Small Business Accounting:

IRS Encourages Businesses to E-File

If you are a business whose tax deposits for one calendar year exceed $200,000 then you are required to use the IRS’ Electronic Federal Tax Payment System (EFTPS) starting in the second succeeding calendar year. For example if you paid out $245,000 in taxes to the IRS in 1998, then beginning in 2000, you have to start using the EFTPS. If you don’t, you will charged a 10% penalty. Any businesses that make payments from $20,000 to $200,000 in tax deposits are not required but are recommended by the IRS to use this system.

This even applies after once you start to use EFTPS and your tax deposits fall below the limit ($200,000). Following is a list of forms that EFTPS applies to:

  • Form 720, Quarterly Federal Excise Tax Return
  • Form 940, Employer's Annual Federal Unemployment Tax (FUTA) Return
  • Form 941, Employer's Quarterly Federal Tax Return
  • Form 943, Employer's Annual Tax Return for Agricultural Employees
  • Form 945, Annual Return of Withheld Federal Income Tax
  • Form 990-C, Farmer's Cooperative Association Income Tax Return
  • Form 990-PF, Return of Private Foundation
  • Form 990-T, Exempt Organization Business Income Tax Return
  • Section 4947(a)(1) Charitable Trust Treated as a Private Foundation
  • Form 1041, Fiduciary Income Tax Return
  • Form 1042, Annual Withholding Tax Return for U.S. Sources on Income of Foreign Persons
  • Form 1120, U.S. Corporation Income Tax Return
  • Form CT-1, Employer's Annual Railroad Retirement Tax Return

Enrollment forms can be obtained by calling 1-800-945-8400 or 1-800-555-4477. Tax payments can be made from the computer, telephone, or your bank or financial institution.