The EFTPS has been compulsory since January 1, 2011. However, those not wanting to use it can arrange with a third party, such as a bank, online payroll service, or financial institution to make the transfers of the taxes due for them. The EFTPS, however, is free for you to use, and others might charge you fees.
The types of taxes one can pay using the Electronic Federal Tax Payment System include all federal employment taxes, federal corporate income taxes, and federal excise taxes.
Be careful NOT to send any of your state payroll taxes or state income taxes to the Federal Internal Revenue Service (IRS) using the EFTPS! You’ll find it difficult and time consuming to get this error unraveled.
Prior Federal Tax Forms:
Prior to December 31, 2010, employer’s could use Form 8109 and Form 8109-B – the Federal Tax Deposit Coupon — to transfer their federal payroll taxes to the IRS. The Form 8109 or Form 8109-B could be taken to the local bank with the funds that were due. By using the EFTPS many accounting steps are eliminated, which makes the system more efficient and economical to run.
EFTPS payments not made on time are subject to a failure-to-deposit penalty of up to 10%. This penalty is separate from any penalty for not filing your IRS Form 941, Form 944, or Form 945 on time.
When you make your deposit you will be provided with an Electronic Funds Transfer (EFT) Trace Number. Be sure to keep this number, as it is your receipt and you might need it to trace your payment if a question about it arises.
Very Important Electronic Federal Tax Payment Point:
For an Electronic Federal Tax Payment System deposit to be considered ‘paid on time,’ you need to make it THE DAY BEFORE IT IS DUE, and by 8:00pm EST.
If you miss this deadline, what can you do? IRS has provided an option: Use the Federal Tax Application (FTA) option. To do this, you need to coordinate with your bank or financial institution ahead of time, and there will probably be costs involved.
Payroll Service for Small Business:
At Payroll Services for Small Business site we aim to provide basic payroll and accounting information about various IRS forms. Why? Because Federal Tax Forms are a challenge for most small business entrepreneurs.
We always encourage you to follow your legal counsel’s advice or your professional adviser’s advice, as we do not intend to give out legal advice or practice law. We want to point you in the direction where you are well-armed with basic information about payroll processing and can make solid decisions regarding your payroll services. We hope to reduce the fees you pay to your professional advisers by giving you the basics.
As a small business owner, your time is best spent on running your business and managing your employees, not struggling with payroll taxes, reports and transmittal of funds.
If you are outsourcing payroll or choose to use an online payroll service, you will have many of your payroll questions answered by them. Still, it is best to know what they are talking about and avert any danger that has not yet come! You’ll find the Electronic Federal Tax Payment System helps simplify your payroll processing.