Businesses Have More Time to
Begin Electronic Payments

WASHINGTON - The Internal Revenue Service announced today that it will not impose penalties through December 31, 1997, on businesses that make timely deposits using paper federal tax deposit coupons while converting to the new electronic payment system. Under the law, taxpayers with more than $50,000 of federal employment tax deposits in 1995 are required to enroll in the Electronic Federal Tax Payment System (EFTPS) and to deposit electronically by July 1, 1997.

Acting Commissioner of Internal Revenue Michael P. Dolan said, "We understand that many taxpayers who have not enrolled in EFTPS may need more time to learn about making electronic tax payments. So, we have decided to take yet another step to help them make the switch comfortably and confidently."

The additional 10 percent penalty for not depositing electronically will be waived through December 31, 1997. However, deposits must still be made on time even when paper coupons are used, in order to avoid a late deposit penalty.

The IRS encourages businesses to use this additional time to get acquainted with EFTPS. Making EFTPS payments successfully will show businesses that they are correctly enrolled and that their payments can be processed without error. "If businesses encounter any problems, they will have time to get help and make adjustments, rather than face a penalty. They will also obtain a better understanding of the advantages of EFTPS," said Dolan.

EFTPS eliminates most of the paperwork in the old federal tax deposit (FTD) coupon system. With EFTPS, deposits may be made by telephone or personal computer. This means no more trips to the bank to deliver FTD coupons and checks. EFTPS is fast, convenient and easy.

Over 1.1 million of the almost 1.2 million businesses that are required to begin using the EFTPS system by July 1 have already enrolled in the system. Another 400,000 businesses, not included in the 1.2 million businesses required to use EFTPS, have enrolled in the system voluntarily. Through last week, more than $100 billion has been collected through EFTPS.

"We owe a lot of gratitude to the two Treasury Financial Agents -- First National Bank of Chicago and NationsBank -- as well as the banking and payroll community, professional tax preparer associations, business associations and many others for their assistance. The fact that so many businesses have already enrolled in EFTPS is a tribute to their efforts," said Dolan.

In conjunction with today's announcement, the IRS addressed some common misunderstandings about EFTPS. Use of EFTPS does not give the IRS access to the business' 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. Although the taxpayer must notify the bank or the Treasuryþs Financial Agent to make the transfer a day before the payment due date, the funds do not move until the due date.

Third, EFTPS is easy to use and does not require special electronic equipment. 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 reduces the complexity of making tax payments. A simple phone call transfers the funds. It takes 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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