The Electronic Federal Tax Payment System (EFTPS) offers businesses and individuals a secure and easy way to pay all federal taxes online or by phone – and possibly avoid IRS penalties.

EFTPS is a service permitting taxpayers to pay all federal taxes online in lieu of using paper forms like Federal Tax Deposit (FTD) coupons. Because the timely transmission of payroll taxes is one of the most chronic compliance problems smaller companies face with the IRS, this program is particularly beneficial to the business clients of tax professionals who routinely transmit payroll taxes to the IRS on behalf of employees.

Here’s How it Works
EFTPS has a secure web site through which taxpayers enroll. The enrollment process includes entering their tax ID number and the bank account from which they will be paying their taxes. After they enroll, taxpayers will receive by mail their PIN and instructions for obtaining their Internet password. Then they logon, enter their security information (the combination of TIN, PIN and Internet password), and make secure payments for any and all federal taxes … 24 hours a day, 7 days a week. And it’s free.

• All of your business clients can use EFTPS. The system offers specific tools to help clients avoid possible IRS penalties.
• Schedule payments in advance…up to 120 days for businesses and 365 for individuals.
• Make payments weekly, monthly or quarterly.
• Cancel a payment up to 48 hours before the scheduled payment date.
• Receive an immediate Acknowledgement Number for every payment, which is a receipt for the taxpayer’s payment instructions and can be used in contacting the IRS.
• Thoroughly review and verify all payment information before submitting the payment to make sure no mistakes have been made.
• Review up to 16 months of EFTPS payment history online to confirm that payments have been made.

Any taxpayer that makes more than one federal tax payment per year should consider enrolling in and using EFTPS.

If you make tax payments on behalf of your clients, you should consider using the free EFTPS Batch Provider software, which is available on the EFTPS web site under Help & Information. With a new version scheduled for Fall 2005, this software allows you to enroll clients and make up to 5,000 tax payments on a single transmission. You can make payments from a Master Account or from each taxpayer’s account. This is an ideal way to manage your clients’ tax payment information, so you can spend more time developing client relationships.

Special Program For Business Taxpayers
The EFTPS Federal Tax Deposit (FTD) Penalty Refund Program offers business taxpayers who make payments with FTD coupons a way to receive a one-time penalty refund from the IRS. If the taxpayer received a Form 941 FTD penalty beginning in calendar year 2003, they are eligible to receive a refund of the penalty if they enroll in EFTPS and use it for four consecutive quarters to make all Form 941 deposits on-time. Key features include:

• No need to file a claim for the penalty refund.
• Beginning in April 2005, after the returns are filed for the fourth quarter of the previous year, the IRS will automatically determine which employers with a previous penalty have met the test of four quarters of EFTPS use. The IRS will perform this review on a quarterly basis for taxpayers that meet their four quarters of EFTPS use after this date.
• IRS will then “look back” to the four quarters prior to enrolling in and using EFTPS, remove the deposit penalty charged in the most recent quarter, and refund the money to the taxpayer if no other taxes are owed.

IRS estimates that non-users of EFTPS are 31 times more likely to be assessed a penalty than users of EFTPS.

Letting Your Clients Know About EFTPS
The U.S. Department of the Treasury offers tax and accounting professionals free marketing materials that can be used with clients. These materials are available in quantity and provide simple, easy to understand information about EFTPS for both businesses and individuals.

Many professionals include an EFTPS statement stuffer or brochure in the tax return information they send to clients. And some professionals send out newsletters or regular mailings and include an EFTPS brochure. Order free EFTPS brochures and enrollment forms.

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