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FACT SHEET: 31 CFR 203: Payment of Federal Taxes and
the Treasury Tax and Loan Program Final Rule

Updated October 14, 2003

Provisions of the Final Rule | Background | Contact Information
Statutory Authority| Other Related Information

The Financial Management Service (FMS) published a final rule in the Federal Register on February 3, 1998, amending Title 31 of the Code of Federal Regulations (CFR) Part 203, "Payment of Federal Taxes and the Treasury Tax and Loan Program." With this rule, the FMS achieved one of its longstanding goals of implementing an electronic means for collecting corporate withholding taxes, the Electronic Federal Tax Payment System (EFTPS). Title 31 CFR Part 203 provides regulations for financial institutions and Federal Reserve Banks (FRBs) handling the payment of Federal taxes by business taxpayers. In fiscal year 1997, nearly $750 billion of the $1.25 trillion total received for corporate withholding taxes was collected electronically.

Provisions of the Final Rule

• Adds five electronic payment options: the future-day payment methods are Automated Clearing House (ACH) debit and credit; the same-day payment methods include Fedwire Non-Value, Fedwire Value, and Direct Access transactions.

• Eliminates the need for financial institutions to be authorized as Treasury tax and loan (TT&L) depositaries in order to process Federal taxes paid through the EFTPS.

• Attempts to mirror current industry National Automated Clearing House Association (NACHA) standards wherever the interests of the government are not jeopardized. Specifically, a financial institution may initiate an ACH credit reversal without prior IRS approval, and the waiting period between the origination of a prenotification entry and the first payment for an ACH credit will follow NACHA rules -- currently six business days.

• Eliminates the requirement that TT&L note option depositaries must accept and process Federal Tax Deposit (FTD) coupons.

Background

Nearly 11,000 financial institutions process Federal tax deposits for the Treasury. Under the paper FTD tax payment process, business taxpayers present tax payment to a designated TT&L depositary accompanied with a Federal Tax Deposit coupon, Form 8109, on the day the tax is due. The financial institution deposits the payment into a non-interest-bearing account. The next day the tax funds are withdrawn by the FRB when it receives an Advice of Credit, Treasury Form 2284, supporting the deposit amount information. Then the funds are either credited to the Treasury General Account at the FRB or invested with the financial institution in interest-bearing notes.

In 1990, the FMS began development for the collection of Federal taxes electronically. Various tests were conducted along with a nationwide marketing and research project to evaluate the feasibility of an electronic tax collection system. From the test results, the EFTPS was developed. It was designed to reduce the burden of compliance on taxpayers by providing various low cost electronic payment methods to supplement the paper FTD system. With EFTPS taxpayers may take care of tax payments with either a phone call to one of Treasury's financial agents to initiate a debit to their account, or by contacting their financial institution to initiate a next day or same day electronic payment.

EFTPS increases the efficiency, speed, and accuracy of tax collection by converting a paper system to an electronic system. With EFTPS, the time-consuming manual processing necessary with the paper FTD system is eliminated. Furthermore, EFTPS will accelerate the flow of tax deposits to the Federal government by one business day which will enhance Treasury's cash management investment decision making capabilities, increase revenue, and save taxpayer dollars. Everyone benefits with the EFTPS: the business taxpayer enjoys a variety of easy and secure payment options; the Federal government experiences improved cash management, and the financial institution sees the elimination of the paper process.

To enroll in the EFTPS, taxpayers may call Treasury's financial agents at either: 1-800-555-4477 or 1-800-945-8400.

Statutory Authority

Authority: 12 U.S.C. 90, 265-266, 332, 391, 1452(d), 1464(k), 1767, 1789a, 2013, 2122, and 3102; 26 U.S.C. 6302; 31 U.S.C. 321, 323 and 3301-3304.

Other Related Information

31 CFR 203: Payment of Federal Taxes and TT&L Program; Final Rule
Electronic Federal Tax Payment System (EFTPS)
Automated Clearing House (ACH)

Any questions about EFTPS, please call EFTPS Customer Service at 1-800-555-4477 or 1-800-945-8400 24 hours a day, 7 days a week.

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