service has de-
termined this rate as the average of the
monthly yields for the included corporate
bond indices for that month.
The following corporate bond weighted
average interest rate was determined for
plan years beginning in the month shown
below.
For Plan Years
Beginning inPermissible Range
MonthYear
Corporate
Bond Weighted
Average90%to100%
January2008
5.925.335.92
YIELD CURVE AND SEGMENT
RATES
Generally for plan years beginning
after 2007 (except for delayed effective
dates for certain plans under sections 104,
105, and 106 of PPA), § 430 of the Code
specifies the minimum funding require-
ments that apply to single employer plans
pursuant to § 412. Section 430(h)(2) spec-
ifies the interest rates that must be used
to determine a plan’s target normal cost
and funding target. Under this provision,
present value is generally determined us-
ing three 24-month average interest rates
(“segment rates”), each of which applies
to cash flows during specified periods.
However, an election may be made under
§ 430(h)(2)(D)(ii) to use the monthly yield
curve in place of the segment rates. For
plan years beginning in 2008 and 2009, a
transitional rule under § 430(h)(2)(G) pro-
vides that the segment rates are blended
with the corporate bond weighted average
as specified above. An election may be
made under § 430(h)(2)(G)(iv) to use the
segment rates without applying the transi-
tional rule.
Notice 2007–81, 2007–44 I.R.B. 899,
provides guidelines for determining the
monthly corporate bond yield curve, the
24-month average corporate bond segment
rates, and the funding transitional segment
rates used to compute the target normal
cost and the funding target. Pursuant to
Notice 2007–81, the monthly corporate
bond yield curve derived from Decem-
ber 2007 data is in Table I at the end of
this notice. The spot first, second, and
third segment rates for the month of De-
cember 2007 are, respectively, 4.93, 6.13
and 6.69. The three 24-month average
corporate bond segment rates applicable
for January 2008 under the election of
§ 430(h)(2)(G)(iv) are as follows:
January 28, 20083162008–4 I.R.B.

First
Segment
Second
Segment
Third
Segment
5.315.92
6.43
The transitional segment rates under
§ 430(h)(2)(G) applicable for January
2008, taking into account the corporate bond weighted average of 5.92 stated
above, are as follows:
For Plan Years
Beginning in
First
Segment
Second
Segment
Third
Segment
2008
5.725.92
6.09
30-YEAR TREASURY SECURITIES
INTEREST RATE
Section 417(e)(3)(A)(ii)(II) (prior to
amendment by PPA) defines the appli-
cable interest rate, which must be used
for purposes of determining the minimum
present value of a participant’s benefit
under § 417(e)(1) and (2), as the annual
rate of interest on 30-year Treasury se-
curities for the month before the date
of distribution or such other time as the
Secretary may by regulations prescribe.
Section 1.417(e)–1(d)(3) of the Income
Tax Regulations provides that the applica-
ble interest rate for a month is the annual
rate of interest on 30-year Treasury secu-
rities as specified by the Commissioner
for that month in revenue rulings, notices
or other guidance published in the Internal
Revenue Bulletin.
The rate of interest on 30-year Treasury
securities for December 2007 is 4.53 per-
cent. The Service has determined this rate
as the monthly average of the daily deter-
mination of yield on the 30-year Treasury
bond maturing in May 2037.
MINIMUM PRESENT VALUE
SEGMENT RATES
Generally for plan years beginning af-
ter December 31, 2007, the applicable in-
terest rates under § 417(e)(3)(D) are seg-
ment rates computed without regard to a
24-month average. For plan years begin-
ning in 2008 through 2011, the applica-
ble interest rate is the monthly spot seg-
ment rate blended with the applicable rate
under § 417(e)(3)(A)(ii)(II) as in effect
for plan years beginning in 2007. No-
tice 2007–81 provides guidelines for de-
termining the minimum present value seg-
ment rates. Pursuant to that notice, the
minimum present value transitional seg-
ment rates determined for December 2007,
taking into account the December 2007
30-year Treasury rate of 4.53 stated above,
are as follows:
For Plan Years
Beginning in
First
Segment
Second
Segment
Third
Segment
20084.61
4.85
4.96
DRAFTING INFORMATION
The principal author of this notice is
Tony Montanaro of the Employee Plans,
Tax Exempt and Government Entities Di-
vision. Mr. Montanaro may be e-mailed at
RetirementPlanQuestions@irs.gov.
2008–4 I.R.B.317January 28, 2008

Table I
Monthly Yield Curve for December 2007
Maturity YieldMaturity YieldMaturity YieldMaturity YieldMaturity Yield
0.5
4.93
20.56.5040.5
6.71
60.5
6.79
80.5
6.82
1.04.8121.0
6.51
41.06.7261.0
6.79
81.06.82
1.5
4.72
21.56.5241.5
6.72
61.5
6.79
81.5
6.82
2.04.7022.06.5342.06.7262.0
6.79
82.06.82
2.54.7522.56.5442.5
6.72
62.5
6.79
82.5
6.83
3.04.8423.0
6.54
43.06.7363.0
6.79
83.06.83
3.5
4.95
23.56.5543.5
6.73
63.5
6.79
83.5
6.83
4.0
5.07
24.0
6.56
44.06.7364.0
6.79
84.06.83
4.5
5.19
24.56.5744.5
6.73
64.5
6.79
84.5
6.83
5.05.3025.06.5845.06.7365.06.8085.06.83
5.55.4125.56.5845.5
6.74
65.5
6.80
85.5
6.83
6.0
5.51
26.06.5946.06.7466.06.8086.06.83
6.55.6026.5
6.60
46.5
6.74
66.5
6.80
86.5
6.83
7.0
5.68
27.06.6047.06.7467.06.8087.06.83
7.55.7527.5
6.61
47.56.7567.5
6.80
87.5
6.83
8.05.8128.06.6148.06.7568.06.8088.06.83
8.55.8728.5
6.62
48.56.7568.5
6.80
88.5
6.83
9.0
5.93
29.0
6.62
49.0
6.75
69.0
6.80
89.0
6.83
9.55.9829.56.6349.5
6.75
69.56.8089.56.83
10.06.0330.06.63
50.06.75
70.06.81
90.0
6.83
10.5
6.07
30.5
6.64
50.5
6.76
70.5
6.8190.56.83
11.06.1131.06.6451.06.7671.06.81
91.0
6.84
11.56.1531.56.6551.5
6.76
71.5
6.8191.56.84
12.06.1832.0
6.6552.0
6.7672.06.81
92.0
6.84
12.5
6.21
32.5
6.66
52.5
6.76
72.5
6.8192.56.84
13.06.2433.06.66
53.0
6.7673.06.81
93.0
6.84
13.5
6.27
33.5
6.67
53.5
6.77
73.5
6.8193.56.84
14.0
6.29
34.06.6754.06.7774.06.81
94.0
6.84
14.5
6.32
34.5
6.67
54.5
6.77
74.5
6.8194.56.84
15.0
6.34
35.0
6.68
55.0
6.77
75.0
6.8195.06.84
15.5
6.36
35.5
6.68
55.5
6.77
75.5
6.8295.56.84
16.06.3736.06.68
56.0
6.7776.06.82
96.0
6.84
16.5
6.39
36.5
6.69
56.5
6.78
76.5
6.8296.56.84
17.06.4137.0
6.69
57.06.78 77.06.82
97.0
6.84
17.5
6.42
37.5
6.69
57.5
6.78
77.5
6.8297.56.84
18.06.4438.06.70
58.0
6.7878.06.82
98.0
6.84
18.56.4538.5
6.70
58.5
6.78
78.5
6.8298.56.84
19.0
6.46
39.0
6.7059.06.78
79.0
6.82
99.0
6.84
19.56.4839.56.7159.56.7879.56.8299.56.84
20.0
6.49
40.06.7160.06.7880.06.82100.06.84
January 28, 20083182008–4 I.R.B.

Part IV. Items o
fGeneralInterest
Notice of Proposed
Rulemaking and Notice of
Public Hearing
Employment Tax Adjustments
REG–111583–07
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Notice of proposed rulemaking
and notice of public hearing.
SUMMARY: This document contains pro-
posed amendments to regulations relating
to employment tax adjustments and em-
ployment tax refund claims. These pro-
posed amendments modify the process for
making interest-free adjustments for both
underpayments and overpayments of Fed-
eral Insurance Contributions Act (FICA)
and Railroad Retirement Tax Act (RRTA)
taxes and Federal income tax withholding
(ITW) under sections 6205(a) and 6413(a),
respectively, of the Internal Revenue Code
(Code). These proposed amendments also
modify the process for filing claims for
refund of overpayments of employment
taxes under sections 6402 and 6414.
These amendments are proposed in
connection with the IRS’s development
of new forms to report adjustments to
employment taxes which will replace the
existing process of reporting adjustments
of employment taxes on regularly filed
employment tax returns. These proposed
amendments affect taxpayers that file
Form 941,“Employer’s QUARTERLY
Federal Tax Return,” Form 943,“Em-
ployer’s Annual Federal Tax Return for
Agricultural Employees,”Form 944,“Em-
ployer’s ANNUAL Federal Tax Return,”
Form 945,“Annual Return of Withheld
Federal Income Tax,”and Form CT–1,
“Employer’s Annual Railroad Retirement
Tax Return,”and any related Spanish-lan-
guage returns or returns for U.S. posses-
sions.
This document contains proposed
amendments to regulations relating to the
return requirements under section 6011 to
reflect the changes to the adjustment and
refund processes, and to reflect additional
statutory and process updates. This docu-
ment also contains proposed amendments
to the regulations under section 6302 to
clarify deposit obligations with respect
to interest-free adjustments of underpay-
ments and the effect of adjustments and
refunds on the deposit schedule of a Form
943 filer.
This document also provides notice of
a public hearing on these proposed amend-
ments to the regulations.
DATES: Written or electronic comments
must be received by March 27, 2008. Re-
quests to speak (with outlines of topics to
be discussed) at the public hearing sched-
uled for April 17, 2008, must be received
by March 27, 2008.
Applicability Dates:SeetheProposed
Dates of Applicability section of the SUP-
PLEMENTARY INFORMATION.
Effective Date: See the Proposed Ef-
fective Date section of the SUPPLEMEN-
TARY INFORMATION.
ADDRESSES: Send submissions to:
CC:PA:LPD:PR (REG–111583–07), room
5203, Internal Revenue Service, PO Box
7604, Ben Franklin Station, Washing-
ton, DC 20044. Submissions may be
hand-delivered Monday through Friday
betweenthehoursof8a.m. and4p.m.
to CC:PA:LPD:PR (REG–111583–07),
Courier’s Desk, Internal Revenue
Service, 1111 Constitution Avenue, NW,
Washington, DC, or sent electronically,
viatheFederaleRulemaking
Portalatwww.regulations.gov
(IRS-REG–111583–07).The public
hearing will be held in the Auditorium,
Internal Revenue Building, 1111
Constitution Avenue, NW, Washington,
DC.
FOR FURTHER INFORMATION
CONTACT: Concerning the proposed reg-
ulations, please contact Ligeia M. Donis of
the Office of Division Counsel/Associate
Chief Counsel (Tax Exempt and
Government Entities), (202) 622–0047;
concerning submission of comments,
the hearing, and/or to be placed on
the building access list to attend the
hearing, please contact Richard Hurst at
Richard.A.Hurst@irscounsel.treas.govor
(202) 622–7180 (not toll-free numbers).
SUPPLEMENTARY INFORMATION:
Paperwork Reduction Act
The collection of information contained
in this notice of proposed rulemaking has
been submitted to the Office of Manage-
ment and Budget for review in accordance
with the Paperwork Reduction Act of 1995
(44 U.S.C. 3507(d)). Comments on the
collection of information should be sent to
theOffice of Management and Budget,
Attn: Desk Officer for the Department
of the Treasury, Office of Information
and Regulatory Affairs, Washington, DC
20503, with copies to theInternal Rev-
enue Service, Attn: IRS Reports Clear-
ance Officer, SE:W:CAR:MP:T:T:SP,
Washington, DC 20224. Comments on
the collection of information should be re-
ceived by February 29, 2008. Comments
are specifically requested concerning:
Whether the proposed collection of in-
formation is necessary for the proper per-
formance of the functions of the IRS, in-
cluding whether the information will have
practical utility;
The accuracy of the estimated burden
associated with the proposed collection of
information; and
Estimates of capital or start-up costs
and costs of operation, maintenance, and
purchase of services to provide informa-
tion.
The collection of information
in these proposed regulations is
in §§31.6011(a)–1,31.6011(a)–4,
31.6011(a)–5, 31.6205–1, 31.6402(a)–2,
31.6413(a)–1,31.6413(a)–2,and
31.6414–1. This information is required
by the IRS to verify compliance with
return requirements under section 6011,
employment tax adjustments under sec-
tions 6205 and 6413, and claims for refund
of overpayments of employment taxes
under sections 6402 and 6414. This infor-
mation will be used to determine whether
the amount of tax has been reported and
calculated correctly. The likely respon-
dents are employers.
Estimated total annual reporting and/or
recordkeeping burden: 15,000,000 hours.
Estimated average annual burden per
respondent: 10 hours.
Estimated number of respondents:
1,500,000.
2008–4 I.R.B.319January 28, 2008

