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IRS Says EFTPS Can Help with Payroll Tax Deposits

Make no mistake, January through April is the regular season and playoffs rolled into one for tax professionals. Perhaps because of filing season’s notorious reputation, it’s also generally the first and last time that taxpayers even think about 1040s, W-2s, and, unfortunately, their paid tax return preparer all year. That’s why many tax offices provide basic payroll services, and the Electronic Federal Tax Payment System (EFTPS) can be an essential part of the process.

Whether to retain tax clients or start pulling in some off-season revenue, basic payroll has become a pillar of many tax practices. As for what providing payroll services entails, a recent IRS press release highlighting EFTPS has a short explanation.

“Third-party payroll service providers can help assure filing deadlines and deposit requirements are met and streamline business operations,” the IRS explains. “Most payroll service providers administer payroll and employment taxes on behalf of an employer, where the employer provides the funds initially to the third party. They also report, collect, and deposit employment taxes with state and federal authorities.”

But where does EFTPS factor in?

Since electronic payment of employment tax is required by the Treasury, the IRS says it makes sense to use the platform they provide to make those deposits. But what about businesses that have a tax professional handle their payroll? EFTPS is designed to support third-party payroll services.

“Third parties making tax payments on behalf of an employer will generally enroll their clients in the EFTPS under their account,” the IRS says. “This allows them to make deposits using the employer’s Employer Identification Number (EIN).” Aside from convenience for both the tax professional and client, EFTPS is also designed with an oversight mechanism that helps both parties stay on top of payment deadlines.

When the payroll service provider sets up an account to make payments for their client, “it may generate an EFTPS Inquiry PIN for the employer. Once activated, this PIN allows employers to monitor and ensure the third party is making all required tax payments.” EFTPS accounts can even be configured to notify taxpayers when payments have been scheduled, cancelled, or returned.

If you’re interested in learned more about using EFTPS in your tax practice, visit IRS.gov and EFTPS.gov.

Source: IR-2019-171

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