Frustrated in trying to persuade small-business owners to pay taxes online, the Internal Revenue Service is turning to banks for help.
The IRS created its Electronic Federal Tax Payment System three years ago in hopes of enticing businesses of all sizes to pay their monthly and quarterly federal taxes online rather than at their banks. In recent months IRS employees have been visiting bank branches across the country and asking bankers to help sell the concept.
"There's just a lack of knowledge," said Michelle Sosa, a bilingual specialist in the IRS taxpayer education office. "So the IRS' push with banks is simply to get the word out."
For banks the selling point is supposed to be that electronic filing would reduce lobby traffic and back-office processing costs. Most small-business owners pay monthly and quarterly federal taxes by going to the bank with a check and a tax payment coupon, which banks forward to the IRS.
The selling point for the IRS, which wants to become an entirely electronic agency, is that electronic filing reduces errors by 30%, Ms. Sosa said .
The electronic system enables small businesses and self-employed individuals to file their payroll, income, and excise tax statements online and transfer money from their bank accounts to the IRS.
About 4.6 million businesses of all sizes are using the electronic system, according to the IRS. However, with the Small Business Administration reporting about 22.9 million small businesses across the country, the IRS still has a long way to go to get its message out.
Tom Davis, the team leader for the electronic tax system, said that the push to enlist banks started at the beginning of the year, when the agency first allowed businesses to make advance tax payments online.
The effort was stepped up in May, when the IRS said it would refund fines levied for late or inaccurate filings to companies that signed up to use its online payment system.
Mr. Davis said he does not know how many banks are working with the IRS to promote the online payment program, but that banks have ordered 42 million pieces of promotional materials about it this year.
One of its larger partners in the promotion, PNC Bank in Pittsburgh, has been distributing materials about electronic tax payments in all of its 800 branches.
The IRS estimates that it costs banks $2 to $4 per transaction to process payment coupons.
The electronic system "removes the paper coupon transaction from the teller who has to accept the coupon and the back office that has to process it," said Carol Thomas, the vice president of product development for Valley Independent Bank in El Centro, Calif.
Since May the $2.4 billion-asset bank has been promoting the electronic payment systems through statement stuffers and brochures provided by the IRS. And apparently Valley has had some success: Ms. Thomas said that in July about 1,900 coupons were processed, 10% fewer than when the bank started to push electronic payment.