Estimated annual frequency of re-
sponses: on occasion.
An agency may not conduct or sponsor,
and a person is not required to respond to, a
collection of information unless it displays
a valid control number assigned by the Of-
fice of Management and Budget.
Books or records relating to a collection
of information must be retained as long
as their contents may become material in
the administration of any internal revenue
law. Generally, tax returns and tax return
information are confidential, as required
by 26 U.S.C. 6103.
Background
These proposed regulations are part of
the IRS’s effort to reduce taxpayer burden
by permitting employers to make employ-
ment tax adjustments on a separately filed
form as soon as an error is ascertained,
rather than as a line adjustment on the em-
ployer’s regularly filed employment tax re-
turn.
These proposed regulations amend the
Employment Tax Regulations (26 CFR
part 31) under section 6011 relating to the
requirement to file a return, under sec-
tions 6205(a) and 6413(a) relating to the
process for making adjustments of under-
payments and overpayments, respectively,
of employment taxes, under section 6302
relating to deposit obligations, and under
sections 6402 and 6414 relating to the
processoffilingaclaimforrefundforan
overpayment of employment taxes. For
purposes of these proposed amendments
to the regulations, the termemployment
taxesmeans the Federal Insurance Con-
tributions Act (FICA) tax (both the social
security and Medicare portions) imposed
on both the employer and the employee,
the Railroad Retirement Tax Act (RRTA)
tax imposed on both the employer and
employee, and federal income tax with-
holding (ITW). To the extent that other
types of withholding are treated as ITW
under section 3402(a) (that is, gambling
withholding, pension withholding, and
backup withholding as set forth in sections
3402(q)(7), 3405(f), and 3406(h)(10), re-
spectively), these other types of withhold-
ing are included in the term “employment
taxes”.
Interest-free Adjustments
Generally, the Internal Revenue Code
(Code) requires that interest be paid to
the IRS on any underpayment of tax and
that interest be allowed and paid to the
taxpayer on any overpayment of tax. See
sections 6601(a) and 6611(a), respec-
tively. An exception to the general rule,
however, applies uniquely to employment
taxes. Where an amount other than the
correct amount of tax imposed by sections
3101 (employee FICA tax), 3111 (em-
ployer FICA tax), 3201 (employee RRTA
tax), 3221 (employer RRTA tax), or 3402
(ITW) is reported to the IRS with respect
to any payment of wages or compensation,
sections 6205(a) and 6413(a) permit em-
ployers to make interest-free adjustments
for underpayments and overpayments,
respectively. Where the correct amount
of tax has been reported but not paid, no
adjustment to the amount is necessary;
accordingly, the interest-free adjustment
rules do not apply.
The legislative history of the predeces-
sors to sections 6205 and 6413 indicates
that the interest-freeadjustment process
was envisioned as a way to fix errors
made in prior return periods as soon as
they were discovered, without the need to
go through more burdensome procedures.
The adjustment process was designed to
permit the employer to adjust, without in-
terest, overpayments and underpayments
of tax without the necessity in the former
case of requiring the filing of a claim for
refund and in the latter case of a notice
and demand by the IRS for additional tax.
Thus, the legislative history shows that
Congress envisioned a process whereby
the employer would correct prior errors,
separate from the refund and notice and
demand processes. Moreover, the leg-
islative history indicates that Congress
assumed that an overpayment adjustment
would be accepted by the IRS only after
the employer had returned to the employee
any amount of previously overwithheld
tax.
The existing regulations under section
6205(a) set forth the procedures for mak-
ing interest-free adjustments for underpay-
ments of employment taxes. They provide
that if a return is filed and less than the
correct amount of employee or employer
portions of FICA or RRTA tax is reported
and paid, the employer shall adjust the un-
derpayment (a) by reporting the additional
amount due as an adjustment on a current
return, or (b) by reporting such additional
amount on a supplemental return. The
IRS has not issued guidance or procedures
for filing a supplemental return, other than
indicating that the forms used to accept
an assessment of employment taxes af-
ter an examination (that is, Form 2504,
“Agreement to Assessment and Collec-
tion of Additional Tax and Acceptance of
Overassessment (Excise or Employment
Tax)”, and Form 2504–WC,“Agreement
to Assessment and Collection of Additional
Tax and Acceptance of Overassessment in
Worker Classification Cases (Employment
Tax)”)constitute supplemental returns for
purposes of permitting the assessment to
be made without interest. See Rev. Rul.
75–464, 1975–2 C.B. 474. Accordingly,
outside of the examination context, in-
terest-free adjustments of employment
tax are made on a current return. (See
§601.601(d)(2)(ii)(b)).
The reporting of an underpayment of
FICA tax or RRTA tax constitutes an in-
terest-free adjustment when the underpay-
ment is reported on a current return only if
the current return is filed on or before the
last day on which the return is required to
be filed for the return period in which the
error is ascertained. An error is ascertained
when the employer has sufficient knowl-
edge of the error to be able to correct it.
If the amount of the underpayment is paid
to the IRS by the due date for reporting
the adjustment, it is paid without interest.
However, if the underpayment is reported
but the amount is not paid when due, in-
terest begins to accrue from the due date
for reporting the adjustment. The rules are
the same for adjusting underpayments of
ITW when less than the correct amount has
been withheld, except that adjustments on
the current return can only be made on a
return for a return period in the same cal-
endar year in which the wages or compen-
sation is paid. Although the regulations do
not address it, the relevant forms and in-
structions permit employers to adjust ad-
ministrative errors involving ITW, that is,
errors involving theinaccurate reporting
of the amount withheld, and errors discov-
ered as part of an examination for previous
calendar years.
The existing regulations provide that an
interest-free adjustment for an underpay-
ment may not be made after a taxpayer has
January 28, 20083202008–4 I.R.B.

received notice and demand from the IRS
for payment of the amount based on an as-
sessment or after a taxpayer has received a
Notice of Determination of Worker Classi-
fication.
An underpayment adjustment may only
be made within the period of limitations
for assessment under section 6501(a) (gen-
erally 3 years from the date the original re-
turn is filed). Section 6501(b)(2) provides
that, for purposes of section 6501, em-
ployment tax returns reporting FICA tax
orITWforanyreturnperiodendingwith
or within a calendar year filed before April
15 of the succeeding calendar year will be
deemed filed on April 15 of such succeed-
ing calendar year.
The regulations also provide that where
an employer fails to collect the correct
amount of employee tax (either the em-
ployee share of FICA tax, the employee
share of RRTA tax) or ITW with respect
to wages or compensation paid during a
given return period and discovers that er-
ror before it files the return for such return
period, the employer is still required to re-
port and pay the correct amount on a timely
basis. If the employer fails to report and
pay the correct amount, any subsequent
correction of that error will not qualify as
an interest-free adjustment. However, if
the employer files a FICA tax return and
should have filed a RRTA tax return, or
vice versa, and reports and pays less than
the correct amount of tax, an interest-free
adjustment may be made by filing the cor-
rect type of return for each return period
and reporting the additional amount of tax.
The existing regulations under section
6413(a) set forth the procedures for mak-
ing interest-free adjustments for overpay-
ments of employment taxes. They provide
that, if an employer ascertains an over-
payment error within the applicable period
of limitations on credit or refund, the em-
ployer is required to repay or reimburse
its employees the amount of overcollected
employee FICA tax or employee RRTA tax
priortotheduedateofthereturnforthere-
turn period after the return period in which
the error was ascertained and prior to the
expiration of the applicable period of lim-
itations. An error is ascertained when the
employer has sufficient knowledge of the
error to be able to correct it. An employer
“reimburses” an employee by applying the
overwithheld amount against taxes to be
withheld on future wages. The employer
must retain appropriate records to reflect
that the employee has been repaid or reim-
bursed and that the employee has not filed
a claim for refund of such tax or that any
filed claim has been rejected.
The applicable period of limitations is
set forth in section 6511 and is generally
3 years from the date the original return
was filed or 2 years from the date the
tax was paid, whichever is later. Section
6513(c)(1) provides that, for purposes of
section 6511, employment tax returns re-
porting FICA tax or ITW for any return
period ending with or within a calendar
year filed before April 15 of the succeed-
ing calendar year will be deemed filed on
April 15 of such succeeding calendar year.
Section 6513(c)(2) provides that if FICA
tax or ITW with respect to remuneration
or other amount paid during any return pe-
riod ending with or within a calendar year
is paid before April 15 of the succeeding
calendar, for purposes of section 6511 such
tax will be deemed paid on April 15 of such
succeeding calendar year.
Once an employer repays or reimburses
an employee, the employer may report
both the employee and employer portions
of FICA or RRTA tax as an overpayment
on a current return. The reporting of the
overpayment constitutes an interest-free
adjustment if the overpayment is reported
on a current return filed on or before the
last day on which the return is required
to be filed for the return period following
the return period in which the error was
ascertained. Because of the requirement to
repay or reimburse employees, employers
are given an extra return period in which
to repay or reimburse their employees and
make the adjustment. Similar rules apply
for making interest-free adjustments for
overpayments of ITW, except that an in-
terest-free adjustment may only be made
if the employer ascertains the error and
repays or reimburses its employees within
the same calendar year that the wages
were paid and reports the adjustment on
a return for such calendar year. For ex-
ample, if an employer who is a Form 941
filer discovers an overpayment of ITW
on December 15, 2009 for wages paid in
June 2009, the employer must repay or
reimburse its employees by December 31,
2009 and must report the adjustment on
the fourth quarter 2009 Form 941.
An overpayment adjustment under sec-
tion 6413(a) must be made within the pe-
riod of limitations for credit or refund of
the overpayment, as set forth in section
6511 and described above. The adjust-
ment may be limited in amount under sec-
tion 6511(b)(2). An interest-free adjust-
ment for an overpayment may not be made
once a claim for refund has been filed.
Currently, an interest-free adjustment,
whether for an underpayment or an over-
payment, is made by entering the amount
as a line adjustment on a current return and
including the amount in calculating the
current return period’s liability on the re-
turn. The current returnperiodadjustment
can be made on Form 941, “Employer’s
QUARTERLY Federal Tax Return,” Form
943,“Employer’s Annual Federal Tax Re-
turn for Agricultural Employees,”Form
944,“Employer’s ANNUAL Federal Tax
Return,”Form 945,“Annual Return of
Withheld Federal Income Tax,”or Form
CT–1,“Employer’s Annual Railroad Re-
tirement Tax Return,”andonanyrelated
Spanish-language returns or returns for
U.S. possessions. The return on which
the underpayment or overpayment adjust-
ment is entered must include an attached
statement explaining the adjustment, des-
ignating the return period in which the
error occurred, and setting forth such other
information as is required by the regula-
tions and by the instructions relating to the
return. Form 941c,“Supporting Statement
to Correct Information,”qualifies as such
attached statement and includes the nec-
essary certifications to establish that the
employer has satisfied the requirements
to repay or reimburse its employee for
overpayment adjustments and to obtain
statements that the employee has not filed
a claim for refund or that the claim has
been rejected.
Claims for Refund
For overpayments of employment
taxes, section 6413(b) permits the filing
of a claim for refund when an interest-free
adjustment cannot be made. The existing
regulations under section 6413(a) provide
that an adjustment cannot be made after a
claim for refund is filed. Under the regula-
toryauthorityinsection6413(b),theIRS
has permitted taxpayers to choose between
filing a claim for refund pursuant to sec-
tion 6402(a) and making an interest-free
adjustment pursuant to section 6413(a) to
correct an overpayment of employment
2008–4 I.R.B.321January 28, 2008

taxes. The preamble to T.D. 6472, 1960–2
C.B. 351, which promulgated the existing
regulations, indicated an intent to make
the overpayment adjustment process per-
missive. An extensive evaluation of these
regulations in the late 1970’s confirmed
the optional nature of the overpayment
adjustment process, and is reflected in
Rev. Rul. 81–310, 1981–2 C.B. 241. (See
§601.601(d)(2)(ii)(b)).
Under section 6402(a), the IRS, within
the applicable period of limitations on
credit or refund, may credit the amount of
an overpayment, including any interest,
against any tax liability of the person who
made the overpayment and shall, subject
to certain offsets, refund any balance to
such person. A claim for refund under
section 6402(a) must be filed within the
period of limitations on credit or refund
as set forth in section 6511. Such refund
may be limited in amount pursuant to
section 6511(b)(2). Claims for refund are
not granted automatically and the IRS is
not required to act on the refund claim.
Section 6532(a) provides that a taxpayer
cannot file a suit for refund before the ex-
piration of 6 months from the date of filing
a claim for refund unless the IRS renders
a decision on the claim within that time.
The taxpayer must file suit within 2 years
of the date the claim was disallowed.
The existing regulations under section
6402(a) set out the procedures for filing
aclaimforrefundofoverpaidFICAand
RRTA taxes. The regulations permit an
employer to file a claim for refund for an
overpayment of FICA or RRTA tax, but
require the employer to include a state-
ment that the employer has repaid the em-
ployee’s share of FICA or RRTA tax to the
employee or has secured the written con-
sent of the employee to allowance of the
refund or credit. The employer must retain
appropriate records reflecting that it has
repaid its employee or obtained the em-
ployee’s consent and that the employee has
not filed a claim for refund of such tax or
that any filed claim has been rejected.
Section 6414 permits refunds of ITW
only to the extent the amount of the ITW
overpayment was not actually deducted
and withheld from an employee. The ex-
isting regulations under section 6414 set
out the procedures for filing a claim for
refund of overpaid ITW and are similar to
the procedures for filing a claim for refund
of overpaid FICA or RRTA tax, except
that an employer may not file a claim for
an overpayment of ITW for an amount the
employer deducted or withheld from an
employee.
An employer makes a claim for refund
by filing Form 843,“Claim for Refund
and Request for Abatement”, with a Form
941c attached (or an equivalent statement).
Form 941c includes the amounts to be re-
funded and the necessary certifications to
establish that the employer has repaid the
employee or obtained the employee’s con-
sent to filing the claim for refund, and has
obtained a statement that the employee has
not filed a claim for refund or that the claim
has been rejected.
Reason for Amendments
The current process for adjusting un-
derpayments or overpayments of employ-
ment taxes raises a number of issues both
for employers and the IRS, primarily be-
cause the current process requires employ-
ers to make adjustments to past return pe-
riods in connection with the filing of their
current returns. The IRS believes it will
reduce the burden for taxpayers, as well as
improve tax administration, if the adjust-
ment process for employment tax returns
is revised by creating a separate “adjusted
return” to make adjustments to past return
periods that can be filed independently of
a return for any other return period.
Explanation of Provisions
Adjusted Return Replaces Current Return
Process
The proposed amendments change the
process by which employers can make in-
terest-free adjustments to correct under-
payments or overpayments of employment
tax. The proposed amendments to the
regulations eliminate the existing process
that uses the current return to make adjust-
ments and replace it with a new process
which will use a separately filed adjusted
return to make adjustments. Unlike Form
941c, the new adjusted return will not be
filed as an attachment to a current return
and will not affect the liability reported on
the current return.
The proposed amendments to the regu-
lations also eliminate any reference to the
use of supplemental returns to make ad-
justments. The proposed amendments pro-
vide that Forms 2504 and 2504–WC will
be treated as adjusted returns under the
same rationale and criteria that they have
been treated as supplemental returns un-
der Rev. Rul. 75–464. Thus, correc-
tions reported on these forms following an
examination will continue to be eligible
for interest-free adjustment treatment. See
§601.601(d)(2)(ii)(b).
The proposed amendments to the regu-
lations do not affect the existing rules on
correcting undercollections of employee
tax (either the employee share of FICA or
RRTA tax), or ITW when an employer dis-
covers the error during the return period
in which the undercollection occurred. In
such case, the employer must report and
pay the correct amount on a timely basis as
if the correct amount of tax had been col-
lected. If the employer fails to report and
pay the correct amount, any subsequent
correction of that error will not be an in-
terest-free adjustment.
Time for Filing Adjusted Return
An employer may file an adjusted re-
turn correcting an underpayment or an
overpayment as soon as the employer
ascertains the underpayment or overpay-
ment error, rather than waiting to report
the adjustment with the regularly filed em-
ployment tax return. The adjusted return
for an underpayment may only be filed
within the applicable period of limitations
for assessing the underpayment, and the
adjusted return for an overpayment may
only be filed before the 90th day prior to
the expiration of the applicable period of
limitations on credit or refund. If the orig-
inal return reporting FICA tax or ITW for
the return period in which the wages were
paid was timely filed and the taxes were
timely paid, the limitations period for both
assessment and credit or refund begins to
run on April 15 of the year following the
year in which the wages were paid and
ends three years after that. Thus, for ex-
ample, if wages are paid on June 6, 2009,
and an original employment tax return re-
porting those wages is filed July 31, 2009
and the reported taxes are timely paid,
the period of limitations for assessment
or for credit or refund would expire April
15, 2013. An adjusted return reporting
an underpayment must be filed by April
15, 2013. An adjusted return reporting an
overpayment must be filed by January 15,
2013, the date which is 90 days before the
January 28, 20083222008–4 I.R.B.

