March 22, 1999
Small Businesses Given a Choice
for Paying Taxes
WASHINGTON - The Treasury Department and Internal Revenue
Service have announced that proposed regulations issued today would
raise the threshold requiring the use of the Electronic Federal Tax
Payment System (EFTPS) to $200,000 beginning January 1, 2000. This
means that 91 per cent of all businesses would have a choice of how
to pay their taxes.
"The success of EFTPS due to the large number of volunteers
using the system means that most businesses can voluntarily
participate in EFTPS," said IRS Commissioner Charles O. Rossotti.
"We believe that most of the businesses that are currently using the
system will continue to do so because they find it easier to use."
Deputy Secretary of the Treasury Lawrence Summers said, "Today's
actions demonstrate the value of our continuing dialogue with the
small business community. The relief provided will enable small
businesses to achieve a smooth transition to the new, more
efficient, electronic financial system of the 21st century."
After the regulations are finalized, businesses that were
previously required to use EFTPS but did not make more than $200,000
in aggregate deposits for 1998 will be relieved of the requirement
to use EFTPS on January 1, 2000. As a result, only about 9 percent
of all businesses making deposits will be required to use EFTPS.
Also, about 65 percent of the businesses that have previously been
required to use EFTPS will be relieved of the requirement.
The new threshold of $200,000 applies to aggregate deposits.
This means that businesses will consider deposits for all types of
taxes made during the year to see if they are required to use EFTPS.
If a business makes more than $200,000 in aggregate deposits for a
calendar year, it meets the requirement based on this test and then
it must use EFTPS starting January 1, of the second succeeding
calendar year. Thus, a business with more than $200,000 in aggregate
deposits for 1998 would be required to use EFTPS starting January 1,
2000. Over 90 per cent of these businesses already use EFTPS.
In addition, the IRS scheduled a public hearing on the
regulations for May 11, 1999. The proposed regulations provide
details on submitting comments.
Members of the business community were quick to applaud today's
announcement. "The small business community appreciates Commissioner
Rossotti's successful efforts to make electronic payment of taxes
voluntary," said Jack Farris, President of the National Federation
of Independent Business. "The Commissioner was a business owner who
now as an administrative official cares enough to truly address the
needs of his customers."
Bennie L. Thayer, President and CEO of the National Association
for the Self-Employed also commended the announcement. "The new
$200,000 threshold shows that IRS has listened to small business'
concerns on this issue , and we appreciate it. While electronic
payment of taxes is increasingly popular due to its speed and
convenience, the decision to raise the threshold requiring the use
of EFTPS shows understanding and flexibility for the needs of
The IRS also announced today that it will continue to waive
penalties for most smaller businesses required to use EFTPS that
make timely deposits using paper deposit coupons. This penalty
relief will run from July 1, through December 31, 1999.
The penalty relief will apply to all taxpayers currently
required to use EFTPS if the taxpayer did not make aggregate tax
deposits of more than $200,000 during 1998. However, IRS will impose
penalties for taxpayers currently required to use EFTPS, if their
aggregate deposits were more than $200,000 during 1998, and they do
not use EFTPS for deposits due beginning July 1, 1999.
Over 2 million taxpayers are enrolled in EFTPS and electronic
tax payments through EFTPS recently topped $2 trillion since the
inception of the program. "We decided to offer further penalty
relief because of our concerns that the requirement may have created
a hardship on some small businesses," said Commissioner Rossotti."We
will also continue our outreach efforts with tax practitioners, the
business community and individuals and our enhanced marketing
initiatives to further increase voluntary participation and meet our
The IRS reminds businesses eligible for the penalty relief that
deposits must still be made on time even when using paper coupons or
they risk a late deposit penalty. But the 10 percent penalty for not
depositing electronically will be waived through December 31, 1999
for businesses eligible for the penalty relief.
The IRS encourages businesses to use the system and to get
comfortable with EFTPS. EFTPS is easy to use, it's accurate, and
it's convenient because it saves businesses last minute trips to the
bank with checks and coupons. The IRS also urges those taxpayers who
will no longer be required to make payments electronically to
continue to experience the ease and convenience of using EFTPS.
Those who volunteer to use EFTPS will not be penalized for not
Tax information and payment instructions flow electronically and
are processed through EFTPS to the government based on the specific
instructions of the taxpayer. No government agency or outside party
has unauthorized access to a taxpayer's account or company
information. The technology is the same as automatic bill payment or
point-of-sale payments for groceries.
Traditionally, businesses have used a paper coupon and a check
to make Federal Tax Deposits (FTDs). EFTPS eliminates most of the
paperwork in the old FTD coupon system. With EFTPS, deposits may be
made by telephone or personal computer, or through the financial
institution of the business.
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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