The IRS encourages businesses, both large and small, to use its Electronic Federal Tax Payment System (EFTPS) to pay payroll taxes [IR-2019-171, 10-18-19]. The IRS said that “EFTPS can help employers whether they prepare and submit payroll taxes themselves or if they hire a payroll service provider (PSP) to do it on their behalf.”
Using a PSP
Treasury regulations require that employment tax deposits be made electronically and employers should ensure their third-party PSP uses EFTPS. EFTPS helps employers monitor their tax responsibilities, even if they have hired a PSP. The IRS said that EFTPS is secure, accurate, easy to use, and provides an immediate confirmation for each transaction.
The IRS recommends that employers not change their address of record to the PSP as it may limit the employer’s ability to be informed of tax matters.
Inquiry PINs for Employers
PSPs making tax payments on behalf of employers will generally enroll their clients in EFTPS under their account. This allows PSPs to make deposits using the employer's employer identification number (EIN). When PSPs do this, it may generate an EFTPS Inquiry PIN (personal identification number) for the employer. Once activated, the Inquiry PIN allows employers to monitor and ensure the PSP is making all required tax payments. Employers that have not been issued Inquiry PINs or do not have their own EFTPS enrollment should register to get their own PIN and use this PIN to periodically verify payments. “A red flag should go up the first time a PSP misses or makes a late payment,” warns the IRS.
Employers enrolled in EFTPS can make up any missed tax payments and keep making tax payments if they change PSPs. They can also update their information to receive email notifications about their account's activities.
To learn more about federal and state laws, regulations, and information to keep your company's payroll operations in compliance, check out Payroll Source Plus!
Jyme Mariani, Esq., is Managing Editor of Payroll Currently and Payroll Information Resources for the APA.