WASHINGTON - Bank of America Corp. and Bank One Corp. stand to benefit if as many businesses and people choose to pay their taxes on the Internet as the Internal Revenue Service predicts.
The two banking companies run the IRS's electronic federal tax payment system, which Treasury Department and IRS officials opened to the broader public with great fanfare on Thursday.
"Technology can do wonderful things," Deputy Treasury Secretary Ken Dam said at a press conference introducing eftps.gov, a Web site that lets users pay their corporate and individual income taxes and monitor their account status.
"Unfortunately, it cannot eliminate paying taxes," he said, "but it can make it easier."
Traditional middlemen could lose business, however.
Banks already collect income taxes for the government. However, traditional "lockbox" systems - in which banks receive and process checks to the IRS and deposit the funds into a Treasury account at the Federal Reserve Bank of New York - have drawn heightened scrutiny after reports of fraud and negligence.
Last month, Mellon Financial Corp. in Pittsburgh lost its contract to provide lockbox services for the Northeast after admitting that employees had hidden or destroyed hundreds of tax payment records. Similar cases were unearthed in a report issued by the General Accounting Office last year.
"The Mellon case shows the value of using an electronic system where there is no paper" to lose or mishandle, IRS Commissioner Charles O. Rossotti said at the press conference.
Since 1996, 3.5 million filers using special software have made payments on the system, and the IRS predicts the total will grow now that the service has been made accessible to more users by being placed on the Internet.
Until now, corporations owing more than $200,000 a year in taxes - which by law must pay electronically - have accounted for the bulk of the nearly $6 trillion the federal government has collected through the system since 1996.
Now any Internet user can log on to the Web site, register, and begin making quarterly estimated payments.
Though not revealing the size of Bank One's contract with the IRS, Stan Dietzel, a senior vice president, said the company gets a flat fee for maintaining the electronic federal tax payment system and takes a per transaction fee on some items. Therefore, as more people switch to online payments, Bank One and Bank of America would make more money, he said.
The banking companies and the IRS have been testing the system for two years, and both sides said they feel assured that the site has the utmost security and protections for confidential data.
Mr. Dam said that to ensure security the site requires multiple passwords and code numbers that are mailed to the user for confirmation.
Businesses and the self-employed, who must pay taxes quarterly, will reap the most benefits from the system, he said. People who only pay taxes once a year may use the system, which is free, but others may find it unnecessary and stick to paper checks, credit cards, or other existing payment methods.
Users will get a confirmation number each time they make a payment, and this can be used to track the payment. The system also allows them to check their payment history.
The system is only for payments; it cannot be used for filing tax returns. Taxpayers may continue to file returns using commercial software or by mailing in paper.
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