expiration of the period of limitations on
credit or refund. A claim for refund for the
same overpayment will be timely if filed
by April 15, 2013.
The proposed amendments to the regu-
lations provide that an adjustment will be
interest-free only if it is reported on an ad-
justed return within a certain amount of
time after it is discovered. Specifically,
the adjusted return reporting an underpay-
ment must be filed by the due date of the
return for the return period in which the er-
ror is ascertained; the amount of the un-
derpayment must be paid by the time the
adjusted return is filed, or interest will be-
gin to accrue from the date the adjusted re-
turn is filed. In addition, subject to lim-
ited exceptions, for underpayments of ITW
where the incorrect amount was withheld,
an adjusted return may be filed only for er-
rors ascertained during the calendar year
in which the wages were paid and must
be filed by the due date of the return for
the return period in which the error is as-
certained. In addition, for overpayments
of ITW where the incorrect amount was
withheld, the adjusted return may be filed
only for errors ascertained during the cal-
endar year in which the wages were paid,
the employer must repay or reimburse the
employees within the same calendar year
that the wages were paid, and the adjusted
return must be filed by the due date of the
return for the return period following the
return period in which the error is ascer-
tained.
Treatment as Interest-Free Adjustment
Where Original Return Never Filed
The proposed amendments to the reg-
ulations also provide that interest-free ad-
justments for underpayments of FICA tax,
RRTA tax, and ITW are available under
certain circumstances where the underpay-
ment arises because the employer failed
to file an original return. As in the exist-
ing regulations, an interest-free adjustment
is available if an employer filed a FICA
tax return when a RRTA tax return should
have been filed, or vice versa. In addi-
tion, interest-free adjustment treatment is
generally available if an employer failed
to file a return for a return period solely
because the employer failed to treat any
individuals as employees. The latter in-
terest-free adjustment provision was orig-
inally proposed in 1992 (EE–12–92, 57
FR 58423) and is being re-proposed as
part of these proposed amendments to the
regulations. The proposed regulations in
EE–12–92 will be withdrawn once these
proposed amendments to the regulations
are finalized.
To constitute an interest-free adjust-
ment in these circumstances, the employer
must file an original return of the correct
type for each return period for which the
employer failed to file the correct return
and report on the return the additional
amount of tax. Generally, such reporting
will constitute an interest-free adjustment
if the return is filed by the due date of the
return for the return period in which the
error is ascertained. The amount reported
must be paid by the time the original return
is filed or interest will accrue from that
date.
Repayment or Reimbursement of
Employees Required for Interest-free
Adjustments of Overpayments
When an overpayment error is as-
certained, the proposed amendments to
the regulations retain the rule that the
employer must repay or reimburse the
employee’s share of FICA or RRTA tax be-
fore making the overpayment adjustment
of both the employees’ and employer’s
taxes. Such repayment or reimbursement
must occur by the due date of the return
for the return period following the return
period in which the error is ascertained
and within the applicable period of limi-
tations on credit or refund. However, the
requirement to repay or reimburse does
not apply to the extent that taxes were not
withheld from the employee or if, after
reasonable efforts, the employer cannot
locate the employee; in such case, the em-
ployer may make an adjustment for only
the employer share of FICA or RRTA tax.
The adjusted return reporting the overpay-
ment may only be filed once the employer
has repaid or reimbursed its employees to
the extent required. The employer must
certify on the adjusted return that it has
repaid or reimbursed its employees to the
extent required. Because repayment or
reimbursement of overwithheld ITW must
be made within the same calendar year,
and annual Forms 943, 944, and 945 are
normally filed after the close of the cal-
endar year, there can be no repayment or
reimbursement of ITW after filing such
annual returns. Thus, no overpayment ad-
justments of ITW can generally be made
for such returns, except for administrative
errors, that is, errors involving the inac-
curate reporting of the amount actually
withheld. Note that in the case of backup
withholding reported on Form 945, re-
payment of erroneous withholding is not
required and is permitted only in certain
circumstances. See §31.6413(a)–3.
Deposits, Payments, and Credits
The proposed amendments to the regu-
lations under section 6302 provide that an
employer making an interest-free adjust-
ment must pay the amount of the adjust-
ment by the time it files an adjusted return;
such timely payment will satisfy the em-
ployer’s deposit obligations with respect
to the adjustment. In addition, the pro-
posed amendments to the regulations gov-
erning agricultural employers (Form 943
filers) provide that for purposes of deter-
mining the amount of accumulated taxes
in the employer’s lookback period (which
determines the employer’s deposit sched-
ule), adjustments to tax liability made pur-
suant to the filing of adjusted returns or
claims for refund will not be taken into
account. This rule is consistent with the
rule already in effect with respect to Form
941 and Form 944 filers that adjustments
to prior return periods are not taken into ac-
count in determining the employment tax
liability for such prior return period. See
§31.6302–1T(b)(4).
For interest-free adjustments of under-
payments, the amount must be paid when
the adjusted return is filed. If the amount is
not paid when the adjusted return is filed,
interest will begin to accrue as of the date
the adjusted return is filed.
Consistent with the legislative history
of section 6413, the adjusted overpayment
amount will be applied as a credit toward
payment of the employer’s liability for the
calendar quarter (or calendar year for an-
nual returns being adjusted) in which the
adjusted return is filed, unless the IRS no-
tifies the employer that the credit will be
applied to a different return period or that
the employer is not entitled to the adjust-
ment under applicable laws or procedures.
Refunds for Overpayments
As in the existing regulations, in lieu of
making an interest-free adjustment for an
2008–4 I.R.B.323January 28, 2008

overpayment, employers may file a claim
for refund pursuant to section 6402 or 6414
for the amount of the overpayment. Fur-
thermore, if an employer cannot make an
interest-free adjustment with respect to an
overpayment because the period of limi-
tations for claiming a credit or refund for
such overpayment will expire within 90
days or because the IRS has otherwise no-
tified the employer that it is not entitled to
the adjustment, the employer may recover
the overpayment only by filing a claim for
refund. The proposed amendments to the
regulations under section 6414 continue to
provide that an employer can only file a
claim for refund for ITW that was not with-
held from the employee. Prior to filing
a claim for refund under section 6402 for
FICA or RRTA tax, employers must ei-
ther repay or reimburse the employees or
obtain the employees’ consents to the al-
lowance of the refund, except to the ex-
tent that the overpayment does not include
taxes withheld from the employee or, after
reasonable efforts, the employer cannot lo-
cate the employee or the employee will not
provide the requested consent. The em-
ployer must certify that it has either repaid
or reimbursed the employee or obtained
the employee’s consent to the extent re-
quired.
Under the proposed amendments to the
regulations, employers will file the pre-
scribed form to claim a refund. However,
Form 941c will no longer be used as an at-
tachment to a claim for refund.
Tax Returns or Statements
This notice of proposed rulemaking
also proposes amendments to the regu-
lations for reporting employment taxes
under section 6011 to reflect the changes
to the adjustment and refund processes.
In particular, the proposed amendments
remove references to Form 941c from the
regulations under section 6011 because
Form 941c will no longer be used. The
proposed amendments also remove ref-
erences to other obsolete tax returns, add
references to current tax returns in use,
and make minor stylistic changes to the
text of the regulations.
The proposed amendments also update
the section 6011 regulations to conform to
current law due to the enactment of section
3510, added to the Code by section 2(b)(1)
of the Social Security Domestic Employ-
ment Reform Act of 1994 (Public Law
103–387), which mandates annual returns
for domestic service employment taxes,
and to reflect current procedures. Sched-
ule H (Form 1040), rather than Form 942,
is the prescribed form for reporting wages
for domestic service in a private home paid
in calendar years beginning after Decem-
ber 31, 1994. If an employer is required
to file Form 941, Form 943, or Form 944,
the employer may choose to report wages
with respect to domestic workers on Form
941, Form 943, or Form 944, instead of re-
porting such wages on Schedule H (Form
1040).
Proposed Effective Date
The amendments to the regulations as
proposed will be effective on the date they
are published as final regulations in the
Federal Register.
Proposed Dates of Applicability
With respect to the regulations under
Code sections 6205, 6302, 6402, 6413, and
6414, the regulations, as proposed, apply
to any error ascertained on or after January
1, 2009.
Special Analyses
It has been determined that this notice
of proposed rulemaking is not a significant
regulatory action as defined in Executive
Order 12866. Therefore, a regulatory as-
sessment is not required. It has also been
determined that section 553(b) of the Ad-
ministrative Procedure Act (5 U.S.C. chap-
ter 5) does not apply to these regulations.
Because the regulations under section
6302 do not impose a collection of infor-
mation on small entities, the Regulatory
Flexibility Act (5 U.S.C. chapter 6) does
not apply.
The proposed amendments to the reg-
ulations under section 6011, 6205, 6402,
6413, and 6414 affect all taxpayers that
file employment tax returns. Therefore,
the IRS has determined that these proposed
amendments will have an impact on a sub-
stantial number of small entities.
The IRS has determined, however, that
the impact on entities affected by the pro-
posed amendments to the regulations will
not be significant. The proposed amend-
ments to the regulations require taxpayers
who file employment tax returns and who
make interest-free adjustments to their em-
ployment taxes for either underpayments
or overpayments or who file claims for re-
fund for an overpayment of employment
tax to provide an explanation setting forth
the basis for the correction or the claim
in detail, designating the return period in
which the error was ascertained and the
return period being corrected, and setting
forth such other information as may be re-
quired by the instructions to the form. In
addition, for adjustments of overpayments
and for claims for refund, taxpayers must
also obtain and retain the written receipt of
the employee showing the date and amount
of the repayment, or the written consent of
the employee. For purposes of overpay-
ment adjustments and claims for refund of
employee FICA and RRTA tax overcol-
lected in an earlier year, the employer must
also obtain and retain the written statement
from the employee providing that the em-
ployee has not claimed refund or credit of
the amount of the overcollection, or if so,
such claim has been rejected, and that the
employee will not claim refund or credit of
the amount.
This collection of information is not
new to the proposed regulations and has
been in existence since the 1960’s when
the existing regulations were promulgated.
In addition, the proposed amendments to
the regulations are being made in conjunc-
tionwithaprojectoftheOfficeofTax-
payer Burden Reduction which seeks to
revise the process for making corrections
to employment tax returns to make it less
burdensome to taxpayers. The filing of a
claim for refund and the making of an in-
terest-free adjustment pursuant to both the
existing and proposed regulations are vol-
untary on the part of taxpayers.
Based on these facts, the IRS hereby
certifies that the collection of information
contained in these regulations will not
have a significant economic impact on a
substantial number of small entities. Ac-
cordingly, a regulatory flexibility analysis
is not required.
Pursuant to section 7805(f) of the Code,
this notice of proposed rulemaking will be
submitted to the Chief Counsel for Advo-
cacy of the Small Business Administration
January 28, 20083242008–4 I.R.B.

for comment on its impact on small busi-
ness.
Comments and Public Hearing
Before these proposed regulations are
adopted as final regulations, consideration
will be given to any written (a signed origi-
nal and eight (8) copies) or electronic com-
ments that are submitted timely to the IRS.
The Treasury Department and the IRS re-
quest comments on the clarity of the pro-
posed rules and how they can be made eas-
ier to understand. All comments will be
available for public inspection and copy-
ing. A public hearing has been sched-
uled for April 17, 2008, at 10:00 a.m., in
the Auditorium, Internal Revenue Build-
ing, 1111 Constitution Avenue, NW, Wash-
ington, DC. Due to building security pro-
cedures, visitors must enter at the Consti-
tution Avenue entrance. In addition, all
visitors must presentphoto identification
to enter the building. Because of access
restrictions, visitors will not be admitted
beyond the immediate entrance area more
than 30 minutes before the hearing starts.
For information about having your name
placed on the building access list to attend
the hearing, see the “FOR FURTHER IN-
FORMATION CONTACT” section of this
preamble.
The rules of 26 CFR 601.601(a)(3) ap-
ply to the hearing. Persons who wish to
present oral comments at the hearing must
submit comments and an outline of the top-
icstobediscussedandthetimetobede-
voted to each topic by March 27, 2008.
A period of 10 minutes will be allot-
ted to each person for making comments.
An agenda showing the scheduling of
the speakers will be prepared after the
deadline for receiving outlines has passed.
Copies of the agenda will be available free
of charge at the hearing.
Drafting Information
The principal author of these proposed
regulations is Ligeia M. Donis of the Of-
fice of the Division Counsel/Associate
Chief Counsel (Tax Exempt and Govern-
ment Entities). However, other personnel
from the IRS and Treasury Department
participated in their development.
*****
Proposed Amendments to the
Regulations
Accordingly, 26 CFR part 31 is pro-
posed to be amended as follows:
PART 31—EMPLOYMENT TAXES
AND COLLECTION OF INCOME TAX
AT THE SOURCE
Paragraph 1. The authority citation for
part 31 continues to read, in part, as fol-
lows:
Authority: 26 U.S.C. 7805 * * *
Par. 2. Section 31.6011(a)–1 is
amended by revising paragraphs (a)(2),
(a)(3), (a)(4) and (c) to read as follows:
§31.6011(a)–1 Returns under Federal
Insurance Contributions Act.
(a) * * *
(2)Employers of agricultural workers.
Every employer who pays wages for agri-
cultural labor withrespect to taxes im-
posed by the Federal Insurance Contribu-
tions Act must make a return for the first
calendar year in which the employer pays
such wages and for each subsequent cal-
endar year (whether or not wages are paid)
until the employer has filed a final return
in accordance with §31.6011(a)–6. Form
943,“Employer’s Annual Federal Tax Re-
turn for Agricultural Employees,”is the
form prescribed for making the annual re-
turn required by this section, except that,
if the employer’s principal place of busi-
ness is in Puerto Rico, or if the employer
has employees who are subject to income
tax withholding for Puerto Rico, the return
must be made on Form 943–PR,“Planilla
para la Declaración ANUAL de la Con-
tribución Federal del Patrono de Emplea-
dos Agrícolas.”
(3)Employers of domestic workers.
Schedule H (Form 1040),“Household
Employment Taxes,”is the form prescribed
for use by every employer in making a re-
turn as required under paragraph (a)(1) of
this section in respect of wages, as defined
in the Federal Insurance Contributions
Act, paid by the employer in any calendar
year for domestic service as defined in
section 3510. Schedule H (Form 1040) is
generally filed as an attachment to an in-
come tax return, however, if the employer
does not otherwise have an obligation
to file an income tax return, Schedule H
(Form 1040) may be filed as a separate re-
turn. If, however, the employer is required
under paragraph (a)(1) of this section to
makeareturnonForm941,“Employer’s
QUARTERLY Federal Tax Return,”or un-
der paragraph (a)(2) of this section to make
a return on Form 943,“Employer’s An-
nual Federal Tax Return For Agricultural
Employees,”or under paragraph (a)(5)
ofthissectiontomakeareturnonForm
944,“Employer’s ANNUAL Federal Tax
Return,”the employer may choose instead
to report wages with respect to domestic
workers on such Form 941, Form 943 or
Form 944. If such wages are included on
Form 941, Form 943 or Form 944, the
employer must also include Federal unem-
ployment tax for the employee(s) on Form
940,“Employer’s Annual Federal Unem-
ployment (FUTA) Tax Return,”under the
provisions of §31.6011(a)–3.
(4)Employers in Puerto Rico, the U.S.
Virgin Islands, Guam, American Samoa,
or the Commonwealth of the Northern
Mariana Islands.Form 941–PR,“Planilla
para la Declaración Federal TRIMES-
TRAL del Patrono,”(or Form 944–PR,
“Planilla para la Declaración Federal
ANUAL del Patrono,”if the IRS notified
the employer that the Form 944–PR must
be filed in lieu of Form 941–PR) is the
form prescribed for use in making the re-
turn required under paragraph (a)(1) (or
(a)(5)) of this section in the case of every
employer whose principal place of busi-
ness is in Puerto Rico, or if the employer
has employees who are subject to income
tax withholding for Puerto Rico. Form
941–SS,“Employer’s QUARTERLY Fed-
eral Tax Return (American Samoa, Guam,
the Commonwealth of the Northern Mari-
ana Islands, and the U.S. Virgin Islands),”
(or Form 944–SS,“Employer’s ANNUAL
Federal Tax Return (American Samoa,
Guam, the Commonwealth of the North-
ern Mariana Islands, and the U.S. Virgin
Islands),”if the IRS notified the employer
that Form 944–SS must be filed in lieu of
Form 941–SS) is the form prescribed for
use in making the return required under
paragraph (a)(1) (or (a)(5)) of this section
in the case of every employer whose prin-
cipal place of business is in the U.S. Virgin
Islands, Guam, American Samoa, or the
Commonwealth of the Northern Mariana
Islands, or if the employer has employees
who are subject to income tax withhold-
ing for these U.S. possessions. However,
2008–4 I.R.B.325January 28, 2008

