Get Ready for Electronic Payments

As of late August the IRS has proposed regulations that would eliminate paper coupons for deposits of employment taxes, corporate income and estimated taxes, and many others as the paper coupon system would no longer be maintained by the Treasury Department after December 31, 2010. The IRS expects to finalize this regulation by the end of this year but they are not to take effect before January 1, 2011. With this change, the IRS will require taxpayers to use their Electronic Federal Tax Payment System (EFTPS) to process federal tax deposits.

As proposed, the regulations will require the following taxes to be deposited electronically:

• Corporate income and corporate estimated taxes
• Unrelated business income taxes of tax-exempt organizations
• Private foundation excise taxes
• Taxes withheld on nonresident aliens and foreign corporations
• Estimated taxes on certain trusts
• FICA taxes and withheld income taxes
• Railroad retirement taxes
• Nonpayroll taxes, including backup withholding
• FUTA taxes
• Excise taxes reported on Form 720

It is worth noting that the proposed regulations due keep intact the exception for businesses that are depositing a minimal amount of withheld income and FICA taxes. These businesses that qualify can simply make their payments with their tax return.

As we move into the final months of 2010 and these regulations draw closer to becoming permanent and effective, please be aware that your method of paying taxes may need to change if you currently use paper coupons. If you fall into this category and are not sure where to start, please contact your CPA as they should be able to guide you through getting set up on the EFTPS payment system.

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