Changes Ahead for Employers Making Federal Payroll Tax Deposits

Employers, put away your #2 pencils, and say goodbye to the old yellow coupon books for payroll tax deposits.

Effective Jan. 1, 2011, most employers must use the Electronic Federal Tax Payment System (EFTPS) to make federal payroll deposit payments, either by the Internet or by phone. After you sign up, EFTPS will transfer payroll tax funds from your bank account directly to the Treasury. (And by the way, you can make all federal tax payments through this service.)

New Change May Affect Your Schedule
Employers, procrastinate no more! Take note: You can’t wait until the last minute anymore to make your payroll tax deposits. According to the EFTPS, you must schedule your payment one calendar day before the due date, and pay it online or by phone by 8 p.m. Eastern time to be considered timely. (So, if you’re a creature of habit known for dashing to the bank at 4:55 p.m. on the 15th of the month to make your payroll deposit — you’ll now need to dash to your phone or computer before 8 p.m. on the 14th instead.)

Super-Small Businesses May Qualify for Exception
If you’re a small business with a federal tax liability of less than $2,500 per quarter, you may have the option of mailing a check with your annual or federal returns (call the IRS at 1-800-830-5215, as they decide which businesses qualify, not me!)

How to Enroll in EFTPS
You most likely received an IRS mailing that detailed this coming change. If you haven’t opened this envelope, it’s time to find it and do it now. While the IRS has pre-enrolled employers in EFTPS and issued each employer a Personal Identification Number (PIN), you must activate your enrollment in the program. The brochure explains how, and your assigned PIN number is included in the mailing.

Call EFTPS at 1-800-555-3453 to activate your enrollment, and follow the prompts to enter your PIN number, 9-digit Employer Identification Number (EIN), banking info and phone number. Once you complete your enrollment, follow more prompts to get a temporary log-in password to make payroll tax payments at EFTPS online.

After you activate, you can make EFTPS deposits online, by phone, or by one additional method. Some banks may still be able to make federal deposits via EFTPS on your behalf, but you’ll still need to initiate the transaction a day early (sorry.) Contact your bank for more details and any costs for this service.

The Info You Need at a Glance
Yes, it is a lot to process. Here are some answers to questions you might be asking:

I activated my enrollment and I’m ready to make a payroll tax payment online or by phone — what’s next? Go to www.eftps.gov or call 1-800-555-3453.
How do I activate my enrollment in EFTPS? Call EFTPS at 1-800-555-3453.
Who do I call if I didn’t get my EFTPS enrollment info (or can’t find it)? Call EFTPS Customer Service at 1-800-555-4477 or visit www.eftps.gov.
I think my business might be small enough to qualify for mailing payments with my payroll tax return. What should I do? Call the IRS at 1-800-830-5215 to see if your business qualifies.
I have questions about my bank and EFTPS. Who do I call? Call EFTPS Customer Service at 1-800-555-4477 or visit www.eftps.gov.
I want to know more about why this is happening. Read the Federal Register report on EFTPS.

Note: Thinking about chancing it and mailing in a old tax deposit coupon with your liability payment? That may not be the best idea. According to the IRS, they may charge you a 10% penalty for each non-electronic deposit – even if your payment is on time.

I’ll try to keep you updated on important info regarding this change. Meanwhile, if you’ve had enough already and you’d like more info on payroll tax solutions (and let someone else worry about your payroll taxes for a change), check out our online payroll software and TaxBeGone payroll tax service.

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