Tax Advisor - U.S. Federal Tax Deposits to Be Made by Electronic Payments Rather Than Paper Coupons After 2010

The Internal Revenue Service recently issued proposed regulations which will eliminate the use of paper coupons for electronic payments for a variety of federal tax deposits, effective beginning with payments due in 2011.

Background

Under current regulations, depositors whose aggregate annual federal tax deposits exceed $200,000 generally must use the Treasury Department’s Electronic Federal Tax Payment System (EFTPS) to pay their deposits.  Depositors not currently required to use EFTPS for deposits may instead use a paper-based coupon system, a process that dates back to World War I.

Basic Effect of the Proposed Regulations

The proposed regulations require all deposits of the following federal taxes to be made by EFTPS beginning January 1, 2011:

  • Corporate income and corporate estimated taxes pursuant to Treasury Regulations (TR) Sec. 1.6302-1;
  • Unrelated business income taxes of tax-exempt organizations under Internal Revenue Code (IRC) Sec. 511 pursuant to TR Sec. 1.6302-1;
  • Private foundation excise taxes under IRC Sec. 4940 pursuant to TR Sec. 1.6302-1;
  • Taxes withheld on nonresident aliens and foreign corporations pursuant to TR Sec. 1.6302-2;
  • Estimated taxes on certain trusts pursuant to TR Sec. 1.6302-3;
  • Federal Insurance Contributions Act (FICA) taxes and withheld income taxes pursuant to TR Sec. 31.6302-1;
  • Railroad retirement taxes pursuant to TR Sec. 31.6302-2;
  • Non-payroll taxes, including backup withholding pursuant to TR Sec. 31.6302-4;
  • Federal Unemployment Tax Act (FUTA) taxes pursuant to TR Sec. 31.6302(c)-3; and
  • Excise taxes reported on Form 720, Quarterly Federal Excise Tax Return, pursuant to TR Sec. 40.6302(c)-1.

Observations

  • The proposed regulations do not change existing rules for determining a depositor’s status as either a monthly or semi-weekly depositor for employment taxes.
  • They also do not change existing rules on whether a taxpayer can remit taxes with a tax return, in lieu of making a federal tax deposit.  For example, an employer with a federal deposit liability for income taxes withheld from wages and FICA taxes (collectively, employment taxes) of less than $2,500 for a return period may, under an existing de minimis rule in TR Sec. 31.6302-1T(f)(4), continue to remit the employment taxes with its quarterly or annual tax return, use other methods of payment as provided by the instructions relating to the return, or voluntarily make deposits by EFTPS.

 

Further information on EFTPS, including how to enroll, can be found at www.eftps.gov or
by calling EFTPS Customer Service at 800-555-4477.

 

Or if you have questions on this matter, please contact:
Michael Hydell, tax manager
P: 330.255.2456
Email

 

 

Any tax advice in this communication is not intended or written by Bober Markey Fedorovich to be used, and cannot be used, by a client or any other person or entity for the purpose of (i) avoiding penalties that may be imposed on any taxpayer, or (ii) promoting, marketing, or recommending to another party any matters addressed herein. With this alert, Bober Markey Fedorovich is not rendering any specific advice to the reader.

This publication has been prepared by EisnerAmper LLP for informational purposes only. These materials do not constitute accounting, tax or legal advice and cannot be relied upon by any taxpayer for the purpose of avoiding penalties imposed under the Internal Revenue Code.

Redistributed by Bober Markey Fedorovich with permission.