Form 941 (or Form 944 if the IRS notified
the employer that Form 944 must be filed
in lieu of Form 941) is the form prescribed
for making such return in the case of every
such employer who is required pursuant to
§31.6011(a)–4 to make a return of income
tax withheld from wages.
*****
(c)Adjustments and refunds.Forrules
applicable to adjustments and refunds
of employment taxes, see sections 6205,
6402, 6413, and 6414, and the applicable
regulations.
*****
Par. 3. Section 31.6011(a)–4 is
amended by revising paragraph (a)(2) to
read as follows:
§31.6011(a)–4 Returns of income tax
withheld.
(a) * * *
(2)Wages paid for domestic service.
Schedule H (Form 1040),“Household
Employment Taxes,”is the form prescribed
for making the return required under para-
graph (a)(1) of this section with respect
to income tax withheld, pursuant to an
agreement under section 3402(p), from
wages paid for domestic service in a pri-
vate home of the employer. Schedule
H (Form 1040) is generally filed as an
attachment to an income tax return; how-
ever, if the employer does not otherwise
have an obligation to file an income tax
return, Schedule H (Form 1040) may be
filed as a separate return. The preced-
ing sentence shall not apply in the case
of an employer who has chosen under
§31.6011(a)–1(a)(3) to use Form 941,
“Employer’s QUARTERLY Federal Tax
Return,”Form 943,“Employer’s An-
nual Federal Tax Return for Agricultural
Employees,”or Form 944,“Employer’s
ANNUAL Federal Tax Return,”as the re-
turn with respect to such payments for
purposes of the Federal Insurance Contri-
butions Act. For the requirements relating
for Schedule H (Form 1040) with respect
to qualified State individual income taxes,
see §301.6361–1(d)(3)(iv) of this chapter.
*****
Par. 4. Section 31.6011(a)–5 is
amended by revising paragraph (a) to read
as follows:
§31.6011(a)–5 Monthly returns.
(a)In general—(1)Requirement.The
provisions of this section are applicable
in respect of the taxes reportable on re-
turns required pursuant to §31.6011(a)–1
or §31.6011(a)–4. An employer (or other
person) who is required by §31.6011(a)–1
or §31.6011(a)–4 to make quarterly or an-
nual returns on any such form shall, in
lieu of making such quarterly or annual re-
turns, make returns of such taxes in ac-
cordance with the provisions of this sec-
tion if the employer is so notified in writ-
ing by the IRS. Every employer (or other
person) notified by the IRS shall make a
return for the calendar month in which the
notice is received, for each of the prior cal-
endar months in the return period, and for
each calendar month afterwards (whether
or not wages are paid in any such month)
until the employer has filed a final return or
is required to make quarterly or annual re-
turns pursuant to notification as provided
in paragraph (a)(2) of this section. Each
return required under this section shall be
made on the form prescribed for making
the return which would otherwise be re-
quired of the employer (or other person)
under the provisions of §31.6011(a)–1 or
§31.6011(a)–4, except that, if some other
form is furnished by the IRS for use in lieu
of such prescribed form, the return shall be
made on such other prescribed form. The
IRS may notify any employer (or other per-
son)—
(i) Who by reason of notification as
provided in §301.7512–1 of this chapter
(Regulations on Procedure and Adminis-
tration), is required to comply with the pro-
visions of such §301.7512–1; or
(ii) Who failed to—
(A) Make any return required pursuant
to §31.6011(a)–1 or §31.6011(a)–4;
(B) Pay tax reportable on any such
form; or
(C) Deposit any such tax as required
under the provisions of §31.6302(c)–1.
(2)Termination of requirement.The
IRS, in its discretion, may notify the em-
ployer in writing that the employer shall
discontinue the filing of monthly returns
under this section. If the employer is so
notified, the IRS will provide the em-
ployer with instructions for filing the
final monthly return. Afterwards, the
employer shall make quarterly or annual
returns in accordance with the provisions
of §31.6011(a)–1 or §31.6011(a)–4.
*****
Par. 5. Section 31.6205–1 is amended
to read as follows:
§31.6205–1 Adjustments of
underpayments.
(a)In general. (1) An employer who
has undercollected or underpaid em-
ployee Federal Insurance Contributions
Act (FICA) tax under section 3101 or
employer FICA tax under section 3111,
employee Railroad Retirement Tax Act
(RRTA)taxundersection3201orem-
ployer RRTA tax under section 3221, or
income tax required under section 3402 to
be withheld, with respect to any payment
of wages or compensation, shall correct
such error as provided in this section. Such
correction may constitute an interest-free
adjustment as provided in paragraph (b) or
(c)ofthissection.
(2)Nocorrectionwillbeeligibleforin-
terest-free adjustment treatment if the fail-
ure to report relates to an issue that was
raised in an examination of a prior return
period or if the employer knowingly under-
reported its employment tax liability.
(3) Every correctionunder this section
of an underpayment of tax with respect to
a payment of wages or compensation shall
be made on the prescribed form that corre-
sponds to the return being corrected. The
form, filed in accordance with this section
and the instructions, will constitute an ad-
justed return for the return period being
corrected.
(4) Every adjusted return on which an
underpayment is corrected pursuant to this
section shall designate the return period in
which the error was ascertained and the
return period being corrected, explain in
detail the grounds and facts relied upon to
support the correction, and set forth such
other information as may be required by
the regulations in this section and by the
instructions relating to the form.
(5) For purposes of this section, an error
is ascertained when the employer has suf-
ficient knowledge of the error to be able to
correct it.
(6)Nocorrectionwillbeeligibleforin-
terest-free adjustment treatment pursuant
to this section after the earlier of the fol-
lowing:
January 28, 20083262008–4 I.R.B.

(i) Receipt from the IRS of notice and
demand for payment thereof based upon
an assessment.
(ii) Receipt from the IRS of a Notice
of Determination of Worker Classification
(Notice of Determination) in connection
with such underpayment. Prior to receipt
of a Notice of Determination, the taxpayer
may, in lieu of making a payment, make a
cash bond deposit that would have the ef-
fect of stopping the accrual of any interest,
but would not deprive the taxpayer of its
right to receive a Notice of Determination
and to petition the Tax Court under section
7436.
(7) Subject to the exceptions speci-
fied in paragraphs (a)(2) and (a)(6) of
this section, Form 2504,“Agreement to
Assessment and Collection of Additional
Tax and Acceptance of Overassessment
(Excise or Employment Tax),”and Form
2504–WC,“Agreement to Assessment
and Collection of Additional Tax and Ac-
ceptance of Overassessment in Worker
Classification Cases (Employment Tax),”
constitute adjusted returns for purposes of
this section.
(8) For provisions related to furnish-
ing employee statements and corrected
employee statements reporting wages and
withheld taxes, see sections 6041 and
6051 and §§1.6041–2 and 31.6051–1 of
this chapter. For provisions relating to
filing information returns and corrected
information returns reporting wages and
withheld taxes, see sections 6041 and
6051 and §§1.6041–2 and 31.6051–2 of
this chapter.
(b)Federal Insurance Contributions
Act and Railroad Retirement Tax Act—(1)
Undercollection ascertained before return
is filed. If an employer collects less than
the correct amount of employee FICA or
RRTAtaxfromanemployeewithrespect
to a payment of wages or compensation,
and if the employer ascertains the error
before filing the return on which the em-
ployee tax with respect to such wages or
compensation is required to be reported,
the employer shall nevertheless report on
the return and pay to the IRS the correct
amount of employee tax. If the employer
does not report and pay the correct amount
of tax on a timely basis in these circum-
stances, the employer may not later correct
the error through an interest-free adjust-
ment.
(2)Error ascertained after return is
filed.(i) If an employer files a return on
whichFICAtaxorRRTAtaxisrequiredto
be reported, and reports on the return less
than the correct amount of employee or
employer FICA or RRTA tax with respect
to a payment of wages or compensation,
and if the employer ascertains the error
after filing the return, the employer shall
correct the error through an interest-free
adjustment as provided in this section. The
employer shall adjust the underpayment of
tax by reporting the additional amount due
on an adjusted return for the return period
in which the wages or compensation was
paid, accompanied by a detailed explana-
tion of the amount being reported on the
adjusted return and any other information
asmayberequiredbythissectionand
by the instructions relating to the form.
The reporting of the underpayment on an
adjusted return constitutes an adjustment
within the meaning of this section only
if the adjusted return is filed within the
period of limitations for assessment for the
return period being corrected, and by the
due date for filing the return for the return
period in which the error is ascertained.
For purposes of the preceding sentence,
the due date for filing the adjusted return
is determined by reference to the return
being corrected. The amount of the un-
derpayment adjusted in accordance with
this section must be paid to the IRS by
the time the adjusted return is filed. If
an adjustment is reported pursuant to this
section, but the amount of the adjustment
is not paid when due, interest accrues from
that date (see section 6601).
(ii) If an employer files a return report-
ing FICA tax for a return period although
the employer was required to file a return
reporting RRTA tax, or vice versa, and re-
ports on the return less than the correct
amount that should have been reported on
the return required to be filed, and if the
employer ascertains the error after filing
the return, the employer shall correct the
error through an interest-free adjustment
as provided in this section. The employer
shall adjust the underpayment of tax by re-
porting the additional amount due on an
original return for the correct tax for the
return period for which the incorrect re-
turn was filed, accompanied by a detailed
explanation of the amount being reported
on the original return and any other infor-
mation as may be required by the regu-
lations in this section and by the instruc-
tions relating to the form. The reporting of
the additional amount for the period con-
stitutes an adjustment within the meaning
of this section only if the return is filed by
the due date of the return for reporting the
correct tax for the return period in which
the error is ascertained. The amount of the
underpayment adjusted in accordance with
thissectionmustbepaidtotheIRSbythe
time the return is filed. If an adjustment
is reported pursuant to this section, but the
amount of the adjustment is not paid when
due, interest accrues from that date (see
section 6601).
(3)Return not filed because of failure
to treat individual as employee.Ifanem-
ployer fails to file a return for a return pe-
riod solely because the employer failed to
treat any individuals properly as employ-
ees for the return period (and, therefore,
failed to withhold and pay any employer
or employee FICA or RRTA tax with re-
spect to wages or compensation paid to the
employees), and if the employer ascertains
the error after the due date of the return, the
employer shall correct the error through an
interest-free adjustment as provided in this
section. The employer shall adjust the un-
derpayment of tax by reporting the amount
due on an original return for the return pe-
riod for which the employer failed to file
a return, accompanied by a detailed expla-
nation of the amount being reported on the
original return and any other information
as may be required by this section and by
the instructions relating to the form. The
reporting of the correct amount of tax for
the return period constitutes an adjustment
within the meaning of this section only if
the return is filed by the due date of the re-
turn for reporting such tax for the return
period in which the error is ascertained.
The amount of the underpayment adjusted
in accordance with this section must be
paid to the IRS by the time the return is
filed. If an adjustment is reported pursuant
to this section, but the amount of the ad-
justment is not paid when due, interest ac-
crues from that date (see section 6601).
(c)Income tax required to be with-
held from wages—(1)Undercollection
ascertained before return is filed.If an
employer collects less than the correct
amount of income tax required to be with-
held from wages under section 3402, and
if the employer ascertains the error before
filing the return on which the withheld tax
2008–4 I.R.B.327January 28, 2008

