More than 1.2 million business taxpayers are required to make their federal tax payments electronically through the Electronic Federal Tax Payment System this year.
Other businesses will be phased into the program over the next four years on the basis of their tax obligations. By 2000, six million companies-90% of business taxpayers-will pay an estimated $1 trillion in federal income taxes electronically.
The electronic system will replace the method of business taxpayers bringing a paper coupon and a check to their bank before the tax is due. Taxpayers do not need to purchase any equipment or change banks.
The government benefits from this new process because it receives the payments faster and can eliminate a labor-intensive process of processing tax payments by hand. Businesses are not required to pay their taxes any earlier than they did using the paper system.
The Internal Revenue Service selected NationsBank Corp. and First Chicago NBD Corp. to build the electronic tax payment system. NationsBank serves the northern half of the country and First Chicago serves the south.
Taxpayers do not need to open accounts with NationsBank or First Chicago to use the electronic payment system. Tax payments will flow directly from the businesses' bank accounts to the Internal Revenue Service through the Automated Clearing House system.
So far, 977,000 business taxpayers have used the electronic payment system, which has processed two million transactions totaling $73 billion.
The electronic tax payment system does not charge banks or taxpayers any processing fees, but the taxpayer's financial institution may charge a fee for originating the transaction.
The IRS automatically sends business owners an enrollment form before the company is required to pay electronically. The enrollment form requires taxpayers to provide their taxpayer identification number, name, bank account number, routing number, and transfer number. Anyone who writes a check is required to provide the same information.
Business owners will receive an instruction booklet and a personal identification number, which is mailed separately, to use to make their payment.
Business owners can make their payment using a telephone or a personal computer. There are three payment methods-Automated Clearing House credit, Automated Clearing House debit, and same day transfer.
With the Automated Clearing House debit, business owners must report the amount of their payment and the date they want the electronic payment system to transfer the money at least one day before the tax is due.
Business owners should check that their bank can originate an Automated Clearing House credit before they choose this method. The primary difference between the Automated Clearing House credit and Automated Clearing House debit is that the taxpayer, rather than the electronic payment system, originates the transfer.
When business owners make their payment, they receive an acknowledgement number, which serves as evidence that the payment has been made using the electronic payment system.
Business owners who cannot report their tax payment before it is due can use the same day transfer, which also serves as a backup payment method.
With all three methods, the IRS has no more access to the business' bank account than it would if the business owner writes a check. Business owners must use their taxpayer identification number and personal identification number to access the electronic payment system. The IRS cannot initiate transfers from the taxpayer's account.
Anyone can use a voice response tutorial that guides taxpayers through the process of making their payments electronically. The telephone number is 800-572-8683. The electronic payment system also operates two telephone numbers, 800-605-9876 and 800-945-7900, to help financial institutions use the system.