Tax Tip of the Week – IRS Expands Use of Electronic Payments, Discontinues Paper Coupons

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Electronic-payments The IRS has issued proposed regulations that would eliminate paper coupons for deposits of employment taxes, corporate income and estimated taxes, and many other taxes (REG-153340-09). The paper coupon payment system will be shut down at the end of this year.

With this change, business taxpayers will be required to use the IRS’ Electronic Federal Tax Payment System (EFTPS) to make federal tax deposits of various withheld and estimated taxes. The introduction to the proposed regulations notes that over 97.5% of all federal tax deposits are already deposited electronically through EFTPS.

The proposed regulations do continue the exception for businesses that are depositing a minimal amount of withheld income and FICA taxes. Businesses that qualify can make their payments with their tax returns. Employers with a deposit liability of less than $2,500 for a return period can remit employment taxes with their quarterly or annual return.

The proposed regulations will require the following taxes to be deposited electronically:

1. Corporate income and corporate estimated taxes

2. Unrelated business income taxes of tax-exempt organizations

3. Private foundation excise taxes

4. Taxes withheld on nonresident aliens and foreign corporations

5. Estimated taxes on certain trusts

6. FICA taxes and withheld income taxes

7. Railroad retirement taxes

8. Non-payroll taxes, including backup withholding

9. Federal Unemployment Tax Act (FUTA) taxes

10. Excise taxes reported on Form 720, Quarterly Federal Excise Tax


As proposed, the new rules would be effective for payments made on or after the date the final regulations are published in the Federal Register, but no earlier than Jan. 1, 2011, and the IRS says it expects to finalize the regulations before then.

If you have any questions, feel free to call our office at 915-857-8158. We will be more than happy to answer any questions.