is required to be reported, the employer
shall nevertheless report on the return and
pay to the IRS the correct amount of tax
required to be withheld. If the employer
does not report and pay the correct amount
of tax on a timely basis in these circum-
stances, the employer may not correct the
error through an interest-free adjustment.
(2)Error ascertained after return is
filed. If an employer files a return on
which income tax required to be withheld
from wages is required to be reported and
reports on the return less than the cor-
rect amount of income tax required to be
withheld, and if the employer ascertains
the error after filing the return, the em-
ployer shall correctthe error through an
interest-free adjustment as provided in
this section. The employer shall adjust the
underpayment of tax by reporting the ad-
ditional amount due on an adjusted return
for the return period in which the wages
were paid, accompanied by a detailed ex-
planation of the amount being reported on
the adjusted return and any other informa-
tion as may be required by this section and
by the instructions relating to the form.
The reporting of the underpayment on an
adjusted return constitutes an adjustment
within the meaning of this section only
if the adjusted return is filed by the due
date for filing the return for the return
period in which the error is ascertained.
For purposes of the preceding sentence,
the due date for filing the adjusted return
is determined by reference to the return
being corrected. However, an adjustment
mayonlybereportedpursuanttothissec-
tion if the error is ascertained within the
same calendar year that the wages to the
employee were paid, unless the underpay-
ment is attributable to an administrative
error, that is, an error involving the inac-
curate reporting of the amount actually
withheld, or the adjustment is reported
on a Form 2504 or Form 2504–WC. The
amount of the underpayment adjusted in
accordance with this section must be paid
to the IRS by the time the adjusted return
is filed. If an adjustment is reported pur-
suant to this section, but the amount of the
adjustment is not paid when due, interest
accrues from that date (see section 6601).
(3)Return not filed because of failure
to treat individual as employee.Ifanem-
ployer fails to file a return for a return pe-
riod solely because the employer failed to
treat any individuals properly as employ-
ees for the return period (and, therefore,
failed to withhold and pay any income tax
required to be withheld from wages), the
employer shall correct the error through an
interest-free adjustment as provided in this
section. The employer shall adjust the un-
derpayment of tax by reporting the correct
amount on an original return for the re-
turn period for which the employer failed
tofileareturnandpaythetaxtotheIRS.
The reporting of the correct amount of tax
for the return period constitutes an adjust-
ment within the meaning of this section
only if the return is filed by the due date
of the return for reporting such tax for the
return period in which the error is ascer-
tained. However, an adjustment may only
be reported pursuant to this section if the
error is ascertained within the same calen-
dar year that the wages to the employee
were paid or section 3509 applies to de-
termine the amount of the underpayment.
The amount of the underpayment adjusted
in accordance with this section must be
paid to the IRS by the time the adjusted re-
turn is filed. If an adjustment is reported
pursuant to this section, but the amount of
the adjustment is not paid when due, in-
terest accrues from that date (see section
6601).
(d)Deductions from employee—(1)
Federal Insurance Contributions Tax Act
and Railroad Retirement Tax Act.Ifan
employer collects less than the correct
amount of employee FICA or RRTA
tax from an employee with respect to a
payment of wages or compensation, the
employer must collect the amount of the
undercollection by deducting the amount
from remuneration of the employee, if
any, paid after the employer ascertains the
error. Such deductions may be made even
though the remuneration, for any reason,
does not constitute wages or compensa-
tion. The correct amount of an undercol-
lection of employee tax from an employee
must be reported and paid, as provided in
paragraph (b) of this section, whether or
not the undercollection is corrected by a
deduction made as prescribed in this para-
graph (d)(1), and even if the deduction is
made after the return on which the em-
ployee tax must be reported is due. If such
a deduction is not made, the obligation
of the employee to the employer with re-
spect to the undercollection is a matter for
settlement between the employee and the
employer. If an employer makes an erro-
neous collection of employee tax from two
or more of its employees, a separate set-
tlement must be made with respect to each
employee. An overcollection of employee
tax from one employee may not be used
to offset an undercollection of such tax
from another employee. For provisions
relating to the employer’s liability for the
tax, whether or not it collects the tax from
the employee, see §31.3102–1(d). This
paragraph (d)(1) does not apply if section
3509 applies to determine the employer’s
liability.
(2)Income tax required to be withheld
from wages. If an employer collects less
than the correct amount of income tax re-
quired to be withheld from wages during
a calendar year, the employer must collect
the amount of the undercollection on or be-
fore the last day of the year by deducting
the amount from remuneration of the em-
ployee, if any, paid after the employer as-
certains the error. Such deductions may
be made even though the remuneration,
for any reason, does not constitute wages.
The correct amount of an undercollection
of income tax from an employee must be
reported and paid, as provided in para-
graph (c) of this section, whether or not the
undercollection is corrected by a deduc-
tion made as prescribed in this paragraph
(d)(2), and even if the deduction is made
after the return on which the tax must be
reported is due. If such a deduction is not
made, the obligation of the employee to the
employer with respect to the undercollec-
tion is a matter for settlement between the
employee and the employer within the cal-
endar year. If an employer makes an er-
roneous collection of income tax from two
or more of its employees, a separate settle-
ment must be made with respect to each
employee. An overcollection of income
tax from one employee may not be used to
offset an undercollection of such tax from
another employee. For provisions relat-
ing to the employer’s liability for the tax,
whether or not it collects the tax from the
employee, see §31.3403–1. For provisions
relating to the employer’s liability for an
underpayment of tax unless the employer
can show that the income tax against which
the tax under section 3402 may be credited
has been paid, see §31.3402(d)–1. This
paragraph (d)(2) does not apply if section
3509 applies to determine the employer’s
liability.
January 28, 20083282008–4 I.R.B.

Par. 6. Section 31.6302–0 is amended
by adding a new entry for §31.6302–1
paragraph (c)(7) to read as follows:
§31.6302–0 Table of contents.
*****
§31.6302–1 Federal tax deposit rules for
withheld income taxes and taxes under
the Federal Insurance Contributions Act
(FICA) attributable to payments made
after December 31, 1992.
*****
(c) * * *
(7)Exception to the monthly and semi-
weekly deposit rules for employers making
interest-free adjustments.
*****
Par. 7. Section 31.6302–1 is amended
by adding paragraph (c)(7) and revising
paragraph (g)(4) to read as follows:
§31.6302–1 Federal tax deposit rules for
withheld income taxes and taxes under
the Federal Insurance Contributions Act
(FICA) attributable to payments made
after December 31, 1992.
*****
(c) * * *
(7)Exception to the monthly and semi-
weekly deposit rules for employers making
interest-free adjustments. An employer fil-
ing an adjusted return under §31.6205–1
to report taxes that were accumulated in a
prior return period shall pay the amount of
the adjustment by the time it files the ad-
justed return, and the amount timely paid
will be deemed to have been timely de-
posited by the employer. The payment
may accompany the adjusted return, be
made by electronic funds transfer, or be
made by other methods of payment as pro-
vided by the instructions relating to the ad-
justed return.
*****
(g) * * *
(4)Lookback period. The tax liability
shown on the original return for the re-
turn period is the amount taken into ac-
count in determining whether the accumu-
lated taxes for thelookback period exceed
$50,000. The employer does not take into
account any adjustments to tax liability
made pursuant to the filing of adjusted re-
turns or claims for refund pursuant to sec-
tions 6205, 6402, 6413 and 6414 filed after
the due date of the original return when de-
termining accumulated taxes for the look-
back period.
*****
Par. 8. Section 31.6402(a)–1 is
amended by revising paragraph (a) to read
as follows:
§31.6402(a)–1 Credits or refunds.
(a)In general. For regulations un-
dersection6402ofspecial application to
credits or refunds of employment taxes,
see §§31.6402(a)–2, 31.6402(a)–3, and
31.6414–1. For regulations under section
6402 of general application to credits or re-
funds, see §§301.6402–1 and 301.6402–2
of this chapter (Regulations on Proce-
dure and Administration). For provisions
relating to adjustments without interest
of overpayments of taxes under the Fed-
eral Insurance Contributions Act or the
Railroad Retirement Tax Act or income
tax withholding, see §§31.6413(a)–1 and
31.6413(a)–2.
*****
Par. 9. Section 31.6402(a)–2 is
amended by revising paragraph (a) and
removing paragraph (c) to read as follows:
§31.6402(a)–2 Credit or refund of tax
under Federal Insurance Contributions
Act or Railroad Retirement Tax Act
(a)Claim by person who paid tax to
IRS—(1)In general.(i) Any person may
fileaclaimforcreditorrefundforan
overpayment (except to the extent that the
overpayment must be credited pursuant to
§31.3503–1) if the person paid to the IRS
more than the correct amount of employee
tax under section 3101 or employer tax
under section 3111 of the Federal Insur-
ance Contributions Act (FICA), employee
tax under section 3201, employee repre-
sentative tax under section 3211, or em-
ployer tax under section 3221 of the Rail-
road Retirement Tax Act (RRTA), or inter-
est, addition to the tax, additional amount,
or penalty with respect to any such tax.
(ii) The claim for credit or refund must
be made in the manner and subject to the
conditions stated in this section. The claim
for credit or refund must designate the re-
turn period to which the claim relates, ex-
plain in detail the grounds and facts re-
lied upon to support the claim, and set
forth such other information as may be re-
quired by this section and by the instruc-
tions relating to the form used to make
such claim. No refund or credit pursuant
to this section for employer tax will be
allowed unless the employer has first re-
paid or reimbursed its employee or has se-
cured the employee’s consent to the al-
lowance of the claim for refund and in-
cludes a claim for the refund of such em-
ployee tax. However, this requirement
does not apply to the extent that the taxes
were not withheld from the employee or,
after the employer makes reasonable ef-
forts to repay or reimburse the employee
or secure the employee’s consent, the em-
ployer cannot locate the employee or the
employee will not provide consent. No re-
fund or credit of employee FICA or RRTA
tax overcollected in an earlier year will be
allowed if the employee has claimed a re-
fund or credit of the amount of the over-
collection which has not been rejected or
if the employee has taken the amount of
such tax into account in claiming a credit
against or refund of the employee’s income
tax, including instances in which the em-
ployee has included an overcollection of
employee FICA or RRTA tax in comput-
ing a special refund (see §31.6413(c)–1).
(iii) For adjustments without interest of
overpayments of taxes under the FICA or
the RRTA, see §31.6413(a)–2.
(iv) For provisions related to furnish-
ing employee statements and corrected
employee statements reporting wages and
withheld taxes, see sections 6041 and
6051 and §§1.6041–2 and 31.6051–1 of
this chapter. For provisions relating to
filing information returns and corrected
information returnsreporting wages and
withheld taxes, see sections 6041 and
6051 and §§1.6041–2 and 31.6051–2 of
this chapter.
(v) For the period of limitations
on credit or refund of taxes, see
§301.6511(a)–1 of this chapter (Regula-
tions on Procedure and Administration).
(2)Statements supporting employer’s
claims for employee tax.(i) Every claim,
filedbyanemployer,forrefundorcredit
of employee FICA tax under section 3101
or employee RRTA tax under section 3201
collected from an employee must include
a certification that the employer has re-
paid or reimbursed the tax to its employee
or has secured the employee’s written
consent to allowance of the filing of the
2008–4 I.R.B.329January 28, 2008

claim for refund except to the extent that
the taxes were not withheld from the em-
ployee. The employer must retain as part
of its records the written receipt of the em-
ployee showing the date and amount of the
repayment, evidence of reimbursement,
or the written consent of the employee,
whichever is used in support of the claim.
(ii) Every claim, filed by an employer,
forrefundorcreditofemployeeFICAtax
under section 3101 or employee RRTA
tax under section 3201 collected from
an employee in a calendar year prior to
the year in which the credit or refund is
claimed, also must include a certifica-
tion that the employer has obtained the
employee’s written statement that the em-
ployee has not claimed refund or credit of
the amount of the overcollection, or if so,
such claim has been rejected, and that the
employee will not claim refund or credit
of the amount. The employer must retain
the employee’s written statement as part
of the employer’s records.
*****
Par. 10. Section 31.6413(a)–1 is re-
vised to read as follows:
§31.6413(a)–1 Repayment or
reimbursement by employer of tax
erroneously collected from employee.
(a)Federal Insurance Contributions
Act and Railroad Retirement Tax Act—(1)
Overcollection ascertained before return
is filed. (i) If an employer during any
return period collects from an employee
more than the correct amount of em-
ployee Federal Insurance Contributions
Act (FICA) tax under section 3101 or
employee Railroad Retirement Tax Act
(RRTA) tax under section 3201, and if the
employer ascertains the error before filing
thereturnonwhichtheemployeetaxis
required to be reported, repays or reim-
burses the amount of the overcollection
to the employee before filing the return
for such return period, and obtains and
keeps as part of its records the written
receipt of the employee showing the date
and amount of the repayment or evidence
of reimbursement, the employer shall not
report on any return or pay to the IRS the
amount of the overcollection.
(ii) Any overcollection not repaid or re-
imbursed to the employee as provided in
paragraph (a)(1)(i) of this section shall be
reportedandpaidtotheIRSonthereturn
for reporting such tax for the return pe-
riod in which the overcollection is made.
However, the reporting and payment of the
overcollection may be treated as an error
ascertained after the return is filed for pur-
poses of paragraph (a)(2) of this section.
(iii) For purposes of this paragraph
(a)(1), an error is ascertained when the
employer has sufficient knowledge of the
error to be able to correct it.
(2)Error ascertained after return is
filed. (i) If an employer files a return
for a return period on which FICA tax
or RRTA tax is reported, collects from
an employee and pays to the IRS more
than the correct amount of the employee
FICA or RRTA tax, and if the employer
ascertains the error within the applicable
period of limitations on credit or refund,
the employer shall repay or reimburse
the employee in the amount of the over-
collection prior to the expiration of the
return period following the return period in
which the error is ascertained and prior to
the expiration of suchlimitations period.
However, this paragraph (d)(2) does not
apply to the extent that, after reasonable
efforts, the employer cannot locate the
employee. This paragraph (d)(2) has no
application in any case in which an over-
collection is made the subject of a claim
by the employer for refund or credit, and
the employer chooses to secure the written
consent of the employee to the allowance
of the refund or credit under the procedure
provided in §31.6402(a)–2.
(ii) If the employer repays the amount
oftheovercollectiontoanemployee,the
employer shall obtain and keep as part of
its records the written receipt of the em-
ployee, showing the date and amount of the
repayment.
(iii) If the employer reimburses the
amount of the overcollection to an em-
ployee, the employer shall keep as part
of its records evidence of reimbursement.
The employer shall reimburse the em-
ployee by applying the amount of the
overcollection against the employee FICA
or RRTA tax which attaches to wages or
compensation paid by the employer to the
employee prior to the expiration of the
return period following the return period
in which the error is ascertained and prior
to the expiration of the applicable period
of limitations on credit or refund. If the
amount of the overcollection exceeds the
amount so applied against such employee
tax, the excess amount shall be repaid to
the employee as required by this section.
(iv) If, in any calendar year, an em-
ployer repays or reimburses an employee
in the amount of an overcollection of
employee FICA or RRTA tax that was
collected from the employee in a prior
calendar year, the employer shall obtain
from the employee and keep as part of
its records a written statement that the
employee has not claimed refund or credit
of the amount of the overcollection, or
if so, such claim has been rejected, and
that the employee will not claim refund or
credit of such amount. For this purpose, a
claim for refund or credit by the employee
includes instances in which the employee
has included an overcollection of em-
ployee FICA or RRTA tax in computing a
special refund (see §31.6413(c)–1).
(v) For purposes of this paragraph
(a)(2), an error is ascertained when the
employer has sufficient knowledge of the
error to be able to correct it.
(vi) For the period of limitations
on credit or refund of taxes, see
§301.6511(a)–1 of this chapter (Regula-
tions on Procedure and Administration).
(b)Income tax withheld from
wages—(1)Overcollection ascertained
before return is filed. (i) If an employer
during any return period collects from an
employee more than the correct amount
of tax required to be withheld from wages
under section 3402, and if the employer
ascertains the error before filing the re-
turn on which such tax is required to be
reported, repays or reimburses the amount
of the overcollection to the employee be-
fore filing the return for such return period
and before the end of the calendar year in
which the overcollection was made, and
obtains and keeps as part of its records the
written receipt of the employee showing
the date and amount of the repayment or
evidence of reimbursement, the employer
shall not report on any return or pay to the
IRS the amount of the overcollection.
(ii) Any overcollection not repaid or re-
imbursed to the employee as provided in
paragraph (b)(1)(i) of this section shall be
reported and paid to the IRS on the return
for reporting such tax for the return pe-
riod in which the overcollection is made.
However, the reporting and payment of the
overcollection may be treated as an error
ascertained after the return is filed for pur-
poses of paragraph (b)(2) of this section.
January 28, 20083302008–4 I.R.B.

