IRS Offering a Penalty Rebate for Enrolling in EFTPS
The Internal Revenue Service's (IRS) has announced nationwide implementation of the FAD-EFTPS penalty refund offer. This offer allows paper coupon users who were assessed a Form 941 deposit penalty the opportunity to receive a one-time penalty refund. To qualify, the employer must:
In April 2005, after the returns are filed for the fourth quarter of 2004, the IRS will automatically determine which employers have achieved the 4 quarters of EFTPS compliance and reverse the taxpayer's most recent full-paid FTD penalty. The refunds will be issued on a quarterly basis following the scheduled Form 941 due dates.
The IRS computer will look back up to 4 quarters prior to your 4-quarter compliance period for a fully paid FTD penalty to refund. So you will want to enroll and use EFTPS for four quarters before your most recent penalty is too far in the past to be refunded. The IRS computer will automatically refund the penalty if you qualify. For example, if you use EFTPS for all four quarters in 2004, the computer will look back as far as the quarter beginning January 1, 2003, for a full paid FTD penalty.
Every quarter, beginning in early 2005, the IRS computer will look for accounts that have met the qualifications and automatically refund the most recent penalty incurred prior to the start of your 4-quarter EFTPS compliance period.
Frequently Asked Questions
Q. Why should I use EFTPS?
A. It's fast, easy, accurate, and secure. There are verification steps along the way that eliminate 90% of paper coupon errors. It is available 24 hours a day, 7 days a week, even when you're away from home. Plus, you receive an EFT Acknowledgement Number, and you can review all electronic payments made within the last 16 months.
Q. Does the IRS have access to my checking account?
A. No. The IRS does not have access to the account when the employer initiates tax payments through EFTPS. The Financial Management Service, a separate division of the Department of Treasury, operates EFTPS. What is sent to IRS is confirmation that the payment has been made, so that the credit can be posted to your account.
Q. Do I have to start using EFTPS at the beginning of the calendar year in order to qualify for the refund?
A. No, the first quarter counted toward your 4-quarters EFTPS use does not have to be at the beginning of the calendar year. If you do not enroll in time to use EFTPS for that quarter, you can start your 4-quarters EFTPS use at the beginning of any later quarter.
Q. I'm in a seasonal business, and, in some quarters, I don't have any employees. Will these quarters still count for EFTPS use?
A. Seasonal employers must use EFTPS for four quarters too, but those four quarters may be spread out over more than 12 months.
Q. Do I have to pay the penalty that was assessed?
A. Yes, but if you qualify for the refund, we'll refund the money with interest. The penalty won't be refunded if you do not pay the penalty quarter in full.
Q. Which penalty will be refunded?
A. The most recent penalty incurred prior to the start of your 4-quarter compliance period will be refunded. The computer will look back up to 4 quarters to find a full-paid FTD penalty.
Q. If I receive a penalty refund and stop using EFTPS, can I qualify a second time?
A. No. This is a one-time offer.
Q. If I stop using EFTPS before the 4-quarters compliance period ends, can I start over?
A. Yes. You can start your new 4-quarters compliance period at the beginning of the next quarter.
Q. How long do I have to claim the refund?
A. The IRS computer will look back up to 4 quarters prior to your 4-quarter compliance period for a fully paid FTD penalty to refund. So you will want to enroll and use EFTPS for four quarters before your most recent penalty is too far in the past to be refunded. The IRS computer will automatically refund the penalty if you qualify. For example, if you use EFTPS for all four quarters in 2004, the computer will look back as far as the quarter beginning January 1, 2003, for a full paid FTD penalty.
Q. How will I get my penalty refund?
A. IRS will issue a check. Every quarter, beginning in early 2005, the IRS computer will look for accounts that have met the qualifications and automatically refund the most recent penalty incurred prior to the start of your 4-quarter EFTPS compliance period.
Q. How long will it take to receive the refund?
A. The first refunds are scheduled for late April of 2005 after IRS has finished processing the Form 941 returns for the 4th quarter of 2004. However, if you have outstanding tax liabilities, the refund will first be applied to those liabilities and the excess, if any, will be refunded.
Q. Some quarters I send IRS a check with my return, will I still qualify for the penalty refund?
A. No. To qualify for a refund, you must use EFTPS to pay all Form 941 taxes for all four quarters. This includes any payments that are due with the return.
Q. If I'm already signed-up for and using EFTPS for all my Form 941 payments, will I qualify for the refund if I was assessed an FTD penalty before I started using EFTPS?
A. Yes. Employers who began using EFTPS prior to the opening of the offer won't be disqualified. When the first batch of refunds is issued in 2005, the IRS computer will look for quarters of EFTPS use. Each consecutive "extra" quarter (up to four) will extend the refund look-back period by a quarter - provided the statute of limitations for issuing the refund is not expired.
Q. I am required to use EFTPS. Will I qualify for a refund?
A. No. The offer is open to voluntary EFTPS users. However, if you begin your 4 quarters of EFTPS compliance before you are required to use EFTPS you will not be disqualified.
Q. What if I have additional questions about the penalty refund offer?
A. First, review IRS Publication 04048. Then, if there are additional questions about the Penalty Refund Program, call the Business and Specialty Tax Lines at 800-829-4933 or EFTPS Customer Service at 800-555-4477 or 800-945-8400. You can learn more about EFTPS at www.eftps.gov.
To contact Feeley & Driscoll, please click here or call us at 1 (888) 875-9770.
|
