Tax Tips for Small Business


EFTPS is the Electronic Federal Tax Payment System developed by the U.S. Department of the Treasury's Internal Revenue Service (IRS) and Financial Management Service (FMS), to enable taxpayers to pay their federal taxes electronically. The system allows taxpayers to use the Internet (www.eftps.gov), personal computer (PC) software, or phone to initiate tax payments to EFTPS directly. EFTPS payments may also be initiated through your financial institution. It's convenient, secure and timesaving.

Q	What is EFTPS?

A

EFTPS is the Electronic Federal Tax Payment System developed by the U.S. Department of the Treasury’s Internal Revenue Service (IRS) and Financial Management Service (FMS), to enable taxpayers to pay their federal taxes electronically. The system allows taxpayers to use the Internet (www.eftps.gov), personal computer (PC) software, or phone to initiate tax payments to EFTPS directly. EFTPS payments may also be initiated through your financial institution. It’s convenient, secure, and timesaving.

 

Q	Is there a cost to use EFTPS?

A

No. EFTPS does not charge taxpayers for its services. However, if you choose to use EFTPS-Through a Financial Institution or the Same Day Payment mechanism (both available only to businesses) you may incur a fee from your financial institution. Please check with your financial institution directly to inquire about their fee structure.

 

Q	Do I need to enroll to use the service?

A	Yes. You can enroll through the Internet at www.eftps.gov, or by completing an enrollment form available from EFTPS Customer Service at 1-800-555-4477 or 1-800-945-8400.

 

Q	What are the benefits of using EFTPS?

A

EFTPS offers you many benefits over the traditional paper system: it’s fast…you can make a tax payment in minutes it’s accurate…because there are verification steps along the way, you are able to check and review your information before it is sent it’s convenient…EFTPS is available to you by Internet, PC software or phone—24 hours a day, 7 days a week, and can be used to schedule payments in advance it’s easy to use…it’s a step-by-step process that tells you what information you need to successfully complete your tax payment for any federal tax it’s secure…EFTPS offers the highest levels of security on the Internet

 

Q	How does EFTPS work?

A

With EFTPS-Direct, you make your tax payments at least one calendar day prior to the tax due date. Based on your instructions, EFTPS initiates a debit against your bank account and your tax records are updated with the IRS. You can use EFTPS-OnLine (www.eftps.gov), EFTPS-PC Software or EFTPS-Phone to make your payments. With EFTPS-Through a Financial Institution, you will initiate your tax payment through a service offered by your financial institution. Your financial institution will debit your account and send the tax payment electronically. You should first check with your financial institution to see if they offer the service and the fees involved.

 

Q	Who controls making the tax payments?

A	It’s your responsibility to initiate the tax payment. It will not occur automatically. Funds will only be debited from your account on the date and in the amount you indicate when making a payment through EFTPS.

 

Q	Can I schedule payments in advance?

A	Yes. Business taxpayers can schedule tax payments up to 120 days in advance, and individual taxpayers can schedule payments for up to 365 days in advance of due date.

 

Q	Does money move over the Internet?

A	No. When you make a payment using EFTPS-OnLine, only information is transmitted via the Internet. The exchange of funds still occurs within your financial institution, and the IRS does not have access to your checking account information.

 

Q	What types of taxes can be paid through EFTPS-OnLine (www.eftps.gov)?

A	Individual taxpayers can pay all individual tax types including estimated taxes, balance due payments, installment payments, even estate and gift taxes. Business taxpayers can pay all types of federal taxes, including employment taxes, excise taxes, and corporate income taxes.

 

Q	Why should I enroll in EFTPS?

A

EFTPS makes paying federal taxes easy and convenient. By enrolling in EFTPS, you can make your payments electronically from the convenience of your office or home, using the Internet, the PC software or phone. It eliminates the need for you to complete Federal Tax Deposit (FTD) coupons or vouchers, write a check, and take that check and coupon to a financial institution or the Post Office prior to tax due date. EFTPS is easy to use, accessible 24 hours a day, 7 days a week. It allows you to make payments with short lead-time, and you can even schedule future payments if your tax liability is known in advance.

 

Q	What is the difference between EFTPS-Direct and EFTPS-Through a Financial Institution?

A

With EFTPS-Direct, you access EFTPS directly to make your tax payment by Internet, PC Software or phone. At the completion of the tax payment, you will receive an EFT Acknowledgement Number as a receipt confirming that your payment instructions have been received. If you have initiated your payment at least one calendar day before the tax due date, the payment will be debited against your account on the due date. With EFTPS-Through a Financial Institution, you will first need to make sure that your financial institution offers a tax payment service and that you are eligible to use that service. You should also ask about your financial institution’s deadlines and fees. You will initiate your tax payment through your financial institution, and they in turn will debit your bank account and send your tax payment electronically to EFTPS. You can use EFTPS-OnLine (www.eftps.gov) to check your payments or access your payment history, but you cannot make or cancel a payment through EFTPS-OnLine if you select EFTPS-Through a Financial Institution on your enrollment form.

