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August 11, 1994



We have received information which indicates that the Internal Revenue Service (IRS) is now verifying payday as part of its employment tax examination process. The IRS has taken the position that constructive receipt occurs when the payment is delivered to the employee, regardless of the date imprinted on the check or warrant. Payroll taxes for State of Florida employees are required to be deposited by IRS Regulations on the next banking day following the payday. The delivering of warrants to State employees before the date imprinted on the warrants could result in the imposition of penalties for late deposit of the payroll taxes, as payday is the date of constructive receipt of the payroll warrants.

Rules of the Bureau of State Payrolls, Section 3A-31.211, Florida Administrative Code, address the release of warrants to payees. These rules provide that warrants may be released to employees who work the Second (Swing) Shift or the Third (Midnight) Shift no earlier than 5:00 P.M. on the day before the date imprinted on the warrant.

Because of potential penalties for the untimely deposit of payroll taxes, agencies may not release warrants to employees before the date imprinted on the warrant. The Bureau of State Payrolls' rules are being amended to prohibit this practice. Additionally, agencies mailing payroll warrants directly to their employees should review their procedures to ensure that the employees do not receive the warrants before the date imprinted thereon.

Penalties assessed by the IRS for late deposits of payroll taxes could be substantial. These penalties could be applied to all payments for a payday on which it was found that warrants were released early. Any penalties assessed against the State due to the early release of payroll warrants will be paid by the agency releasing the warrants early.

If additional information is needed, please call Bill Schmitt at 488-6416, Suncom 278-6416.