Many bankers and corporate clients are still in the dark as to the rule changes for electronic federal tax deposits scheduled to take effect Jan. 1, officials with the Treasury Management Association say.

Arlene Chapman, standards manager with the Bethesda, Md.based association, said that the IRS' requirement that corporations submit enrollment applications 10 weeks in advance cut too close to the start-up date.

"Taxpayers subject to the electronic mandate in 1995 had not received specific notice from the IRS as of Sept. 12, which will leave them barely enough .time to make the internal company changes that will be necessary," the trade group said in a written release.

The Nafta Implementation Act signed in January prescribed that the IRS must issue electronic federal tax regulations within 210 days. The agency issued temporary regulations in July.

In response to the trade group's claim that proper notice had not been sent, IRS officials claimed they had in fact sent letters to corporate heads on Sept. 12.

"We are currently receiving calls in response to the letters," said Lillie McCracken, IRS project manager for cash management systems. "We are assisting them now, and sending them enrollment packages and additional information. There's no requirement for electronic enrollment."

The first to be affected are corporations with tax bills in excess of $78 million annually. Various estimates predict between 650 and 800 corporalions to be affected. The tax threshold for corporations will then be lowered in stages over the following years to $20,000 dollars by 1999.

Before finalizing the regulations, the IRS will hear comments at a public hearing slated for Oct. 3. Ms. Chapman said the association hopes to discuss changing provisions in the payment requirements.

One change it will be discussing is eliminating distinctions in liability provisions between the automated clearing house credits and debits.

The association believes that ff the taxpayer using these credits issues correct and timely instructions, there should not be a penalty.

Another change the group will bring up is in the use of Fedwire on an equal basis with the automated clearing house.

"Paying by Fedwire will help both large corporations and the government reduce daylight overdrafts and risk within the system," Ms. Chapman said.

"If a company had to pay fees for daylight overdrafts, or had to maintain idle balances to cover an early morning tax payment debit, then that would represent an added cost of paying taxes. Fedwire enables corporations to better manage the timing of funds transfer," Ms. Chapman added.

The IRS and the Financial Management Service detailed how the government's new Taxlink system has served as a prototype of future tax payments at a cash management conference in New York earlier this month.

The FMS, the arm of the Treasury that provides cash management services for the government, developed a plan called the Treasury Investment Program. With the new system, FMS sought to reduce the float under the current system. Chris Kubeluis, project manager with the FMS, said one of the objectives of the program was to keep funds in the banking system "to the maximum extent possible.

"The size of the Treasury's balance is the single largest market that affects the level of reserves in the banking system," he aid.

Since 1992, Taxlink has been in a controlled test with a limited number of participants, but the system has experienced a fasterthan-expected rollout since the changes in the tax code.

The IRS is in the midst of sweeping changes in the tax collection system, said Sandy Overland, manager of the cash management systems project office. During the conference presentation, she said the agency wanted to "modernize" its cash management system and to increase compliance among taxpayers.

As a result of the tax changes, Ms. Overland said, the list of taxpayers using Taxlink has grown to more than 12,000, with about $6 billion processed. This is still just a small percentage of the IRS' total volumes and dollar figures. In 1993, the agency processed 198 million transactions that resulted in revenues of $1 trillion.

Mr. Kubeluis said three versions of the system are in test phases: one at Federal Reserve Bank of Minneapolis, one at Mercantile Bank of St. Louis, and one at First National Bank of Maryland.

"The idea was not to have a contest between the three systems, but rather to find out what is meeting the taxpayer needs and what is not;' Mr. Kubeluis said.

"It's still a temporary system," Ms. Chapman said. "The government hasn't yet selected a vender to provide the final product."

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