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IRS Delays 3 Percent Withholding

The Internal Revenue Service is giving government contractors a break. The 3 percent withholding requirement has been pushed back a year.

The delay was announced Monday in the Federal Register and is being heralded by the industry as a smart decision in an economy where cash flow is everything.

Part of the 2005 Tax Increase Prevention and Reconciliation Act, the withholding requirement sought to ensure public money would not go to companies with unpaid taxes by setting aside 3 percent of the payments to be held by the IRS. At the end of the year, the money is applied to the company’s tax bill.

Efforts to repeal the measure continue. The rule is now set to go into effect Dec. 31, 2013.


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