According to research conducted by the Internal Revenue Service (IRS), businesses that pay their taxes using the Electronic Federal Tax Payment System (EFTPS) have significantly fewer IRS penalties assessed.

EFTPS is a service offered free from two agencies of the U.S. Department of the Treasury, the IRS and the Financial Management Service. The system enables taxpayers and tax professionals to make federal tax payments electronically using EFTPS-OnLine, EFTPS-PC Software, EFTPS-Phone, or EFTPS Batch Provider software for professionals.

The research analyzed 68,000 taxpayers, and compared the penalties assessed to EFTPS users with the penalties assessed to taxpayers that use a paper check and Federal Tax Deposit (FTD) Coupon to make payments for Form 941 (Employer's Quarterly Federal Tax Return). The study showed that non-EFTPS users were 31 times more likely to be assessed a penalty than EFTPS users.

"We believe this shows one of the hidden benefits to EFTPS—the ability to schedule payments in advance to avoid penalties. The system helps taxpayers set up dates on which payments will be made even if they are out of town or on vacation when a payment is due," according to Robert Hunt, IRS Director, Taxpayer Education and Communication. "EFTPS takes the worry out of remembering the deadlines."

"This also says a lot about EFTPS users. They use the system to their benefit to maintain a consistent and accurate tax payment record," says Hunt.

"We have always noted the high accuracy rate of EFTPS. The rate for EFTPS is 99.9%, almost 19 times more accurate than paper coupons. This study reinforces that EFTPS provides taxpayers with a more accurate tax payment method that can ultimately help them avoid and alleviate penalties."