Web Tax-Payment System Launched
Uncle Sam will now let individuals pay taxes electronically over the Internet thanks to a program announced Thursday.
The agency, which has been testing an Internet-based payment system with corporate taxpayers since January, said it will now open the Web-based system to the general public.
“We are trying to meet taxpayer expectations,” said Terry Lutes, director of electronic tax administration for the IRS. “Our growth ought to keep pace with people’s comfort with online banking.”
The system, called the Electronic Federal Tax Payment System OnLine, or EFTPS for short, does not allow individuals to file their returns electronically. They still must go through an intermediary, such as a software company or professional preparer, to do that. But it will allow Americans to have their tax payments automatically deducted from their bank accounts and check their deposit history online.
The IRS expects the new system to appeal to the 10 million self-employed people--such as small-business owners, doctors, lawyers and accountants--who have to make quarterly estimated tax payments each year.
“This is certainly more convenient,” said Brenda Schafer, senior tax research coordinator at H&R; Block in Kansas City, Mo. “The thing that really impressed me is that you can set it up and go. You don’t have to think about it. You don’t have to worry about whether your check was lost in the mail. And you’ll never make a payment late again.”
An earlier generation of this system allowed individuals and businesses to pay taxes by phone or automatic debit, but the process was far more cumbersome. Taxpayers had to install special software on their computers and dial directly into the Treasury’s computer system to use it.
Still, about 3.5 million businesses and 12,000 individuals signed up for the old system--mainly because it provided a payment history that businesses could use to verify their deposits were credited properly, the IRS said.
To use the EFTPS via the Internet, taxpayers go to https://www.eftps.gov, where they’ll sign up for an account and receive a personal identification number. The IRS will then mail a confirmation kit, a PIN and information about how to set up an Internet password.
Taxpayers can schedule estimated payments as much as a year in advance--or as late as one day before the tax is due. Scheduled payments can be canceled up to two days before the date they’re supposed to be made.
There is no charge to enroll. In fact, the IRS estimates that the system will save the government money by eliminating lost checks and key-punch errors and will reduce delays in processing checks.
The agency declined to reveal how much it expects to save, however. Paper-based systems are 19 times more error-prone than these electronic ones, Lutes said. Both systems have less than a 3% error rate.
Although all taxpayers can use the EFTPS, the agency doesn’t expect most to use it simply because they pay the bulk of their taxes through employee withholding.
Workers who owe taxes at year-end have a simpler option than EFTPS, Lutes said. They can fill out a short form with bank account information, and the IRS will automatically debit their bank accounts on the day the taxpayers specify. In other words, a taxpayer who filed in January could instruct the IRS to deduct the tax due from his or her bank account on April 15.
Getting taxpayers to file electronic returns has been a high priority for the IRS for several years, but the agency has no plans to offer direct Web-based filing.
Dozens of software and tax-preparation firms already provide efficient electronic filing--some at no or low cost, Lutes said. The IRS provides links to some of these services on the agency’s Web page (https://www.irs.gov) and doesn’t aim to compete with private industry, he said.
About 40 million of the nation’s 120 million taxpayers file electronically.
