Electronic funds transfer now required for many taxpayers.

• Author: Laetch, Charles A.

Beginning in 1997, many taxpayers who currently pay their tax deposits with a check will be required to use electronic funds transfer (EFT) to pay their tax liabilities. Although die IRS regulations requiring EFT were originally written in 1994 and effective in 1995 most taxpayers were unaffected due to the high tax deposit amount thresholds. As of July 1, 1997, however, many taxpayers who do not consider themselves "large" taxpayers will be required to file using EFT.

Collection of depository taxes through implementation of the new EFT policies appears to be a priority with the Service, as evidenced by the dramatic increase in the number of taxpayers who win be subject to the new procedures and the use of penalties for noncompliance. It is estimated that more than one million taxpayers will be affected by the new deposit rules.

Depository taxes include payroll taxes, such as income tax withholding and the employee and employer portions of FICA, as well as the estimated income tax payments many taxpayers must make. Taxpayers include any person required to deposit Federal taxes, including not only corporations, but also any trust, estate, partnership, association, company and some individuals. Individual income taxes may be voluntarily remitted by EFT, but are not among the taxes required to be deposited in this manner.

Before Jan. 1, 1995, all taxpayers were required to convey depository taxes through the use of a coupon and a deposit made with a qualified financial institution. For 1996, taxpayers who made deposits of FICA and withholding taxes of less than S@@ million by this procedure during 1993 or 1994 continue to use this historic method. Starting July 1, 1997, taxpayers who paid as little as $50,000 in those taxes during 1995 will be required to make deposits by EFT Also, for 1997, the $50,000 threshold for deposits made in 1995 will include not only deposits of FICA and withholding taxes, but also all other types of depository taxes (such as those for corporate and trust income, backup withholding and Federal unemployment (FUTA)). By Jan. 1, 1999, die threshold drops to $20,000 . Once a taxpayer meets one of the thresholds for the amount of taxes deposited, all future tax deposits, including corporate, this and estate estimated income tax payments, must be made by EFT. To put some teeth in die new requirements, taxpayers who make payments by check will be assessed a 10% penalty, even if made on a timely basis.

Enrollment in the new...