Regulations recently proposed by the IRS will eliminate the ability to make payroll tax deposits using paper coupons. The proposed rule changes are meant to coincide with the Treasury’s move to no longer maintain the paper coupon system after December 31, 2010.
Beginning January 1, 2011, payroll deposits must be made either through the Electronic Federal Tax Payment System (EFTPS) or for small employers (with payroll deposits below a quarterly threshold) by check with the quarterly Form 941 filings. The proposed rules will generally maintain the existing rules for depositing federal taxes through EFTPS.
The IRS noted several advantages to using the EFTPS system, including:
– 24/7 access
– Ability to make deposits from a computer or phone
– Reduction in payment-related errors that could result in “failure to deposit” penalties that are routinely imposed by the IRS
– Ability to schedule payments up to 120 days in advance when taxpayers will be out of town
The proposed regulations are expected to be finalized by the end of 2010. For more information or registration for EFTPS, please visit www.eftps.gov. Circular E and Form 941 also contain additional information on making payroll tax deposits. Your accounting professional can also assist you with this process.