Proposed Regulations For EFTPS

Federal Tax Payment System Gets Tech Savvy

By Thomas R. Bruckel, CPA

Earlier this year, the Internal Revenue Service issued proposed regulations that will compel all but the smallest employers to use the Electronic Federal Tax Payment System (EFTPS).    The Treasury Department adopted these proposed regulations to reduce the amount of paper transactions it handles. 
 
Most employers currently use Federal Tax Deposit Coupons, a  system of payment that has been around for more than 50 years.    Under the current regulations, taxpayers are only required to use EFTPS as of the beginning of the second year (calendar year) after the year that total federal deposits exceed $200,000.  Under the new regulations, employers that have less than $2,500 in quarterly payroll liability and pay their liability when they file quarterly will be exempt. 

If you are not already set up to make payments on the EFTPS system and are currently making tax deposits using tax deposit  coupons at the bank, you will be required to sign up for EFTPS and make your deposits using this system beginning in January 1, 2011.  This includes, but is not limited to, deposits of corporate income and estimated taxes, unrelated business income taxes of tax-exempt organizations, private foundation excise taxes, backup withholding, and FUTA taxes.

It is very easy to sign up for EFPTS.  Simply visit the IRS website (www. IRS.gov) and click on the logo shown on the right side of the website for EFTPS.  This link takes you to the EFTPS site that describes the system, how it works for the taxpayer, and provides detailed information on how to enroll.

In order to enroll, you will need the following:

a. Company name
b. Company Federal ID#
c. Bank Account Information
d. Company Address
e. Individual Company Contact
f. Business Phone Number

The IRS also provides customer service phone numbers for assistance.

The advantage of the EFTPS system for taxpayers is convenience. The system is available 24 hours a day, 7 days a week.  Once enrolled, you can make payments by use of the internet or via phone.  When you determine a payment is due, the company instructs EFTPS to transfer the cash from your account to the Treasury’s account.  You can set the transfer up in advance and have it executed on the date you indicate in the system. 

The proposed regulations do not change existing rules for determining a taxpayer’s status as either a monthly or semi-weekly depositor for employment taxes.
In summary, if you have not already done so and your company is making federal tax deposits using coupons, you should take the time now to sign up for EFTPS and process payments before the end of 2010, so that when the requirements change to make it mandatory, you are all set!

Have questions about getting a head start on EFTPS registration?  Give us a call at 1-800-487-7624.