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Sunday, April 08, 2007

DO YOU NEED TO PAY YOUR FEDERAL TAXES ELECTRONICALLY?

EFTPS is the Electronic Federal Tax Payment System developed by the U.S. Treasury Department that enables taxpayers to pay their federal taxes electronically. The system allows taxpayers to use the phone, personal computer (PC) software, or the Internet to initiate tax payment reports to EFTPS directly. Any individual taxpayer making payments for Forms 1040, 706 estate, 709 gift taxes or installment payments can use EFTPS-OnLine. Business taxpayers can also use the EFTPS system. The system allows business taxpayers to eliminate paper Federal Tax Deposit coupons and individual taxpayers to eliminate paper vouchers.

Some business taxpayers are required to use EFTPS. Specifically, if your total deposits of designated federal taxes (including employment taxes, income taxes, Railroad Retirement taxes, Social Security taxes, and various other types of non-payroll withholding) during a calendar year exceed $200,000, you are required to use EFTPS beginning in the second succeeding calendar year. For example: if you had more than $200,000 in deposits of designated taxes in calendar year 2002, you will be required to use EFTPS beginning January 2004. Once you are required to use EFTPS, you will continue to be required in subsequent years, even if your annual tax deposits fall below $200,000.

A 10% penalty will apply if you are required to use EFTPS but instead pay your taxes by check. However, if you voluntarily use EFTPS (that is, you are not required under the above criteria to use it) and then stop using it, the penalty will not apply.

For more information, visit the EFTPS website at https://www.eftps.com/eftps/home.do.
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