The IRS has issued proposed regulations, effective January 1, 2011, relating to employers’ remittances of federal employment taxes. The proposed regulations would no longer permit employers to make deposits via paper tax-deposit coupons. Instead, employers would remit federal employment taxes (including income-tax withholdings, FICA, and FUTA tax) electronically or by phone by means of the Electronic Federal Tax Payment System (EFTPS). While these proposed regulations are not final, we want to provide you with some advanced notice so that you can begin preparing for the new deposit rules. Final regulations are expected to be issued by December 31, 2010.

No More Paper

As part of the IRS’ Financial Management Service initiative announced earlier in the year, federal tax deposits are expected to almost exclusively transition from a paper-based system to the EFTPS beginning in 2011. As a result, the regulations would eliminate the rules pertaining to making federal tax deposits by paper coupon (i.e., Forms 8019 and 8109-B) after December 31, 2010. Instead, the regulations generally would adopt existing rules relating to making federal deposits under the EFTPS. The rules would allow some businessesto pay a minimal amount of tax to make their payments with the related tax return, rather than through the EFTPS.

Flexibility

The IRS states that adopting the electronic remittance system benefits taxpayers as well as the federal government.

 Specifically, the flexibility and versatility of the EFTPS significantly reduces payment-related errors that could result in a penalty. Employers using the EFTPS can make tax payments 24 hours a day, seven days a week, from virtually any location.

 Under the system, employers can schedule for tax payments to be made during a period of time when they are out of the office temporarily or for a protracted period of time. And the EFTPS enables users to arrange for tax payments to be made up to 120 days in advance of the intended payment date.

 Let Us Help

If you have any questions about depositing federal employment taxes, please let us know. We can assist you in determining your tax-deposit requirements and how best to satisfy those requirements. We are always ready to help.