(iii) For purposes of this paragraph
(b)(1), an error is ascertained when the
employer has sufficient knowledge of the
error to be able to correct it.
(2)Error ascertained after return is
filed. (i) If an employer files a return for
a return period on which tax required to
be withheld from wages is reported, col-
lects from an employee and pays to the
IRS more than the correct amount of the
taxrequiredtobewithheldfromwages,
and if the employer ascertains the error
after filing the return but before the end
of the calendar year in which the wages
were paid, the employer shall repay or
reimburse the employee in the amount of
the overcollection prior to the end of the
calendar year and by the expiration of the
return period following the return period
in which the error is ascertained. How-
ever, this paragraph does not apply to the
extent that, after reasonable efforts, the
employer cannot locate the employee.
(ii) If the employer repays the amount
of the overcollection to an employee, the
employer shall obtain and keep as part of
its records the written receipt of the em-
ployee, showing the date and amount of the
repayment.
(iii) If the employer reimburses the
amount of the overcollection to an em-
ployee, the employer shall keep as part
of its records evidence of reimbursement.
The employer shall reimburse the em-
ployee by applying the amount of the
overcollection against the tax under sec-
tion 3402, which otherwise would be
required to be withheld from wages paid
by the employer to the employee in the
calendar year in which the overcollection
is made and prior to the expiration of the
return period following the return period
in which the error is ascertained. If the
amount of the overcollection exceeds the
amount so applied against such tax, the
excess amount shall be repaid to the em-
ployee as required by this section.
(iv) For purposes of this paragraph
(b)(2), an error is ascertained when the
employer has sufficient knowledge of the
error to be able to correct it.
Par. 11. Section 31.6413(a)–2 is re-
vised to read as follows:
§31.6413(a)–2 Adjustments of
overpayments.
(a)In general. (1) An employer who
has overcollected or overpaid employee
Federal Insurance Contributions Act
(FICA) tax under section 3101 or em-
ployer FICA tax under section 3111, em-
ployee Railroad Retirement Tax (RRTA)
tax under section 3201 or employer RRTA
tax under section 3221, or income tax re-
quired under section 3402 to be withheld,
and has repaid the amount of the over-
collection of such tax to the employee,
shall correct such error as provided in this
section. Such correction may constitute
an interest-free adjustment as provided in
paragraph (b) or (c) of this section.
(2) Every correction under this section
of an overpayment of tax shall be made
on the prescribed form that corresponds to
the return being corrected. The form, filed
in accordance with this section and the in-
structions, will constitute an adjusted re-
turn for the return period being corrected.
(3) Every adjusted return on which an
overpayment is corrected pursuant to this
section shall include a certification that the
employer has repaid or reimbursed its em-
ployee, except where taxes were not with-
held from the employee or where, after rea-
sonable efforts, the employer cannot lo-
cate the employee. Every adjusted return
shall designate the returnperiodinwhich
the error was ascertained and the return pe-
riod being corrected, explain in detail the
grounds and facts relied upon to support
the correction, and set forth such other in-
formation as may be required by this sec-
tion and §31.6413(a)–1 and by the instruc-
tions relating to the form. Every adjusted
return, filed by an employer, for overpay-
ment of employee FICA tax under section
3101 or employee RRTA tax under sec-
tion 3201 collectedfrom an employee in
a calendar year prior to the year in which
the adjusted return is filed, must also in-
clude a certification that the employer has
obtained the employee’s written statement
that the employee has not claimed refund
or credit of the amount of the overcollec-
tion, or if so, such claim has been rejected,
and that the employee will not claim re-
fund or credit of the amount.
(4) For purposes of this section, an error
is ascertained when the employer has suf-
ficient knowledge of the error to be able to
correct it.
(5) For provisions related to furnish-
ing employee statements and corrected
employee statements reporting wages and
withheld taxes, see sections 6041 and
6051 and §§1.6041–2 and 31.6051–1 of
this chapter. For provisions relating to
filing information returns and corrected
information returnsreporting wages and
withheld taxes, see sections 6041 and
6051 and §§1.6041–2 and 31.6051–2 of
this chapter.
(b)Federal Insurance Contributions
Act and Railroad Retirement Tax Act—(1)
Overcollection ascertained before return
is filed.If an employer collects more than
the correct amount of employee FICA
or RRTA tax from an employee, and if
the employer ascertains the error before
filing the return on which the employee
tax with respect to such wages or com-
pensation is required to be reported, and
repays or reimburses the employee under
§31.6413(a)–1(a)(1), the employer shall
not report on any return or pay to the IRS
the amount of the overcollection. If the
employer does not repay or reimburse
the amount of the overcollection under
§31.6413(a)–1(a)(1) before filing the re-
turn, the employer must report the amount
of the overcollection on the return. How-
ever, the reporting and payment of the
overcollection may be treated as an error
ascertained after the return is filed for pur-
poses of paragraph (b)(2) of this section.
(2)Error ascertained after return is
filed—(i)Employee tax. If an employer
files a return for a return period on which
FICA tax or RRTA tax is required to be re-
ported and reports on the return more than
the correct amount of employee FICA or
RRTA tax, and if the employer ascertains
the error after filing the return, and repays
or reimburses the employee the amount
of the overcollection of employee tax,
as provided in §31.6413(a)–1(a)(2), the
employer may correct the error through
an interest-free adjustment as provided in
this section. The employer shall adjust
the overpayment of tax by reporting the
overpayment on an adjusted return for
the return period in which the wages or
compensation was paid, accompanied by
a detailed explanation of the amount being
reported on the adjusted return as required
by paragraph (a)(3) of this section. Except
as provided in paragraph (d) of this sec-
tion, the reporting of the overpayment on
an adjusted return constitutes an adjust-
2008–4 I.R.B.331January 28, 2008

ment within the meaning of this section
only if the adjusted return is filed by the
due date of the return for the return period
following the return period in which the
error is ascertained and before the expira-
tion of the period of limitations on credit
or refund. For purposes of the preceding
sentence, the due date for filing the ad-
justed return is determined by reference to
the return being corrected. The employer
shall take the adjusted amount as a credit
towards payment of employment tax lia-
bilities for the return period in which the
adjusted return is filed unless the IRS no-
tifies the employer that the adjustment is
not permitted under paragraph (d) of this
section.
(ii)Employer tax. If an employer files
areturnforareturnperiodonwhichFICA
tax or RRTA tax is required to be reported
and reports on the return more than the cor-
rect amount of employer FICA or RRTA
tax, and if the employer ascertains the er-
ror after filing the return, the employer
may correct the error through an inter-
est-free adjustment as provided in this sec-
tion. The employer must first repay or re-
imburse the employee the amount of any
overcollection of employee tax, if any, pur-
suant to §31.6413(a)–1(a)(2), before mak-
ing the adjustment for the employer share,
unless the employer could not locate the
employee after reasonable efforts. The
employer shall adjust the overpayment of
tax by reporting the overpayment on an ad-
justed return for the return period in which
the wages or compensation was paid, ac-
companied by a detailed explanation of the
amount being reported on the adjusted re-
turn as required by paragraph (a)(3) of this
section. Except as provided in paragraph
(d) of this section, the reporting of the
overpayment on an adjusted return consti-
tutes an adjustment within the meaning of
this section only if the adjusted return is
filed by the due date of the return for the
return period following the return period in
which the error is ascertained and before
the expiration of the period of limitations
on credit or refund. For purposes of the
preceding sentence, the due date for filing
the adjusted return is determined by refer-
ence to the return being corrected. The em-
ployer shall take the adjusted amount as a
credit towards payment of employment tax
liabilities for the return period in which the
adjusted return is filed unless the IRS noti-
fies the employer that the adjustment is not
permitted under paragraph (d) of this sec-
tion.
(c)Income tax withheld from
wages—(1)Overcollection ascertained
before return is filed.Ifanemployer
collects more than the correct amount of
income tax required to be withheld from
wages, and if the employer ascertains the
error before filing the return on which
the tax is required to be reported, and re-
pays or reimburses the employee under
§31.6413(a)–1(b)(1), the employer shall
not report on any return or pay to the IRS
the amount of the overcollection. If the
employer does not repay or reimburse
the amount of the overcollection under
§31.6413(a)–1(b)(1) before filing the re-
turn, the employer must report the amount
of the overcollection on the return. How-
ever, the reporting and payment of the
overcollection may be treated as an error
ascertained after the return is filed for pur-
poses of paragraph (c)(2) of this section.
(2)Error ascertained after return is
filed.Ifanemployerfilesareturnforare-
turn period on which income tax required
to be withheld from wages is required
to be reported and reports on the return
more than the correct amount of income
tax required to be withheld, and if the em-
ployer ascertains the error after filing the
return, and repays or reimburses the em-
ployee in the amount of the overcollection
as provided in §31.6413(a)–1(b)(2), the
employer may correct the error through
an interest-free adjustment as provided in
this section. The employer shall adjust
the overpayment of tax by reporting the
overpayment on an adjusted return for the
return period in which the wages were
paid, accompanied by a detailed explana-
tion of the amount being reported on the
adjusted return as required in paragraph
(a)(3) of this section. Except as provided
in paragraph (d) of this section, the re-
porting of the overpayment on an adjusted
return constitutes an adjustment within the
meaning of this section only if the adjusted
return is filed by the due date of the return
for the return period following the return
period in which the error is ascertained.
For purposes of the preceding sentence,
the due date for filing the adjusted return
is determined by reference to the return
being corrected. If the amount of the over-
collection is not repaid or reimbursed to
the employee under §31.6413(a)–1(b)(2),
there is no overpayment to be adjusted
under this section. However, the employer
may adjust an overpayment of tax attrib-
utable to an administrative error, that is,
an error involving the inaccurate reporting
of the amount withheld, pursuant to this
section. The employer shall take the ad-
justed amount as a credit towards payment
of employment tax liabilities for the re-
turn period in which the adjusted return is
filed unless the IRS notifies the employer
that the adjustment is not permitted under
paragraph (d) of this section.
(d)Adjustments not permitted—(1)
In general. If an adjustment cannot be
made, a claim for refund or credit may be
filed in accordance with §31.6402(a)–2 or
§31.6414–1.
(2)90-day exception. No adjustment in
respect of an overpayment may be made
if the overpayment relates to a return pe-
riod for which the period of limitations on
credit or refund of such overpayment will
expire within 90 days of filing the adjusted
return.
(3)No adjustment after claim for refund
filed. No adjustment in respect of an over-
payment may be made after the filing of a
claim for credit or refund of such overpay-
ment under §31.6402(a)–2.
(4)No adjustment after IRS notifica-
tion. No adjustment may be made upon
notification by the IRS that the adjustment
is not permitted.
Par. 12. Section 31.6414–1 is amended
by revising paragraph (a) to read as fol-
lows:
§31.6414–1 Credit or refund of income
tax withheld from wages.
(a)In general.(1) Any employer who
pays to the IRS more than the correct
amount of income tax required to be with-
held from wages under section 3402 or
interest, addition to the tax, additional
amount, or penalty with respect to such
tax, may file a claim for refund of the
overpayment in the manner and subject to
the conditions stated in this section. The
claim for refund must designate the return
period to which the claim relates, explain
in detail the grounds and facts relied upon
to support the claim, and set forth such
other information as may be required
by the regulations in this section and by
the instructions relating to the form. No
refund to the employer will be allowed
under this section for the amount of any
January 28, 20083322008–4 I.R.B.

overpayment of tax which the employer
deducted or withheld from an employee.
(2) For provisions related to furnish-
ing employee statements and corrected
employee statements reporting wages and
withheld taxes, see sections 6041 and
6051 and §§1.6041–2 and 31.6051–1. For
provisions relating to filing information
returns and corrected information returns
reporting wages and withheld taxes, see
sections 6041 and 6051 and §§1.6041–2
and 31.6051–2.
(3) For interest-free adjustments of
overpayments of income tax withheld
from wages, see §31.6413(a)–2.
*****
LindaE.Stiff,
Deputy Commissioner for
Services and Enforcement.
(Filed by the Office of the Federal Register on December 28,
2007, 8:45 a.m., and published in the issue of the Federal
Register for December 31, 2007, 72 F.R. 74233)
Announcement of Disciplinary Actions Involving
Attorneys, Certified Public Accountants, Enrolled Agents,
and Enrolled Actuaries — Reinstatements, Suspensions,
Censures, Disbarments, and Resignations
Announcement 2008-5
Under Title 31, Code of Federal Regu-
lations, Part 10, attorneys, certified public
accountants, enrolled agents, and enrolled
actuaries may not accept assistance from,
or assist, any person who is under disbar-
ment or suspension from practice before
the Internal Revenue Service if the assis-
tance relates to a matter constituting prac-
tice before the Internal Revenue Service
and may not knowingly aid or abet another
person to practice before the Internal Rev-
enue Service during a period of suspen-
sion, disbarment, or ineligibility of such
other person.
To enable attorneys, certified public
accountants, enrolled agents, and enrolled
actuaries to identify persons to whom
these restrictions apply, the Director, Of-
fice of Professional Responsibility, will
announce in the Internal Revenue Bulletin
their names, their city and state, their pro-
fessional designation, the effective date
of disciplinary action, and the period of
suspension. This announcement will ap-
pear in the weekly Bulletin at the earliest
practicable date after such action and will
continue to appear in the weekly Bulletins
for five successive weeks.
Reinstatement To Practice Before the Internal Revenue
Service
Under Title 31, Code of Federal Reg-
ulations, Part 10, The Director, Office of
Professional Responsibility, may entertain
a petition for reinstatement for any attor-
ney, certified public accountant, enrolled
agent, or enrolled actuary censured, sus-
pended, or disbarred, from practice before
the Internal Revenue Service.
The following individuals’ eligibility to
practice before the Internal Revenue Ser-
vice has been restored:
NameAddressDesignationDate of Reinstatement
Cohen, PeterEdison, NJCPAJune 01, 2004
Brunelle, Roswell J.Queensbury, NYCPAJune 10, 2004
Cohick, Jeffrey S.Newville, PAEnrolled AgentOctober 30, 2004
Cotroneo, NicholasMcLean, VACPAFebruary 28, 2007
Layson, David A.Corydon, INAttorneyOctober 06, 2007
Tomasulo, Maria V.Wantagh, NYCPAOctober 16, 2007
Emeziem, Kelechi C.Antioch, CAAttorneyOctober 17, 2007
Johnston, Gregory A.Muscatine, IAAttorneyOctober 17, 2007
Shapiro, Sidney C.West Palm Beach, FLCPAOctober 29, 2007
Hubbard, Cynthia A.Geneva, ILAttorneyOctober 31, 2007
2008–4 I.R.B.333January 28, 2008

