Wednesday, January 12, 2011

Welcome to the World of Electronic Payments — They Are Not Just for Employers

There has been a lot of publicity about employers making payroll tax payments under the Electronic Federal Tax Payments System (EFTPS) starting January 1, 2011. Gone are the federal tax payment coupons that employers had been making at their bank. These will no longer be accepted by the banks.

Employers now have fewer options. The options include:

1. Using the IRS Website or their voice response system. You must be enrolled in EFTPS to pay via either system. If you recently were pre-enrolled in EFTPS and cannot find your PIN, call 888.434.7338. Payments must be scheduled by 8 p.m. ET the day before the due date to be received timely.

2. Asking your financial institution to initiate an ACH Credit payment on your behalf. This option requires an EFTPS enrollment, but your banking information is not part of that enrollment. Financial institutions are not required to initiate payments for you, and may charge you a fee if they offer this service. Check in advance for cutoff times, which may be earlier than if you make a payment yourself using EFTPS.

3. Asking another trusted third party such as a tax professional or payroll service to make the payment for you.

4. In extraordinary circumstances, asking your financial institution to make a same day tax wire payment for you. Financial institutions are not required to do this, and may charge you a fee. Check with your financial institution in advance for cutoff times.

To download a worksheet for this purpose, go to the Help & Information tab above, then click on Downloads. For general EFTPS Customer Service assistance, call 800.555.4477. If you have questions about the rule, search on "Tax Topics 757" at the IRS Web site or call the IRS at 800.830.5215.

Please take a good look at this website. Signing up is quick and easy. It must be done several days before the first payments are due, because the IRS will be sending out a confirming PIN number by mail.

Payments of Individual Taxpayers. Payments can also be made electronically for individual (or joint) taxpayers. Some of the circumstances are:

1. When paying taxes with the 1040 Tax Return, an authorization for a direct withdrawal from a checking or savings account can be made.

2. Of course, the taxpayer can always (so far) send a payment with his tax return or with a 1040-V payment voucher. This method can also be used for Estimated Tax Payments.

3. If the taxpayer would rather charge the balance due, refer to the tax instructions. Credit card payments are subject to “convenience fees” and interest.

4. Estimated tax return payments can also be scheduled with the tax software. However, I have had discussions with an number of Intuit ProSeries users around the country who do not feel that this is an error-free method. Instead, they tend to recommend the next payment method.

5. The taxpayer(s) can enroll in EFTPS for 1040 or 1040-ES payments, just as business do. This option allows for easily changing estimated tax payment amounts on the payment dates.

State Tax Payments. At the Illinois Department of Revenue, payments can easily be made electronically as well for businesses or individuals:

1. Go to their website at

2. At the left side, click Businesses, or Individuals.

3. Then click Pay, and then Make a Payment.

4. They next options are WebPay, Credit Card, and ACH Credit.

State payments are as easy as IRS EFTPS payments.

It almost makes it a pleasure to pay taxes!
…..Richard P. Allen, Past-President, Independent Accountants Association of Illinois

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