Question: Why did the IRS penalize me 10 percent for sending them a check to pay my payroll taxes?
Answer: Beginning January 1, 2011, the Treasury Department eliminated the system that processed the yellow coupon books (Form 8109) that most small business owners brought to the bank in order to pay their required federal tax deposits for payroll, income tax estimates, and extension payments. Now taxpayers are required to make all of these tax deposits using the Electronic Federal Tax Payment System (EFTPS). Failure to do so can result in a 10 percent penalty.
In order to enroll in the EFTPS system, small business owners should go to www.eftps.gov or by calling 1-800-555-4477.
New businesses that indicate a federal tax obligation when requesting their Employer Identification Number (EIN) will automatically be pre-enrolled in EFTPS. They will then be mailed instructions on how to activate their enrollment.
If you must pay by check in order to avoid a late payment penalty (due to problem with EFTPS or while waiting for the temporary PIN), you must be able to prove that you mailed it in at least two days before the due date to the following address:
P.O. Box 970030
St. Louis, MO 63197
Be sure to write your company’s EIN and specify the tax period being paid.
If you receive a penalty notice, you should 1) enroll in the EFTPS and 2) write a letter responding to the penalty notice requesting abatement. Be sure to enclose proof that you enrolled. Even though we have had success doing this, I won’t promise that they will abate the penalty. The IRS is seldom consistent in their treatment of taxpayer penalty abatement requests. But I know it won’t work if you don’t at least try!
Like any good CPA, I need to add a disclaimer: Unfortunately, it is impossible to offer comprehensive tax info over the Internet, no matter how well researched or written. And remember, I love my readers but having me bookmarked on your computer doesn’t make you a client: before relying on any information given on this site, contact a tax professional to discuss your particular situation.