NameAddressDesignationDate of Reinstatement
Moss, Steve E.Henderson, NCCPANovember 29, 2007
Schaffer, Robert J.Baiting Hollow, NYCPADecember 04, 2007
Woods, Dalton C.Carrollton, TXEnrolled AgentDecember 04, 2007
Brown, Arthur I.Miami, FLCPADecember 14, 2007
Consent Suspensions From Practice Before the Internal
Revenue Service
Under Title 31, Code of Federal Regu-
lations, Part 10, an attorney, certified pub-
lic accountant, enrolled agent, or enrolled
actuary, in order to avoid the institution
or conclusion of a proceeding for his or
her disbarment or suspension from prac-
tice before the Internal Revenue Service,
may offer his or her consent to suspension
from such practice. The Director, Office
of Professional Responsibility, in his dis-
cretion, may suspend an attorney, certified
public accountant, enrolled agent, or en-
rolled actuary in accordance with the con-
sent offered.
The following individuals have been
placed under consent suspension from
practice before the Internal Revenue Ser-
vice:
NameAddressDesignationDate of Suspension
Bauman, John J.Battle Creek, MICPAIndefinite
from
October 1, 2007
Montgomery, Dwight M.Redlands, CAAttorneyIndefinite
from
October 1, 2007
Deku, John V.Toledo, OHAttorneyIndefinite
from
October 8, 2007
Ying, William F.Beverly Hills, CACPAIndefinite
from
October 9, 2007
Brill, Ann M.Sheboygan, WICPAIndefinite
from
October 10, 2007
Benvin, Anne C.Phoenix, AZEnrolled AgentIndefinite
from
October 22, 2007
Kingman, William B.San Antonio, TXAttorneyIndefinite
from
October 22, 2007
Nurney, J. ChristopherHatboro, PACPAIndefinite
from
October 22, 2007
Wren, Gary M.Redding, CAEnrolled AgentIndefinite
from
October 29, 2007
January 28, 20083342008–4 I.R.B.

NameAddressDesignationDate of Suspension
Beck, Brian S.Boston, MACPAIndefinite
from
November 1, 2007
Draper, Jeffrey L.Olathe, KSCPAIndefinite
from
November 1, 2007
Ehrlich, Gary P.Chevy Chase, MDCPAIndefinite
from
November 1, 2007
Garrison, John C.Prairie Village, KSCPAIndefinite
from
November 1, 2007
Greenslit, WayneKeene, NHCPAIndefinite
from
November 1, 2007
Moran, Philip D.Salem, MAAttorneyIndefinite
from
November 1, 2007
Wright, CoryReno, NVCPAIndefinite
from
November 1, 2007
Turbeville, Mary A.Geyserville, CAEnrolled AgentIndefinite
from
November 16, 2007
Saffold, Rodger P.Cleveland, OHCPAIndefinite
from
December 1, 2007
Voss, Patrick W.Metairie, LACPAIndefinite
from
December 1, 2007
Rosner, Ronald I.Manahawkin, NJCPAIndefinite
from
December 13, 2007
Johnson, Jr., StanleyMiami, FLAttorneyIndefinite
from
December 14, 2007
2008–4 I.R.B.335January 28, 2008

Expedited Suspensions From Practice Before the Internal
Revenue Service
Under Title 31, Code of Federal Regu-
lations, Part 10, the Director, Office of Pro-
fessional Responsibility, is authorized to
immediately suspend from practice before
the Internal RevenueService any practi-
tioner who, within five years from the date
the expedited proceeding is instituted (1)
has had a license to practice as an attor-
ney, certified public accountant, or actuary
suspended or revoked for cause or (2) has
been convicted of certain crimes.
The following individuals have been
placed under suspension from practice be-
fore the Internal Revenue Service by virtue
of the expedited proceeding provisions:
NameAddressDesignationDate of Suspension
Crotts, William P.Phoenix, AZAttorneyIndefinite
from
October 16, 2007
Daugherty, Troy L.Olathe, KSAttorneyIndefinite
from
October 16, 2007
Driscoll, Jr., Wilfred C.Somerset, MAAttorneyIndefinite
from
October 16, 2007
Shah, Ashok S.Manalapan, NJCPAIndefinite
from
October 16, 2007
Sheline, Calvin L.Camp Verde, AZCPAIndefinite
from
October 16, 2007
Bosse, Leigh D.Hillsborough, NHAttorneyIndefinite
from
October 24, 2007
Webb, James E.Nashville, TNCPAIndefinite
from
October 25, 2007
Gottschalk, Don E.Cedar Falls, IAAttorneyIndefinite
from
October 31, 2007
Joy, Steven B.Paton, IAAttorneyIndefinite
from
October 31, 2007
Smallwood, Teresa L.Durham, NCAttorneyIndefinite
from
November 2, 2007
Donaldson, James F.Denver, COAttorneyIndefinite
from
November 15, 2007
Roux, Johnathan M.Fair Oaks, CACPAIndefinite
from
November 20, 2007
January 28, 20083362008–4 I.R.B.

NameAddressDesignationDate of Suspension
Linville, Wiley T.Denver, COAttorneyIndefinite
from
December 4, 2007
Andrade, Sergio R.Inver Grove Hghts, MNAttorneyIndefinite
from
December 13, 2007
Arzani, Mitzi H.Charlotte, NCCPAIndefinite
from
December 13, 2007
Catron, Stephen B.Knoxville, TNAttorneyIndefinite
from
December 13, 2007
Coulagouri, Louis A.Moorestown, NJAttorneyIndefinite
from
December 13, 2007
Crown, Charles K.Blakeslee, PACPAIndefinite
from
December 13, 2007
George, Philip J.Great Falls, VAAttorneyIndefinite
from
December 13, 2007
Heitz, John P.Oneill, NEAttorneyIndefinite
from
December 13, 2007
Jones, William F.Park Rapids, MNAttorneyIndefinite
from
December 13, 2007
Khoury, Arthur M.Lawrence, MAAttorneyIndefinite
from
December 13, 2007
McGree, Charles A.Fort Payne, ALAttorneyIndefinite
from
December 13, 2007
Nason, George H.Franklin, TNAttorneyIndefinite
from
December 13, 2007
Owen, Thomas A.Arlington, TXAttorneyIndefinite
from
December 13, 2007
Ozulumba, MichaelBoston, MAAttorneyIndefinite
from
December 13, 2007
Phillips, Mark A.Elm Grove, WIAttorneyIndefinite
from
December 13, 2007
2008–4 I.R.B.337January 28, 2008

NameAddressDesignationDate of Suspension
Simpson, Joseph H.Amite, LAAttorneyIndefinite
from
December 13, 2007
Sipes, Laura A.St. Charles, MOAttorneyIndefinite
from
December 13, 2007
Sullivan, Joseph O.Warwick, NYAttorneyIndefinite
from
December 13, 2007
Szegda, Michael A.Old Tappan, NJAttorneyIndefinite
from
December 13, 2007
Misch, Paul M.Akron, OHAttorneyIndefinite
from
December 17, 2007
Brenner, Allen L.Long Beach, NYAttorneyIndefinite
from
December 20, 2007
Cook, Rirchard B.Cockeysville, MDAttorneyIndefinite
from
December 20, 2007
Shang, Wade V.S. San Francisco, CACPAIndefinite
from
December 20, 2007
Suspensions From Practice Before the Internal Revenue
Service After Appeal
Under Title 31, Code of Federal Regu-
lations, Part 10, after a decision is issued
by an Administrative Law Judge, either
party may appeal to the Secretary of the
Treasury. The following individuals have
been placed under suspension from prac-
tice before the Internal Revenue Service
AFTERan appeal:
NameAddressDesignationEffective Date
Andrews, Ted E.Avon, INCPAIndefinite
from
October 19, 2007
January 28, 20083382008–4 I.R.B.

Disbarments From Practice Before the Internal Revenue
Service After Notice and an Opportunity for a Proceeding
Under Title 31, Code of Federal Regu-
lations, Part 10, after notice and an oppor-
tunity for a proceeding before an adminis-
trative law judge, the following individu-
als have been disbarred from practice be-
fore the Internal Revenue Service:
NameAddressDesignationEffective Date
Ruocchio, RaymondHavertown, PACPAApril 30, 2007
Roseman, Eric W.Scottsdale, AZCPAAugust 20, 2007
Solomon, StanleyBrooklyn, NYCPASeptember 04, 2007
Marks, RobertMedfield, MAAttorneyOctober 15, 2007
Censure Issued by Consent
Under Title 31, Code of Federal Reg-
ulations, Part 10, in lieu of a proceeding
being instituted or continued, an attorney,
certified public accountant, enrolled agent,
or enrolled actuary, may offer his or her
consent to the issuance of a censure. Cen-
sure is a public reprimand.
The following individuals have con-
sented to the issuance of a Censure:
NameAddressDesignationDate of Censure
Villarreal, RicardoHouston, TXEASeptember 24, 2007
Meisgeier, Deborah K.Richmond, TXEAOctober 16, 2007
O’Brien, Colleen D.Winter Park, FLCPAOctober 24, 2007
Staver, Peter J.Southgate, MIAttorneyNovember 06, 2007
Weiss, IraPittsburgh, PAAttorneyNovember 29, 2007
Orr, William S.Kerrville, TXCPADecember 04, 2007
Whitsitt, RichardPanama City, FLCPADecember 04, 2007
2008–4 I.R.B.339January 28, 2008

Definition of Terms
Revenue rulings and revenue procedures
(hereinafter referred to as “rulings”) that
have an effect on previous rulings use the
following defined terms to describe the ef-
fect:
Amplifieddescribes a situation where
no change is being made in a prior pub-
lished position, but the prior position is be-
ingextendedtoapplytoavariationofthe
fact situation set forth therein. Thus, if
an earlier ruling held that a principle ap-
plied to A, and the new ruling holds that the
same principle also applies to B, the earlier
ruling is amplified. (Compare withmodi-
fied,below).
Clarifiedis used in those instances
where the language in a prior ruling is be-
ing made clear because the language has
caused, or may cause, some confusion.
It is not used where a position in a prior
ruling is being changed.
Distinguisheddescribes a situation
where a ruling mentions a previously pub-
lished ruling and points out an essential
difference between them.
Modifiedis used where the substance
of a previously published position is being
changed. Thus, if a prior ruling held that a
principle applied to A but not to B, and the
new ruling holds that it applies to both A
and B, the prior ruling is modified because
it corrects a published position. (Compare
withamplifiedandclarified, above).
Obsoleteddescribes a previously pub-
lished ruling that is not considered deter-
minative with respect to future transac-
tions. This term is most commonly used in
a ruling that lists previously published rul-
ings that are obsoleted because of changes
in laws or regulations. A ruling may also
be obsoleted because the substance has
been included in regulations subsequently
adopted.
Revokeddescribes situations where the
position in the previously published ruling
is not correct and the correct position is
beingstatedinanewruling.
Supersededdescribes a situation where
the new ruling does nothing more than re-
state the substance and situation of a previ-
ously published ruling (or rulings). Thus,
the term is used to republish under the
1986 Code and regulations the same po-
sition published under the 1939 Code and
regulations. The term is also used when
it is desired to republish in a single rul-
ing a series of situations, names, etc., that
were previously published over a period of
time in separate rulings. If the new rul-
ing does more than restate the substance
of a prior ruling, a combination of terms
is used. For example,modifiedandsu-
persededdescribes a situation where the
substance of a previously published ruling
is being changed in part and is continued
without change in part and it is desired to
restate the valid portion of the previously
published ruling in a new ruling that is self
contained. In this case, the previously pub-
lished ruling is first modified and then, as
modified, is superseded.
Supplementedis used in situations in
which a list, such as a list of the names of
countries, is published in a ruling and that
list is expanded by adding further names in
subsequent rulings. After the original rul-
ing has been supplemented several times, a
new ruling may be published that includes
the list in the original ruling and the ad-
ditions, and supersedes all prior rulings in
the series.
Suspendedis used in rare situations to
show that the previous published rulings
will not be applied pending some future
action such as the issuance of new or
amended regulations, the outcome of cases
in litigation, or the outcome of a Service
study.
Abbreviations
The fol
lowing abbreviations in current use
and for
merly used will appear in material
publis
hedintheBulletin.
A—Individual.
Acq.—A
cquiescence.
B—Individual.
BE—Beneficiary.
BK—Bank
.
B.T.A.—Board of Tax Appeals.
C—Individual.
C.B.—Cu
mulative Bulletin.
CFR—Code of Federal Regulations.
CI—City.
COOP—Coo
perative.
Ct.D.—Court Decision.
CY—County.
D—Decede
nt.
DC—Dummy Corporation.
DE—Donee.
Del. Order
—Delegation Order.
DISC—Domestic International Sales Corporation.
DR—Donor.
E—Estate.
EE—Employee.
E.O.—Executive Order.
ER—Emp
loyer.
ERISA—Employee Retirement Income Security Act.
EX—Executor.
F—Fiduc
iary.
FC—Foreign Country.
FICA—Federal Insurance Contributions Act.
FISC—Fo
reign International Sales Company.
FPH—Foreign Personal Holding Company.
F.R.—Federal Register.
FUTA—Fed
eral Unemployment Tax Act.
FX—Foreign corporation.
G.C.M.—Chief Counsel’s Memorandum.
GE—Grante
e.
GP—General Partner.
GR—Grantor.
IC—Insura
nce Company.
I.R.B.—Internal Revenue Bulletin.
LE—Lessee.
LP—Limited
Partner.
LR—Lessor.
M—Minor.
Nonacq.—No
nacquiescence.
O—Organization.
P—Parent Corporation.
PHC—Persona
l Holding Company.
PO—Possession of the U.S.
PR—Partner.
PRS—Pa
rtnership.
PTE—Prohibited Transaction Exemption.
Pub. L.—Public Law.
REIT—Re
al Estate Investment Trust.
Rev. Proc.—Revenue Procedure.
Rev. Rul.—Revenue Ruling.
S—Subsi
diary.
S.P.R.—Statement of Procedural Rules.
Stat.—Statutes at Large.
T—Target
Corporation.
T.C.—Tax Court.
T.D.—Treasury Decision.
TFE—Trans
feree.
TFR—Transferor.
T.I.R.—Technical Information Release.
TP—Taxpay
er.
TR—Trust.
TT—Trustee.
U.S.C.—Uni
ted States Code.
X—Corporation.
Y—Corporation.
Z—Corporat
ion.
January 28, 2008i2008–4 I.R.B.