 

Q	If I want to use the different EFTPS-Direct payment reporting methods, i.e., Internet or phone, do I have to enroll for each separately?

A	No. With EFTPS-Direct, you only need to enroll once. The payment methods are interchangeable. For example: if you need to make a tax payment but do not have access to a PC, you can make your payment by phone. All EFTPS-Direct payment methods are available 24 hours a day, 7 days a week.

 

Q	How long does it take to complete the enrollment process?

A

It should take you no more than 10 minutes to complete the online New Taxpayer Enrollment Form. Once EFTPS receives your information, Confirmation materials that include instructions on how to obtain your Internet Password will be created and mailed to the name and address you entered on your enrollment form. Additionally, your PIN will be mailed to your official IRS address of record (this is the address that appears on your tax returns or IRS documents). You should receive your Confirmation materials within 15 business days after you complete your enrollment.

 

Q	If I'm already enrolled and using EFTPS-Direct, can I use EFTPS-OnLine?

A

Yes. Because you are already enrolled in EFTPS-Direct, you already have your PIN. Now you need to request and activate an Internet Password to access EFTPS-OnLine. This security feature ensures you of the greatest protection in using EFTPS through the Internet. Every time you access EFTPS-OnLine you will be required to input your TIN, PIN and Internet Password. You can learn how to obtain an Internet Password by calling EFTPS Customer Service at 1-800-555-4477 or 1-800-945-8400. If you are new to EFTPS and enroll online, you will receive instructions for obtaining your Internet Password in your Confirmation materials.

 

Q	What if I cannot locate my Confirmation or PIN letter?

A	If you cannot locate your Confirmation or PIN letter, please call EFTPS Customer Service at 1-800-555-4477 or 1-800-945-8400.

 

Q	What if I lose or forget my Internet Password?

A	If you lose or forget your Internet Password, you will need to locate your original enrollment Confirmation materials or PIN letter you received by mail and call EFTPS Customer Service at 1-800-555-4477 or 1-800-945-8400.

 

Q	What if I use a Payroll Service or Accountant?

A

You should still enroll in EFTPS, even if you use a third party (such as a payroll service or accountant) to make your tax payments. You can check out your payment history or make other payments online if you enroll for EFTPS-Direct. Check with your provider to determine which taxes they are paying on your behalf. If you wish to make payments other than those being made by a third party, you will need to complete an additional Enrollment through EFTPS-OnLine or by calling 1-800-555-4477 or 1-800-945-8400 for a paper enrollment form. For example, if you are a business and a third party makes your payroll tax deposits for you and you wish to make your year-end 1120 corporate income tax payments through EFTPS-OnLine, you would complete an Additional Enrollment under your Taxpayer Identification Number (EIN). Click on "Additional Enrollment" at www.eftps.gov.

 

Q	Does the government have access to my checking account?

A

No. No one has access to your bank account unless you allow them. As the taxpayer, you are in total control of initiating all your tax payments through EFTPS. Based on your tax payment information, your tax payment will be made on the date you specify. Remember, with EFTPS-OnLine, only information moves via the Internet. No money is exchanged over the Internet and the IRS does not have access to your checking account information.

 

Q	Who can use EFTPS?

A	Any individual taxpayer, especially those making 1040ES payments can use EFTPS-OnLine. Any business taxpayer can use EFTPS for any tax type.

 

Q	Who is required to use EFTPS?

A

Some business taxpayers are required to use EFTPS because they have met certain criteria—specifically, if your total deposits of designated federal taxes (including employment taxes, income taxes, Railroad Retirement taxes, Social Security taxes, and various other types of non-payroll withholding) during a calendar year exceed $200,000, you are required to use EFTPS beginning in the second succeeding calendar year. For example: if you had more than $200,000 in deposits of designated taxes in calendar year 2001, you are required to use EFTPS beginning January 2003.

 

Q	What happens if I am required to use EFTPS and my annual tax deposits fall below $200,000?

A	Once you meet the requirement to use EFTPS, you are required to continue using the system even if your deposits in future years drop below the threshold amount.

 

Q	If I am required to use EFTPS and use a paper coupon deposit instead, what happens?

A

If you are required to use EFTPS and do not, a 10% penalty may be applied. However, you may qualify for relief from the penalty for failing to deposit in the proper manner if the reason is due to reasonable cause and not to willful neglect. IRS will evaluate each request for relief on its own merits.