TaxLink: An Alternative Way to
Make Federal Tax Deposits

The IRS is changing the way it does business to meet the demands of the future. Part of our effort is to modernize the way we collect business taxes. Businesses will also benefit from the change. Through a program called TAXLINK, the IRS is offering business taxpayers the option of making federal tax deposit (FTD) payments electronically.

The current FTD system is paper-intensive and based on outdated technology. Business make their deposits by filing out a paper coupon, Form 8109, and taking it to their bank with a check in the amount of the deposit. The bank transfers the funds to the government's account and forwards the coupons to an IRS service center for processing. The deposit information is posted to the taxpayer's IRS file.

The current system has generally met the needs of both the government and the taxpayers. However, advances in information technology and electronic communications make it possible to modernize the process. In mid-1992 the IRS began offering businesses in its southeast region the option of using electronic FTD technology. Beginning in January 1994, businesses throughout the country have the option of using TAXLINK.

In developing the TAXLINK system, the IRS and other Treasury Department agencies solicited comments from various participants in the current system including financial managers, payroll managers, and service bureau representatives. Paramount in our goals is the desire to design a system that meets or exceeds the needs of all stakeholders. We want to offer flexibility and to streamline processing.

TAXLINK offers taxpayers several electronic payment methods to choose from and is flexible enough to fit the varying needs and technological capabilities of any sized business. The option range from highly sophisticated technologies using mainframe computers to a telephone conversation with a live operator. Personal computers with modems and voice response units add to the flexibility of the system to fit all levels of technology.

Electronic payments do not change the due date of tax deposits, the day on which the funds are debited from the taxpayer's account, or the due date of any tax returns that are required. Electronic deposits go through the Automated Clearing House. This is the same network commonly used for direct deposit of salary and social security payments and automatic deductions for loan payments. Businesses initiate the ACH transaction one day before the deposit due date.

The electronic deposit system will expand to accommodate most business tax payments. Eventually most FTD payments will be made electronically. Under the provisions of the North American Free Trade Agreement legislation, electronic tax deposits will be mandated for the collection of federal depository taxes, including employment and excise taxes. The legislation requires IRS to increase the amount of business taxes deposited electronically from a minimum of 3 percent in 1994 to a minimum of 94 percent in 1999 and thereafter.

The Service is developing regulations to phase in mandatory electronic deposits. Until these regulations go into effect, IRS is soliciting large businesses to participate voluntarily.

To obtain an enrollment form, or to get additional information, businesses can call the TAXLINK HELPLINE at 1-800-829-5469, or write to:

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