Good News for Business Taxpayers

WASHINGTON - More than one million businesses are entering the age of electronic tax payments as they begin making their federal tax deposits by computer or telephone. Now, the Internal Revenue Service is taking an extra step to help them make the switch smoothly -- and with confidence. The IRS will not impose any penalties on taxpayers who enroll in the Electronic Federal Tax Payment System (EFTPS) and attempt to make the payments through the system before July 1, 1997.

The new approach was announced today by Margaret Milner Richardson, Commissioner of Internal Revenue, in a speech before the North Carolina Governor's Conference on Small Business in Raleigh. It applies to all individuals and businesses who enroll in EFTPS and attempt to make their tax payments through that system.

The IRS and the Financial Management Service of the Treasury Department have sent letters to business taxpayers subject to the July 1 deadline, but officials at the two agencies feel some taxpayers are still hesitant about making electronic payments.

In announcing the penalty-free period, Richardson said, "There is no reason to impose a penalty before July 1 on businesses that are simply trying to get comfortable with EFTPS but make a mistake in doing so."

Traditionally, businesses have used a paper coupon and a check to make Federal Tax Deposits (FTDs). With EFTPS, deposits are made by telephone or personal computer. This means no more trips to the bank to deliver FTD coupons and checks.

"EFTPS eliminates most of the paperwork in the old FTD coupon system. It is fast, convenient and easy," according to Commissioner Richardson.

Businesses and individuals can use EFTPS to make their FTDs, but approximately 1.2 million businesses are required to begin using the system by July 1, 1997. Businesses that owed Federal employment tax deposits of more than $50,000 in 1995 are included in the requirement to begin making their FTDs electronically this summer. These businesses need to send their enrollment forms by May 1, 1997, so that they will be ready to make their payments electronically by the July 1 deadline.

Over 960,000 of the almost 1.2 million businesses required to use EFTPS in July have already enrolled in the system, according to the IRS. Another 360,000 businesses have enrolled in the system voluntarily. Of these enrollments, over 100,000 are already using the system. Through the end of March, EFTPS had processed a million and a half deposits totaling more than $55 billion.

The IRS hopes this approach to penalties will give more businesses the confidence they need to begin using EFTPS. "Making EFTPS payments successfully will show businesses that they are correctly enrolled and that their payments can be processed without a hitch. If they encounter any problems, they will have time to make adjustments, rather than face a penalty," said Commissioner Richardson.

During her speech today, Commissioner Richardson took the opportunity to dispel some of the myths about EFTPS. First, the IRS does not have access to the taxpayer's bank account. In fact, the taxpayer controls the amount of money transferred and when those funds are transferred.

Second, EFTPS does not change the tax due date. The taxpayer must tell the bank or the Treasury's Financial Agent to make the transfer a day before the payment due date, but the funds do not move until the due date.

Third, EFTPS is not difficult to use. It can be as simple as making a phone call. There is no equipment required other than a telephone -- a rotary dial telephone is fine. Also, for taxpayers who want to use a computer to transfer the funds, the Financial Agents will even supply the software.

Fourth, EFTPS does not increase the complexity of making tax payments. A simple phone call transfers the funds -- far less time than writing out a check, filling out a coupon and walking or driving to the bank to make the deposit.

For information on EFTPS or to get an enrollment form, call EFTPS Customer Service at (800) 555-4477 or (800) 945-8400. Taxpayers can begin using EFTPS as soon as they receive their payment instruction packet and personal identification number.

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