Under previous law, businesses with employment taxes of less than $1,000 per quarter could make their tax payments quarterly, while other businesses make more frequent tax deposits.

Now, starting January 1, 2001, businesses with employment taxes of less than $2,500 per quarter will be able to make quarterly payments, instead of the monthly payments they were making previously.

"The new standard will reduce the paperwork and red tape that small businesses face," according to IRS Commissioner Charles O. Rossotti. Businesses can expect to face fewer penalties and better cash flow as a result of the change according comments in IRS document IR-2000-83.

Not only will small businesses benefit from the new law, the IRS expects to reduce paperwork as well by anticipating a 70% decrease in monthly notices that must be sent regarding employment tax deposits.

Businesses with less than $2,500 in quarterly employment taxes may now pay their taxes with the quarterly 941 tax form, and will no longer need the monthly deposit coupons, as long as their taxes stay beneath the $2,500 threshold.

About 1 million businesses are expected to be affected by the change.