What is EFTPS?

New business? Then you've no doubt received a standard letter from the IRS outlining EFTPS - the Electronic Federal Tax Payment System. However, don't fret – this system isn't a complicated set of tax forms that you have to spend hours sifting through. It makes paying your federal and estimated taxes fast, simple, and headache-free. Keep reading to learn more or talk to Decimal to get your tax questions answered.

Let's break it down below. 

What is EFTPS?

EFTPS was first started all the way back in 1996 to help move the tax-paying process from a paper system to an electronic one. It is a service provided by the U.S. Department of Treasury that helps you pay your taxes online for 100% free. You can make EFTPS payments by phone or online, 24 hours a day, 7 days a week. 

Even better, its newest updates make it easier and more convenient than ever to pay your federal taxes to the Internal Revenue Service (IRS) and keep your business in check. 

What Do You Use EFTPS For?

Once your business begins paying salaries/wages to yourself and (or) employees, payroll tax payments can be made through the EFTPS system. Also, quarterly estimated payments may be required if you expect to owe more than $1,000 in federal income taxes at the year's end. 

What is the Difference Between IRS and EFTPS?

The IRS is a U.S. federal agency that collects tax payments and enforces federal tax laws. That includes tax administration, like audits and tax returns. 

EFTPS is a service provided by the IRS for businesses to make those required tax payments securely and conveniently. 

Why Would I Get a Letter from EFTPS?

Although you may not currently be required to file payroll taxes or quarterly estimates, you may still receive this letter, and it's important to hold onto it for future reference. It contains all the valuable information you'll need to make electronic tax payments in the future.

If you've already used EFTPS, you may receive a letter with updates or further information, such as registration or payment confirmation, account changes or security alerts. 

Which is Better: IRS Direct Pay or EFTPS?

Both IRS Direct Pay and EFTPS are free tools provided by the IRS to make tax payments. However, IRS Direct Pay is geared more towards individuals who have to make one-time payments and can do so directly through their bank accounts. 

EFTPS, on the other hand, is better for businesses that need to make regular or frequent payments. It can also be used to pay a more wide variety of taxes than just income payments. EFTPS also requires a more comprehensive registration process, which is outlined in our handy FAQ section below. 

If you're a business, you'll want to opt for EFTPS to handle all of your tax payment needs.

Who Needs to Use EFTPS?

Businesses with employees will need to use EFTPS for income tax withholding, social security tax, and Medicare tax. However, self-employed individuals can also use the system to pay to make quarterly estimated tax payments if they have a tax liability of $1,000 or more. 

Does EFTPS Charge a Fee?

No! EFTPS is 100% free. However, as with most tax payments, banks may charge a fee for electronic transfers. It's worth checking beforehand so as to avoid any surprise charges. 

What Taxes Do You Pay on EFTPS?

Beyond income, payroll, and estimated taxes, you can also pay excise taxes on various goods and services. These usually include goods like fuel, tobacco, and alcohol. These taxes are paid by businesses and are included in the cost of the product, though they aren't seen directly by the consumer. 

Another type of tax you can pay is estate and gift taxes. Estate taxes include taxes paid on the transfer of property after death. Gift taxes include the transfer of property from one person to another without receiving anything of value in return. However, these taxes aren't usually a primary concern for businesses. 

How Often Do You Have to Pay EFTPS?

This all depends on the size of your business and the amount of tax you owe. For instance, individuals paying self-employment taxes are required to make quarterly payments, usually in April, June, September, and January of the following year. On the other hand, payroll taxes could be due on a semi-weekly or monthly basis, depending on your tax liability. 

Keep in mind that tax due dates and amounts can change on a yearly basis – and the growth of your company. Feel free to contact our team to set up a free consultation in which you can discuss the matter with our tax partners. 

How Do I Pay Quarterly Taxes Without EFTPS?

If you'd like to use another method for paying your taxes, you can do one of the following:

• Pay by mail: You can send mail a check or money order to the IRS via the address found on your Form 1040-ES.
• Pay by phone: You can call the IRS at 1-800-829-1040 to have the payment process handled over the phone.
• Pay in person: You can pay in person at a designated tax location, as listed on the IRS website. 
• Through a tax professional: Lastly, you can hire an outside tax professional to handle the entire process for you. 

Common EFTPS FAQs

Still have some EFTPS questions? Below, we've got answers to some of the most commonly asked questions about the process. 

How Do I Pay My Taxes Through EFTPS?

Step 1: To enroll online, you will need to collect your taxpayer identification number, banking account number, routing number, address, and name as they appear on your IRS tax documents.

Step 2: Follow the online instructions and select "enrollment," "business," "individual," or "federal agency."

Step 3: Enter the requested information and submit. In seven business days, you will receive your PIN in the mail.

Step 4: To get your password, go to EFTPS.gov and log in. Click on "Need a Password" and enter your EIN, SSN, and PIN. Verify your banking information or your EFTPS® enrollment number and select "next."

Step 5: Make your EFTPS® payment by going to www.eftps.gov and selecting "Make a Payment." After logging in with your EIN, PIN, and password, enter your payment information. Once completed, save a copy of the confirmation page as your receipt.

What New Features Have Been Implemented by EFTPS?

Based on feedback from users, the following updates have been made to the EFTPS® website. Take a look and find out which of the new features on EFTPS® may benefit you the most during this tax season. You can now:

● Receive your confirmation by email

● Verify the bank account that will be used when making a payment

● Change the bank account used for an EFTPS® payment

● Self-select your PIN when creating an additional enrollment

● Terminate an enrollment you are no longer using

Is EFTPS safe?

It's recommended that you enable JavaScript when utilizing the site to make EFTPS payments. To provide additional protection for your sensitive tax data, firewalls, and internal security policies have been put into place by the U.S. Department of Treasury. Every interaction on the site is secured by three types of authentication. The site also reminds users that though their PIN may be requested to verify identity when making EFTPS payments by phone, their password should never be requested.

Why Should I Use EFTPS?

It's fast. EFTPS payments by phone or online can be made in minutes from anywhere that has an internet connection or phone service. It's also easy to use, thanks to a step-by-step guide. And most importantly, it's secure. Thanks to multiple security measures put into place to safeguard your private income tax info, you can feel confident that your information is safe.

Are There Any Penalties for Not Using EFTPS? 

While you aren't required to use the EFTPS system to make your tax payments, if you're required to make electronic payments, you could face some hefty penalties. Again, this comes down to yearly required tax liability amounts, so it's worth double-checking to see what you must pay to avoid underpaying or any missed payments.

Pay Your Taxes on the Right Foot

We all know taking care of our taxes is a must – but it can be daunting taking the task all on your own, especially if EFTPS is a completely new system to you. Luckily, Decimal has a network of partners specializing in everything related to taxes. Reach out today; we can coordinate all the help you need to answer tax questions and solve your financial operations.

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