Treasury Announces Electronic Requirements for Payroll Taxes


By Barbara Balcita

The Department of Treasury announces electronic requirements for all payroll tax deposits and government benefits and eliminates the purchase of U. S. Savings Bonds through payroll.
The U.S. Department of Treasury announced on April 19, 2010 that it will be eliminating Form 8109, Federal Tax Deposit coupons, paper checks for government benefits, and paper option for payroll deduction for U.S. Saving bonds starting in 2011.

Under current law, businesses who have a designated federal tax liability of over $200,000 in the prior calendar year or have been required to pay electronically in the current or prior years must us the Electronic Federal Tax Payment System (EFTPS). (Designated Federal taxes include employment taxes, income taxes, Railroad Retirement taxes, Social Security taxes and various other types of nonpayroll withholding.) All others may use the Form 8109 to paper file their deposits.

Beginning January 1, 2011, all payments for designated Federal taxes must be made through EFTPS. There is a provision for very small employers to be exempt from this requirement (a very small employer is one that has $2,500 or less in quarterly taxes).

Failure to make payments using EFTPS could result in a 10% failure-to-deposit penalty. EFTPS is a free service provided by the Department of Treasury. To find out more about EFTPS or to enroll, call 1-800-555-4477 or visit www.eftps.gov.

The Department of Treasury anticipates that the use of EFTPS will reduce errors and save an estimated $65 million in the first five years.

The Department of Treasury will require all Social Security, Supplemental Security Income, Veterans, Railroad Retirement and U.S. Office of Personnel Management benefits to be received by direct deposit into their account at a financial institution or through the Direct Express program effective March 1, 2011 for new enrollees and March 1, 2013 for existing recipients. The Direct Express program is a prepaid debit card that the individual will use to access their funds.

In conjunction with this new direct deposit mandate, the Department of Treasury intends to issue a notice of proposed rulemaking reaffirming that the account name must match the beneficiary of the federal benefits and not a third party. The Department of Treasury wants to prohibit payday lenders from receiving payments for multiple beneficiaries. Nursing homes and similar facilities, however, will be allowed to have master account.

In addition to these new electronic payment requirements, the Department of Treasury will no longer allow individuals to purchase paper U.S. Savings bonds through payroll deductions after January 1, 2011 (for federal government employees, the cut-off is September 30, 2010). This does not mean that paper U.S. Savings Bonds are being phased out. They will still be sold through financial institutions. Americans can purchase electronic U.S. Savings Bonds through Treasury Direct.

Schneider Downs provides accounting, tax, wealth management and business advisory services through innovative thought leaders who deliver the expertise to meet the individual needs of each client. Our offices are located in Pittsburgh, PA, and Columbus, OH

This advice is not intended or written to be used for, and it cannot be used for, the purpose of avoiding any federal tax penalties that may be imposed, or for promoting, marketing or recommending to another person, any tax related matter.

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