IRS Delays to 2013 Tax Withholding on Government Contractor Payments

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IRS finalizes regulations (T.D. 9524) that would delay the implementation of a new 3 percent withholding requirement on payments from government entities to contractors until Jan. 1, 2013, and exempt any payments of less than $10,000. IRS also issues proposed regulations ( REG-151687-10) that would change the effective date provisions of the concurrently issued final rules. The withholding requirement, created by the 2005 Tax Increase Prevention and Reconciliation Act, mandates withholding by any federal, state, or local entity, and was previously set to go into effect in 2012. Under the law, the requirement was to take effect in 2011, but IRS also delays that effective date by a year as it continues to seek comment on its proposed rules.