Numerical Finding List
1
Bulletins 2008–1 through 2008–4
Announcements:
2008-1, 2008-1 I.R.B.246
2008-2, 2008-3 I.R.B.307
2008-3, 2008-2 I.R.B.269
2008-4, 2008-2 I.R.B.269
2008-5, 2008-4 I.R.B.333
Notices:
2008-1, 2008-2 I.R.B.251
2008-2, 2008-2 I.R.B.252
2008-3, 2008-2 I.R.B.253
2008-4, 2008-2 I.R.B.253
2008-5, 2008-2 I.R.B.256
2008-6, 2008-3 I.R.B.275
2008-7, 2008-3 I.R.B.276
2008-8, 2008-3 I.R.B.276
2008-9, 2008-3 I.R.B.277
2008-10, 2008-3 I.R.B.277
2008-11, 2008-3 I.R.B.279
2008-12, 2008-3 I.R.B.280
2008-13, 2008-3 I.R.B.282
2008-14, 2008-4 I.R.B.310
2008-15, 2008-4 I.R.B.313
2008-16, 2008-4 I.R.B.315
2008-17, 2008-4 I.R.B.316
Proposed Regulations:
REG-111583-07, 2008-4 I.R.B.319
Revenue Procedures:
2008-1, 2008-1 I.R.B.1
2008-2, 2008-1 I.R.B.90
2008-3, 2008-1 I.R.B.110
2008-4, 2008-1 I.R.B.121
2008-5, 2008-1 I.R.B.164
2008-6, 2008-1 I.R.B.192
2008-7, 2008-1 I.R.B.229
2008-8, 2008-1 I.R.B.233
2008-9, 2008-2 I.R.B.258
2008-10, 2008-3 I.R.B.290
2008-11, 2008-3 I.R.B.301
Revenue Rulings:
2008-1, 2008-2 I.R.B.248
2008-2, 2008-2 I.R.B.247
2008-3, 2008-2 I.R.B.249
2008-4, 2008-3 I.R.B.272
2008-5, 2008-3 I.R.B.271
2008-6, 2008-3 I.R.B.271
1
A cumulative list of all revenue rulings, revenue procedures, Treasury decisions, etc., published in Internal Revenue Bulletins 2007–27 through 2007–52 is in Internal Revenue Bulletin
2007–52, dated December 26, 2007.
2008–4 I.R.B.iiJanuary 28, 2008

Finding List of Current Actions on
Previously Published Items
1
Bulletins 2008–1 through 2008–4
Notices:
2006-107
Modified by
Notice 2008-7, 2008-3 I.R.B.276
2007-30
Modified and superseded by
Notice 2008-14, 2008-4 I.R.B.310
2007-54
Clarified by
Notice 2008-11, 2008-3 I.R.B.279
Proposed Regulations:
REG-113891-07
Hearing scheduled by
Ann. 2008-4, 2008-2 I.R.B.269
Revenue Procedures:
2007-1
Superseded by
Rev. Proc. 2008-1, 2008-1 I.R.B.1
2007-2
Superseded by
Rev. Proc. 2008-2, 2008-1 I.R.B.90
2007-3
Superseded by
Rev. Proc. 2008-3, 2008-1 I.R.B.110
2007-4
Superseded by
Rev. Proc. 2008-4, 2008-1 I.R.B.121
2007-5
Superseded by
Rev. Proc. 2008-5, 2008-1 I.R.B.164
2007-6
Superseded by
Rev. Proc. 2008-6, 2008-1 I.R.B.192
2007-7
Superseded by
Rev. Proc. 2008-7, 2008-1 I.R.B.229
2007-8
Superseded by
Rev. Proc. 2008-8, 2008-1 I.R.B.233
2007-39
Superseded by
Rev. Proc. 2008-3, 2008-1 I.R.B.110
2007-52
Superseded by
Rev. Proc. 2008-9, 2008-2 I.R.B.258
Revenue Rulings:
2007-4
Supplemented and superseded by
Rev. Rul. 2008-3, 2008-2 I.R.B.249
1
A cumulative list of current actions on previously published items in Internal Revenue Bulletins 2007–27 through 2007–52 is in Internal Revenue Bulletin 2007–52, dated December 26,
2007.
January 28, 2008iii2008–4 I.R.B.

INDEX
Internal Revenue Bulletins 2008–1 through
2008–4
The abbreviation and number in parenthesis following the index entry
refer to the specific item; numbers in roman and italic type following
the parenthesis refers to the Internal Revenue Bulletin in which the item
may be found and the page number on which it appears.
Key to Abbreviations:
AnnAnnouncement
CDCourt Decision
DODelegation Order
EOExecutive Order
PLPublic Law
PTEProhibited Transaction Exemption
RPRevenue Procedure
RRRevenue Ruling
SPRStatement of Procedural Rules
TCTax Convention
TDTreasury Decision
TDOTreasury Department Order
EMPLOYEE PLANS
Alternative funding schedule, amortization (Ann 2) 3,307
Benefit restrictions for underfunded pension plans, hearing for
REG–113891–07 (Ann 4) 2,269
Claims submitted to IRS Whistleblower Office under section
7623 (Notice 4) 2,253
Defined contribution plans, diversification of employer securi-
ties, extension of certain transitional rules (Notice 7) 3,276
Determination letters, issuing procedures (RP 6) 1,192
Full funding limitations, weighted average interest rates, seg-
ment rates for:
January 2008 (Notice 17) 4,316
Letter rulings:
And determination letters, areas which will not be issued
from:
Associates Chief Counsel and Division Counsel (TE/GE)
(RP 3) 1,110
Associate Chief Counsel (International) (RP 7) 1,229
And general information letters, procedures (RP 4) 1,121
User fees, request for letter rulings (RP 8) 1,233
Proposed Regulations:
26 CFR 1.430; 1.436; benefit restrictions for underfunded
pension plans, hearing for REG–113891–07 (Ann 4) 2,269
Stocks, statutory stock options, information reporting require-
ments (Notice 8) 3,276
Technical advice to IRS employees (RP 5) 1,164
EMPLOYMENT TAX
Claims submitted to IRS Whistleblower Office under section
7623 (Notice 4) 2,253
Frivolous tax return positions (Notice 14) 4,310
EMPLOYMENT TAX—Cont.
Interest-free adjustments and claims for refund of employment
taxes (REG–111583–07) 4,319
Letter rulings and information letters issued by Associate Of-
fices, determination letters issued by Operating Divisions
(RP 1)1,1
Proposed Regulations:
26 CFR 31.6011(a)–1, –4, –5, amended; 31.6205–1,
amended; 31.6302–0, –1, amended; 31.6402(a)–1, –2,
amended; 31.6413(a)–2, amended; 31.6414–1, amended;
interest-free adjustments and claims for refund of employ-
ment taxes (REG–111583–07) 4,319
Technical Advice Memoranda (TAMs) (RP 2) 1,90
ESTATE TAX
Claims submitted to IRS Whistleblower Office under section
7623 (Notice 4) 2,253
Frivolous tax return positions (Notice 14) 4,310
Letter rulings and information letters issued by Associate Of-
fices, determination letters issued by Operating Divisions
(RP 1)1,1
Technical Advice Memoranda (TAMs) (RP 2) 1,90
EXCISE TAX
Claims submitted to IRS Whistleblower Office under section
7623 (Notice 4) 2,253
Frivolous tax return positions (Notice 14) 4,310
Letter rulings and information letters issued by Associate Of-
fices, determination letters issued by Operating Divisions
(RP 1)1,1
Technical Advice Memoranda (TAMs) (RP 2) 1,90
EXEMPT ORGANIZATIONS
Annual notice to donors regarding pending and settled declara-
tory judgment suits (Ann 1) 1,246
Claims submitted to IRS Whistleblower Office under section
7623 (Notice 4) 2,253
Frivolous tax return positions (Notice 14) 4,310
Letter rulings:
And determination letters:
Areas which will not be issued from Associates Chief
Counsel and Division Counsel (TE/GE) (RP 3) 1,110
Exemption application determination letter rulings under
sections 501 and 521 (RP 9) 2,258
And general information letters, procedures (RP 4) 1,121
User fees, request for letter rulings (RP 8) 1,233
Revocations (Ann 3) 2,269
Technical advice to IRS employees (RP 5) 1,164
Transitional relief and filing procedures, charitable trust
(Notice 6) 3,275
2008–4 I.R.B.ivJanuary 28, 2008

GIFT TAX
Claims submitted to IRS Whistleblower Office under section
7623 (Notice 4) 2,253
Frivolous tax return positions (Notice 14) 4,310
Letter rulings and information letters issued by Associate Of-
fices, determination letters issued by Operating Divisions
(RP 1)1,1
Technical Advice Memoranda (TAMs) (RP 2) 1,90
INCOME TAX
Annual notice to donors regarding pending and settled declara-
tory judgment suits (Ann 1) 1,246
Certain outbound reorganizations and section 351 exchanges
(Notice 10) 3,277
Charitable contributions, recordkeeping requirements
(Notice 16) 4,315
Claims submitted to IRS Whistleblower Office under section
7623 (Notice 4) 2,253
Clarification of transitional relief under Notice 2007–54
(Notice 11) 3,279
Consolidated returns, loss disallowance (Notice 9) 3,277
Consumer Price Index (CPI) adjustments, certain loans under
section 1274A for 2008 (RR 3) 2,249
Corporations, health insurance costs of 2-percent shareholder-
employees, S corporation (Notice 1) 2,251
Credits:
Low-income housing credit:
Indian Housing Block Grant (IHBG) Program (RR 6) 3,
271
Satisfactory bond, “bond factor” amounts for the period:
January through March 2008 (RR 2) 2,247
Deductions, dependency exemption, qualifying relative
(Notice 5) 2,256
Displinary actions involving attorneys, certified public accoun-
tants, enrolled agents, and enrolled actuaries (Ann 5) 4,333
Foreign currency, debt characterization, exchange traded notes,
prepaid forwards (RR 1) 2,248
Frivolous tax return positions (Notice 14) 4,310
Guidance to tax return preparer regarding the format and con-
tent to disclose and consents to use tax return information with
respect to taxpayers filing a return in the Form 1040 series
(RP 12) 4,319
Insurance companies:
Loss payment patterns and discount factors for the 2007 acci-
dent year (RP 10) 3,290
Salvage discount factors for the 2007 accident year (RP 11) 3,
301
Interest:
Investment:
Federal short-term, mid-term, and long-term rates for:
January 2008 (RR 4) 3,272
Interim standards under section 6694(a) (Notice 13) 3,282
Letter rulings:
And determination letters, areas which will not be issued
from:
INCOME TAX—Cont.
Associates Chief Counsel and Division Counsel (TE/GE)
(RP 3) 1,110
Associate Chief Counsel (International) (RP 7) 1,229
And information letters issued byAssociate Offices, determi-
nation letters issued by Operating Divisions (RP 1)1,1
Mortgage insurance premiums, allocation and information re-
porting for 2007 (Notice 15) 4,313
Prepaid forward contracts, exchange traded notes (Notice 2) 2,
252
Preparer signature requirements under section 6695(b)
(Notice 12) 3,280
Revocations, exempt organizations (Ann 3) 2,269
Stocks, statutory stock options, information reporting require-
ments (Notice 8) 3,276
Tax conventions, U.S.-Mexico income tax treaty, treatment of
Mexico’s impuesto empresarial a tasa unica (IETU) (Notice 3)
2,253
Technical Advice Memoranda (TAMs) (RP 2) 1,90
Wash sales, individual retirement accounts, Roth IRAs (RR 5) 3,
271
SELF-EMPLOYMENT TAX
Claims submitted to IRS Whistleblower Office under section
7623 (Notice 4) 2,253
Frivolous tax return positions (Notice 14) 4,310
Letter rulings and information letters issued by Associate Of-
fices, determination letters issued by Operating Divisions
(RP 1) 1,1
Technical Advice Memoranda (TAMs) (RP 2) 1,90
January 28, 2008v2008–4 I.R.B.

2008–4 I.R.B.January 28, 2008

January 28, 20082008–4 I.R.B.

INTERNAL REVENUE BULLETIN
The Introduction at the beginning of this issue describes the purpose and content of this publication. The weekly Internal Revenue
Bulletin is sold on a yearly subscription basis by the Superintendent of Documents. Current subscribers are notified by the Superin-
tendent of Documents when their subscriptions must be renewed.
CUMULATIVE BULLETINS
The contents of this weekly Bulletin are consolidated semiannually into a permanent, indexed, Cumulative Bulletin. These are
sold on a single copy basis andare notincluded as part of the subscription to the Internal Revenue Bulletin. Subscribers to the weekly
Bulletin are notified when copies of the Cumulative Bulletin are available. Certain issues of Cumulative Bulletins are out of print
and are not available. Persons desiring available Cumulative Bulletins, which are listed on the reverse, may purchase them from the
Superintendent of Documents.
ACCESS THE INTERNAL REVENUE BULLETIN ON THE INTERNET
You may view the Internal Revenue Bulletin on the Internet at www.irs.gov. Under information for: select Businesses. Under
related topics, select More Topics. Then select Internal Revenue Bulletins.
INTERNAL REVENUE BULLETINS ON CD-ROM
Internal Revenue Bulletins are available annually as part ofPublication 1796 (Tax Products CD-ROM). The CD-ROM can be
purchased from National Technical Information Service (NTIS) on the Internet at www.irs.gov/cdorders (discount for online orders)
or by calling 1-877-233-6767. The first release is available in mid-December and the final release is available in late January.
HOW TO ORDER
Check the publications and/or subscription(s) desired on the reverse, complete the order blank, enclose the proper remittance,
detach entire page, and mail to the Superintendent of Documents, P.O. Box 371954, Pittsburgh PA, 15250–7954. Please allow two to
six weeks, plus mailing time, for delivery.
WE WELCOME COMMENTS ABOUT THE INTERNAL
REVENUE BULLETIN
If you have comments concerning the format or production of the Internal Revenue Bulletin or suggestions for improving it,
we would be pleased to hear from you. You can e-mail us your suggestions or comments through the IRS Internet Home Page
(www.irs.gov) or write to the IRS Bulletin Unit, SE:W:CAR:MP:T:T:SP, Washington, DC 20224
Internal Revenue Service
W
ashington,DC20224
Official Business
Penalty for Private Use, $300